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MNB forecasts 6.7% GDP decline

The National Bank of Hungary (MNB) forecasts a 6.7% decline in GDP and 4.5% average annual inflation for 2009, the bank said on Monday, citing the main figures from its fresh quarterly inflation report to be published in full on Wednesday.

The GDP and inflation figures are the same as the government's projections and unchanged from the previous inflation report published in May.

The MNB also left its GDP forecast for 2010 and 2011 unchanged in the fresh report, projecting a 0.9% decline and 3.4% growth, respectively. It changed the projections for average annual inflation to 4.1% from 4.3% for 2010, and to 2.1% from 1.9% for 2011.

“We can confirm the stand from three months earlier, according to which inflation will be well under the 3% target in the 5-to 8-quarter horizon,” MNB governor András Simor said at a press conference after the rate setting meeting of the Monetary Council. Excluding the effects of VAT and excise tax rises, CPI could fall under 3% in 2010, he added.

The MNB forecast is based on a HUF/EUR exchange rate of 272.1 and an average crude price of USD 71.6 per barrel in 2010.

“It is most important that the Monetary Council follow the most calculable rates policy possible, as this will lead it to its goal of reaching a lower interest rate level in the long term,” Simor said when asked by MTI to assess the Council's previous rate decision, when the governor and a deputy-governor voted for a 50bp cut, but the other members for a 100bp reduction. (MTI-ECONEWS)