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Lower-than-expected GDP growth poses no risk to deficit target - ministry

Hungary's lower-than-expected second quarter GDP growth does not put the government's 2011 deficit target at risk, the National Economy Ministry said on its website late Tuesday.

"The stability fund was created with precisely such a contingency in mind, thus the almost HUF 90 billion negative effect can be securely financed," the ministry said. "The government continues to be committed to reducing state debt and restoring the fiscal balance," it added.

Hungary's GDP rose an unadjusted 1.5% in Q2 from the same period a year earlier, slowing from 2.5% growth in the previous quarter, the Central Statistics Office (KSH) said in a preliminary estimate early Tuesday.

Analysts had put GDP growth for the period at 2.1-2.3%.

The ministry said GDP estimates for the second quarter caused negative surprise in countries across Europe as most showed a significant slowdown from the previous quarter. Lower-than-expected growth in Hungary was first of all the result of external factors, it added.

"Although home constructions continue to show an unfavorable picture, developments financed with European Union resources will positively affect investment trends, as will recently launched investments," the ministry said, citing big projects in Hungary by the carmakers Daimler, Audi and GM as well as tire maker Hankook.