Forint may fall before Gyurcsány speaks on convergence

Parliament

Hungary's forint may decline on speculation Prime Minister Ferenc Gyurcsány will say today the country's budget deficit and public debt may delay its schedule for adopting the euro. The forint has fallen more than 5% versus the euro since Hungary introduced a plan to cut its budget shortfall in early June. „Confirmation of the budget deficit and debt figures will give a slightly negative tone to Hungary,” said Dwyfor Evans, emerging markets analyst at Banc of America Corp. in London. „The selling of the forint may continue.” Against the euro, the forint was little changed at 278.10 at 11:32 a.m. in Budapest, from 278.41 yesterday. Evans expects the currency to weaken to 280 per euro today.

Hungary's budget deficit is the widest in the European Union compared with the size of the economy. Gyurcsány will speak on the convergence program at a press conference today. The nation's budget gap by EU standards will reach 10.1% of gross domestic product this year and narrow to 6.8% in 2007, 4.3% in 2008 and 3.2% in 2009, Index reported. The ratio of the country's debt to GDP is forecast to swell to 70.9% next year and 72.2% in 2008, compared with no more than 60% allowed for euro candidates, the Web portal said. The convergence plan didn't outline a euro-entry target date, Hungary's Deputy Finance Minister Tamás Katona said last week. Some analysts, including Zsolt Papp at ABN Amro Holding NV in London, say that Hungary's plan to join the euro may be postponed to 2015. The government last month abandoned plans to adopt the euro by 2010. (Bloomberg)

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