The International Monetary Fund (IMF) said Hungary has met performance criteria, but the economic outlook has worsened and financial market stress persists, in a review under the country's stand-by arrangement published on the IMF's website.
“The performance criteria, indicative target, structural performance criterion and benchmarks for 2008Q4 were all met. However, economic growth in partner countries and global financial market conditions are turning out to be worse than anticipated,” the IMF said in the review, the first after the IMF, World Bank and EU made a €20 billion stand-by loan available to Hungary to support financial stability last autumn.
The IMF said some policy settings under the program had been revised in light of the deterioration of the macroeconomic outlook. The revised program contains additional fiscal measures to strengthen fiscal sustainability by combining permanent spending cuts with a temporary slowing of the budget consolidation, it places more emphasis on measures to help preserve financial stability, including ensuring the continuity of the safety net for banks, and it ensures that monetary and exchange rate policy will continue to target inflation over the medium term while being prepared to act as needed to mitigate risks to financial stability.
In addition to risks posed by the worsened outlook, the political situation in Hungary is “fragile,” with the ruling party in a minority government. “To help foster broad-based ownership of the program, (IMF) staff have undertaken extensive outreach to the media and the political opposition,” the IMF said in the review.
IMF staff have continued to cooperate closely with the staff of the European Commission and the World Bank, the IMF said. (MTI – Econews)