Hungary's government raised its forecast for inflation and lowered its prediction for growth this year citing a worsening outlook for exports.
Consumer prices will probably rise 5.9 percent in 2008 after 8 percent last year, while gross domestic product will increase 2.4 percent after 1.3 percent in 2007, Finance Minister Janos Veres said in Budapest today. The previous prediction was for 4.8 percent inflation and 2.8 percent growth.
The Hungarian government yesterday reiterated that it expects the budget deficit to shrink to 4 percent of gross domestic product this year from an estimated 5.7 percent last year and a record 9.2 percent in 2006. The government is aiming to reduce the shortfall to 3.2 percent next year.
The government has cut budget reserves by 20 billion forint ($122 million) to reach its deficit target, Veres said today. The widely announced planned tax cut may be as much as 100 billion forint less than earlier expected as rising bond yields make it more expensive to finance the deficit, he added. Hungary earlier planned to reduce taxes by as much as 250 billion forint.
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Governor of National Bank of Hungary András Simor made hints about the necessity of a base rate hike in his latest article in Hungarian daily Népszabadság. He urged economic reforms in the article, while rumours surfaced again that the governing Socialist Party wants to convince him to be the next Prime Minister. Hungarian central bank governor on base rate and presidency.
I find the rumor that Mr Simor would replace Mr Gyurcsány quite far-fetched but it is very unusual that he has written a very long article in the Easter Weekend edition of Népszabadság, the biggest Hungarian daily newspaper.
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