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IMF deal could please investors, signal end to unorthodox policies

Foreign investors want to see an agreement Hungary could reach with the International Monetary Fund signal a return to more orthodox economic policy, Dan Morris, global strategist for J.P. Morgan Asset Management, told MTI after a Citibank roundtable talk on Thursday.

Investors "want to have the confidence that there are not going to be any more unorthodox moves by the government," Mr Morris said. They want to know "what the rules of the game are going to be...if they going to be the ones that everybody...understands, and [is the government] going to continue to play by them, and if that’s the case, then yes. [investors] want to keep investing," he added.

Hungary’s government announced a week ago that it would seek financial assistance from the IMF and the EU as a precautionary measure.

Hungary could deliver its budget plan, maybe with minor modifications, next year even if the GDP will be slower than the one in budget calculations, Mr Morris said in response to MTI.

Hungary’s 2012 budget bill targets a 2.5%-of-GDP general government deficit. The government is expected to reduce its growth forecast from the 1.5% GDP growth used in the budget next week.

Mr Morris noted in the talk that analysts have cut their projections for 2012 growth in Hungary by more than any country in the region, giving it the lowest outlook, for a 0.5% economic expansion.

Western banks brought about EUR 12bn to Hungary by 2008, then started withdrawing the money, which caused the government a great deal of concern, he said. The pace of the withdrawal has slowed in the last several months, in spite of problems, such as a government scheme allowing early repayment of foreign currency-denominated mortgages at discounted exchange rates, he added.

Mr Morris said he did not expect significant lending growth in Hungary next year. Foreign banks will not use their deposits abroad to finance lending at units in Hungary, he explained.