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UPDATE - Takarékbank lowers Hungary growth projections

Takarékbank has lowered its projections for GDP growth in Hungary to 1.7% for 2011 and 1.5% for 2012, department head Zoltán Ádám said at a press conference on Thursday.

The bank's analysts expect GDP growth to pick up to 2.5% in 2013, Ádám said.

In a projection issued in May, Takarékbank put GDP growth at 3% for 2011 and 3.6% for 2012.

Takarékbank sees the average annual unemployment rate reaching 11% this year, then falling to 10.6% next year.

It puts average annual inflation at 3.8% for 2011 and 4.4% for 2012. The increase in the main VAT rate from 25% to 27% could temporarily push the twelve-month CPI above 5% at the beginning of next year.

The central bank base rate is expected to stay on hold at 6.00%, although tightening cannot be excluded if the forint weakens significantly or Hungary's risk premium rises.

Ádám said Hungary's bank system would rack up a HUF 250bn loss, or about 1% of GDP, if one-fifth of borrowers avail of an early repayment scheme for foreign currency-denominated mortgages at a discounted exchange rate.