The Hungarian economy has been let out of the excessive deficit procedure
The Hungarian economy essentially follows trends predicted by GKI. Although Hungary has been let out of the excessive deficit procedure, election-related spending would require further austerity measures. The latest Varga package mainly makes more room for manoeuvring by using old tools. The recession is over; however, only “positive” stagnation can be expected for 2013. Investments continue to decline and consumption remains practically unchanged in spite of increasing real incomes. The further temporary suppression of already declining inflation by market distorting measures has been more radical than previously thought. Taking advantage of this and the favourable international atmosphere in money markets until May, the reduction of the base rate is also faster than expected. Looking ahead, risks are accumulating in Hungarian financial markets. The growth-hindering aspects of the government are becoming stronger and the Hungarian economy lacks perspectives.
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