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MFB says Hungary's GDP contraction likely to subside to 0.5%-1.5% in 2010

State-owned Hungarian Development Bank (MFB) believes that Hungary's GDP contraction will likely decrease to the 0.5%-1.5% range in 2010 from an expected 6.5%-7% in 2009, the MFB informed MTI on Tuesday evening.

The MFB predicted that Hungary's unemployment rate would, on the other hand, culminate at around 12% only at the end of 2010, waning thereafter as a result of next year's anticipated economic rebound.

MFB said that growth factors, only exports represent a significant potential impetus for economic recovery in Hungary, while the chances for a rebound of retail consumption or corporate investments, as well as for a fiscal impetus, are slim. The bank predicted that Hungary's GDP could grow by 3%-4% in 2011 under optimal economic conditions.

MFB expects no major boost from FDI in Hungary either this year or the next as it expects the big international companies, whose behavior is decisive regarding Hungarian investments, to continue to keep a lid on their direct foreign investments.

The bank predicts that central bank's base rate, at present 6.5%, will drop further to 5.5% by the end of 2010 and to 5.0% by the end of 2011.

The MFB said that inflation likely ebbed to its lowest rate during the spring of 2009, predicting an average inflation rate of 4.1% this year.

The bank expects the volatility of the forint's exchange rate to lessen, noting that it is difficult to forecast the exchange rate in the present environment. It forecast that the forint could undergo a continual strengthening against the euro over the coming years, thus improving the prospect of Hungary adopting the single European currency in 2013. (MTI-Econews)