Analysts of investment banking and security firm Goldman Sachs Group Inc acknowledged in a regional report, released last Friday, that the Hungarian government's strategy to reduce the budget deficit works better than expected, however, the prognosis for the structural reforms of the budget looks dim because of “reform-fatigue” observed among the governing parties.
As a result of the fiscal discipline and the extent of the rise in the budget revenues, Goldman Sachs has lowered the European-standard (ESA) budget deficit target of 6.4% to 6.1% for this year, and from 5% to 4.5% for 2008. The investment firm also modified its GDP increase prognosis from the previous 2% to 2.3% for the whole year, and now projects a 2.7% growth for 2008. According to Goldman Sachs, inflation would reach 5% by the end of 2007, and 3.9% by the end of next year. GS predicted that Hungary's central bank (MNB) would further cut its benchmark interest rate by a total of 1.25% during the upcoming months, which would eventually reach 6.5% by Q1 of 2008. (Gazdasági Rádió, Napi Gazdaság)