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ICEG report on Hungary

The rate of economic growth in Hungary might be 2.6% in 2007, and 3.2% in 2008 with export continuing to fuel growth, but domestic demand will start to increase in 2008, says the latest prognosis by ICEG European Center, a branch of research institute International Center for Economic Growth (ICEG).

Deflation will probably gather pace at the end of summer, the annual inflation in 2007 might be 7.2 %, which will drop to 3.4% next year. The international financial market atmosphere is favorable, so central bank MNB will be able to implement slight monetary slackening. ICEG researchers project a base rate of 7.25 % for the end of 2007 and a 6.5 % rate for December 2008.
The 2007 budget targets are quite likely to be met but the crucial figures for 2008 are still precarious. Unlike the revenues, the budget expenditure is dubious, though in the most important subsystems the government managed to put a halt to the earlier almost uncontrolled growth of expenses. The 4.3% deficit targeted for 2008 can be achieved only if expenditure is drastically cut, which, however, has considerable institutional and execution risks. The current account balance deficit might drop to the 4.1% of GDP in 2007 and to 3.6% in 2008. But the decrease is being financed by net capital influx, which generates debt, the gross foreign debt might stay well over the 90% of GDP. (Napi Gazdaság)