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Hungary's convergence program updated

Hungary's freshly updated convergence program forecasts an ESA general government deficit of 3.9% of GDP for 2009 and 3.8% for 2010 before a drop to 2.8% of GDP in 2011, the updated plan, published on the Finance Ministry's website, shows.

The targets in the fresh update are in line with those agreed at May consultations held in Budapest with IMF and EU officials regarding a EUR 20 billion standby loan agreement the two, together with the World Bank approved for Hungary last autumn.

The deficit targets are upped from a 2.6% of GDP target this year, 2.5% next year and 2.2% in 2011 in the December 2008 convergence plan.

The Finance Ministry published the updated plan after the government approved it on May 27 and submitted it to the European Commission on May 29.

The Finance Ministry noted that Hungary's 2008 budget deficit of 3.4% of GDP was lower than targeted, attributing the increased 2009 forecast to the deterioration in the global economy since the calculation of the previous forecast late last year.

Gross government debt is expected to be 80.2% of GDP in 2009, 82.2% of GDP in 2010 and 78.3% of GDP in 2011, compared to the December forecasts of 72.5% of GDP this year, 72.2% of GDP next year and 69% of GDP in 2011.

The Finance Ministry report said that gross government debt was 73.0% of GDP at the end of 2008, compared to 71.1% estimate in the December report.

Hungary's GDP to contract by 6.7% in 2009 and 0.9% in 2010 before growing 3.6% in 2011.

The government's December 2008 plan for Hungary's adoption of the Euro forecast 2009 GDP contraction of 0.9% and GDP growth of 1.6% in 2010 and 2.5% in 2011.

The forint is expected to trade at 295 against the Euro at the end of 2009, compared to the December forecast of 260.

Domestic use is expected to fall 7.9% in 2009 as a result of the decline in GDP before slipping 1.7% in 2010 and rising 3.3% in 2011. Household consumption is expected to fall 6.6% in 2009 and 2.6% in 2010 before increasing 2.5% in 2011. The December forecast predicted that household consumption would decline 3.8% this year before rising 1.1% next year and 1.4% in 2011.

Exports are expected to fall 15.1% in 2009 and decline 3.0% in 2010 before rising 9.2% in 2011. Imports are expected to fall 16.7% in 2009 and decline 2.1% in 2010 before rising 9.2%, the same as exports, in 2011.

Current-account deficit is expected to be 4.2% of GDP in 2009, 4.1% of GDP in 2010 and 4.4% of GDP in 2011. The December prognosis forecast a current-account deficit of 2.6% in 2009, 2.5% in 2010 and 2.2% in 2011.

Unemployment calculated according to National Labor Organization standards is expected to be 10.1% in December 2009, 9.8% in December 2010 and 9.0% in December 2011. The December forecast predicted unemployment of 8.0% at the end of this year, 7.7% at the end of next year. Average unemployment in 2008 was 7.8%.

Inflation is expected to be 4.5% in 2009, 3.8% in 2010 and 2.8% in 2011. The finance ministry's December report predicted inflation of 4.5% this year, 3.2% in 2010 and 3.0% in 2011. (MTI-Econews)