Hungary cannot "chase after dreams of growth", says bank association head

Hungarians should accept that the country’s economy is likely to grow little or stagnate in the coming years, Hungarian Banking Association chairman Mihaly Patai said in an interview with InfoRadio late Tuesday.

"Everybody....has to get used to the idea that there will not be growth in the coming years," Mr Patai said, adding that this period "could be two, three or five years".

He was quick to note that the growth outlook was not domestically defined, but shaped by the slowdown in Europe and on global markets.

"We can’t produce 2-3% growth not because we’re bad, but because the circumstances are different," he said. "We have to respect half a percent or naught percent growth," he added.

The government recently knocked back the GDP growth assumption in the 2012 budget from 1.5% to 0.5%.

Mr Patai said an agreement reached between the association and the government on managing the problem of troubled borrowers with foreign currency-denominated mortgages would generate losses of HUF 600bn for banks. Losses from an early repayment scheme are likely to come to HUF 150bn-200bn, of which banks can claim a 30% refund, or HUF 40bn-50bn, he added.

Mr Patai said that part of the "growth pact" signed by the association and the government has to do with involving big Hungarian banks and their owners in consultations with the International Monetary Fund and the European Union.

Hungary is seeking financial assistance from the IMF and EU as a precautionary measure.