London analysts mull future scenarios

Parliament

The latest monthly emerging markets survey of London analyst Dresdner Kleinwort (DKIB) presents three possible scenarios in Hungary.

According to the first, Prime Minister Ferenc Gyurcsány stays in office as the head of a minority government and will be occasionally supported by the ex-coalition partner SzDSz, e.g. when the budget law is passed. The second version is that either Gyurcsány or SzDSz chairman János Kóka will be removed and the parties will make a new coalition agreement. Thirdly, there will be early parliamentary elections. The first version is the most likely for the coming six months, says the analysis. Gyurcsány will focus on two main targets: further budget consolidation in line with the aims of the convergence program, and a lighter tax reform, which will lower either the corporate tax bracket or the burdens on employment.

At the same time, it is an unfavorable development that the referendum in March and the possibility of another on health funds discouraged Gyurcsány from carrying on the health insurance reform. The acceptance of the mid-term budget reform has a lower chance now that the domestic policy background fell apart, which raises the possibility of the supervision of Hungary's sovereign debt rating. Dresdner Kleinwort reiterated its earlier opinion, that the central bank (MNB) might raise the base rate by even 1 percentage point this year and postpone significant and quick monetary slackening to 2009. The survey expects a 1.7 % GDP growth this year and 2% next year. (Gazdasági Rádió)

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