The next Fidesz-led government is set to be allowed to raise Hungary's fiscal deficit target for reforms in return, a major London-based investment banking group said. Following a trip by its analysts last week to Hungary, Morgan Stanley said in a research note released to investors in London that it found “broad-based confirmation” of its view that Fidesz “understands the importance of the IMF framework”.
For that reason, any upside revision to this year's deficit target, currently at 3.8% of GDP, will be the outcome of a negotiation with the Fund. Essentially, Fidesz will deliver reform plans in return for a deficit target which is less detrimental to the growth outlook.
“This is very different from outright fiscal easing”, Morgan Stanley said. Therefore, later this year there is a high probability that Fidesz chooses to revise the deficit target up to around 5% of GDP, it added. (MTI - Econews)