Worse rating for Hungary

According to a forecast by GKI Gazdaságkutató Zrt. and Erste Bank, both the internal and external balance is expected to show significant improvement in 2008. A significant reduction in the inflation rate is only expected around the end of the year. A global economic crisis has developed by the spring of 2008. A liquidity crisis has developed in the financial and capital markets. These factors and the domestic power struggle make the implementation of the convergence program more difficult than expected. The exchange rate of the HUF stabilised at 4 per cent lower value than previously in the first quarter of 2008. An average rate of HUF 257/EUR is expected for the year 2008. The credit rating of Hungary deteriorated in the past six months. A temporary rise in the prime lending rate will probably occur before a reduction can take place in the second half of 2008. The prime lending rate will probably be 7-7.5 per cent by the end of the year. The average inflation rate for 2008 is expected to be 6-6.5 per cent. Wages in the competitive sector will rise by 8 per cent, while a wage increase of 7 per cent is expected in the public sector. Real income will increase by 0.5-1 per cent in 2008. Employment is expected to grow in the competitive sector and to fall slightly in the public sector.