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Hungary to call down second, €2 bln tranche of EU credit

  Hungary will call down the second, €2 billion tranche of an EU credit line by the end of March, the Finance Ministry said in a statement published on its website on Friday.

Hungary and EU officials on Wednesday signed a supplemental agreement that changes the conditions for drawing the third and fourth tranches of the credit line as outlined in the original agreement signed in November.

Brussels decided on Wednesday and announced on Friday that it was in agreement with the crisis management measures the Hungarian government decided, Finance Ministry state secretary László Keller said.

The review of the government’s economic policy program was necessary because changes to the EU’s growth outlook in January will have a decisive effect on demand for Hungary exports, the Finance Ministry statement said.

Finance Ministry press chief Ferenc Pichler noted that the projection for Hungary’s 2009 GDP had been lowered to a contraction of 3.0-3.5% compared to a forecast for a 1% fall when the credit line agreement was signed in November.

The 2009 inflation forecast was lowered to 3.9% from 4.5% in November, and the projection for the general government deficit, as a proportion of GDP, was raised to 2.9% from 2.6%.

The export outlook was radically modified to a 3% decline from a 3.9% increase, while imports are now seen falling 3.2%, compared to an earlier expected 2.4% rise. Investments are set to fall 5%, compared to a 0.9% fall seen in November.

Hungary reached an agreement on a €20 billion credit line from the IMF, the EU and The World Bank in November. It called down the first, €2 billion tranche of a €6.5 billion loan from the EU in December. The first, €4.9 billion tranche of a €12.3 billion loan from the IMF was also called down in November.

Hungary used up the first EU tranche by the end of February, spending €1 billion in 2008 and another €1 billion in the first months of 2009 to finance the fiscal deficit and pay off maturing debt. The package also includes a €1 billion loan from the World Bank. (MTI-Econews)