Hungarian economy still vulnerable after measures, Fitch says

Initiatives

Hungary's economy remains vulnerable to a pull-out by investors who finance the budget deficit even after the government implemented austerity measures, Fitch Ratings said.

Avoiding a sell-off of assets depends on the government's ability to carry out a deficit-cutting plan pledged to the European Union, Fitch said in a report released yesterday. The country's debt level will continue to rise, increasing risks to the forint and economic growth, it said. “Failure by the government to successfully implement its deficit reduction program could therefore lead to a forced and potentially destabilizing market correction to the exchange rate and the domestic economy,” according to the report. Prime Minister Ferenc Gyurcsány wants to cut the shortfall, the EU's widest, by two-thirds by 2009. He has raised taxes and cut subsidies for products such as natural gas, electricity and medicines to trim the deficit. The government is now working to overhaul education, health care and public administration. (Bloomberg)

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