Waiting for interest rates to fall
According to a forecast by GKI Gazdaságkutató ZRt made with the co-operation of Erste Bank, the objectives of the convergence program for this year are almost certainly going to be fulfilled. Economic growth will slow down. Inflation will fall after the autumn, the forint will stay strong and reduction of the primary lending rate will begin in the second quarter. Real incomes will be reduced by 3-3,5 per cent this year. Export driven growth of industrial production will continue. Inflation was at 8,8 per cent in February, probably the highest figure this year. The balance of external payments improved more than expected in 2006 with the deficit being EUR 0,8 billion less than in 2005. Foreign investment was less however, than before. According to an estimate by GKI Zrt., the deficit will not be more than 6,5 per cent of the GDP by the end of the year. The primary lending rate is also expected to be reduced to 6-6,5 per cent by the end of the year.
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