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IMF Considers Cutting Hungarian Growth Outlook

The International Monetary Fund is considering a cut in this year's economic-growth forecast for Hungary, said Iryna Ivaschenko, the lender's representative in Budapest. The IMF on Jan. 25 estimated Hungary's economy may expand 0.3 percent in 2012, compared with the government's 0.5 percent projection. "This 0.3 percent is our last official estimate, which has been made with slightly better eurozone outlook so it can revised down," Ivaschenko told investors today in Budapest. "We're revising these numbers probably as I speak."

Hungary is seeking to revive bailout talks with the IMF and the European Union to quell investor concern about its ability to service the highest debt level among the trading bloc's eastern members.

Hungary sought aid in November as the forint fell to a record low and the country's credit grade was cut to junk at Standard & Poor's, Moody's Investors Service and Fitch Ratings.

Hungary, the first European Union country to obtain an IMF bailout in 2008, first needs "tangible steps" on government policies, including central-bank independence, to start talks on a loan, Ivaschenko said, repeating a statement IMF Managing Director Christine Lagarde made on Jan. 13. Talks broke down in December over Orban's refusal to change the new central bank legislation.

Hungary is in the process of sorting through government policies the EU's executive said may violate community rules. These include the central bank law and the overhaul of the judiciary and the data protection ombudsman's office, all of which Orban has pledged to amend.

The collapse of Malév Zrt., Hungary's state-owned carrier, may carry fiscal risks for the government that's targeting a budget deficit of 2.5 percent of gross domestic product this year, Ivaschenko said.

An expected decline in revenue at Budapest Airport may in an "extreme case" force the government to compensate the operator in the amount of "several hundred billion forint," the Development Ministry said in an e-mail late yesterday. The government targets a deficit of 576 billion forint ($2.6 billion) this year.

Source: Bloomberg

Last Updated on Friday, 30 August 2013 09:11

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