Fitch's Parker says risks to Hungary ratings are "all negative"

Hungary's government has missed its deficit targets every year since 2001, partly because of overspending. Prime Minister Ferenc Gyurcsány has raised taxes, cut subsidies and slashed government jobs to trim the deficit, the European Union's widest. “All of the risks are on the downside,” said Parker at a Fitch Ratings conference in London today. “The risks have increased by the dent in the Prime Minister's authority to push through his austerity program.” Hungary said it expects its budget deficit to reach €230.4 billion ($1.1 billion) in November, the Finance Ministry said yesterday. Hungary forecasts a deficit of Ft 2.06 trillion for the full year, the Budapest-based ministry said. It maintained its deficit goal of 10.1% of gross domestic product for 2006. Hungary's plan for adopting the euro, submitted to the European Commission September 1, forecasts the deficit by EU standards to drop to 3.2% of GDP by 2009. Parker said Hungary should cut the deficit to 5% of GDP by 2008. Hungary's inflation rate, the highest in the European Union, rose to a two-year high in October because of increases in energy prices, clothing costs and a higher value-added tax rate. Inflation in Hungary has almost tripled in the past six months, exerting further pressure on the central bank to raise rates for a sixth time since June. Hungary's main opposition party demanded a national vote last month within five months to block key parts of Gyurcsány's economic reforms. Demonstrators have been calling for Gyurcsány's resignation since revelations in mid-September he lied about the state of the economy to win re-election this year. (Bloomberg)