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IMF optimistic of economic contraction

The International Monetary Fund (IMF) projects Hungary's economy will contract by 3.3% in 2009, according to its fresh World Economic Outlook.

The projection is far more optimistic than the new government's projection of a 5.5%-6.0% fall in GDP for 2009.

The IMF sees CPI reaching 3.8% in 2009.

Hungary's new government - which only recently unveiled additional austerity measures planned for 2009 and 2010 - projects consumer prices will rise more than earlier expected because of a planned increase in the main VAT rate from 20% to 25%, but it says CPI will remain under 4.5% in 2009 as consumer demand falls.

The IMF forecasts Hungary's general government deficit will narrow to 3.9% of GDP in 2009. The government sees the deficit shrinking to under 3% of GDP.

For 2010, the IMF projects a 0.4% decline in GDP, a 6.1% rise in consumer prices and a 3.4%-of-GDP general government deficit. (MTI – Econews)