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Hungary package announcement delay may suggest ongoing debate

The apparent delay of the rollout of Hungary's planned structural package may suggest still ongoing debates over the widely anticipated fiscal plans, London-based emerging markets analysts said after Prime Minister Viktor Orbán's speech in Parliament on Monday.

In his speech officially opening the spring session of Parliament, Orbán indicated the announcement will be made by March 15, while markets had expected the details to be unveiled by the end of this month.

Neil Shearing, senior emerging markets economist at Capital Economics, a major London-based investment and financial consultancy, told MTI after the speech that the apparent delay is “definitely” a sign of the package still being debated within the government. There had already been rumors in the market of the announcement date possibly being pushed out, however, so it hasn't caused a big surprise and, accordingly, market reaction has been muted, with the forint “softening a bit”, Shearing said.

He added that the ultimate test of the package will be “the structure, the nature of the cuts”, and any market rally will be “fairly short-lived” should the package fall short of the expectations in this respect.

Asked about the planned constitutional cap on debt, Shearing said that the “big comparison here is obviously Poland” where such a cap is already in place. However, “in the event that has not proved particularly binding as the (Polish) governments have managed to find ways and means around the (constitutional debt) target”, he said.

London-based analysts at Goldman Sachs said after Orbán's speech that while in general such a fiscal rule could increase credibility of fiscal consolidation efforts, its effectiveness will depend on the details such as the public debt definition used in the new law, ways of keeping debt under control, and the means and a timeframe for reducing current debt stock to the desired new limit.

Also, it seems that “the plan is still in early stages of development”, they added, referring to the pushback of the announcement to mid-March. (MTI – Econews)