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Is Hungary playing for time with the IMF?

August 8th, 2012

A conservative columnist suspects that the government will only revise its controversial fiscal policy and budget forecasts for next year if forced to do so by financial markets.

In Magyar Hírlap, business commentator Csaba Szajlai, a long-time critic of the government’s “unorthodox” fiscal policies suggests that Hungary has been using the recent credit line talks with the EU and the IMF . He quotes the analysts of OTP, Hungary’s largest bank, who believe next year’s public deficit will be twice as much as planned, unless the government revises its forecasts and expenses. The EU and the IMF, Szajlai explains, will not agree to any fiscal loosening, “whether aimed at promoting growth or at wining the elections in 2014”. But the government may feel that it can make it without the credit-line agreement, and in fact, at present the Forint is strong and Treasury bond yields are decreasing. Nevertheless, Szajlai warns, fundamentals at home are in bad shape and international finances are volatile, therefore market conditions can easily change for the worse, in which case the government will be compelled to revise its forecasts and policies. Another compelling factor might emerge in September, when the EU will revise Hungarian accounts in the framework of its excessive deficit procedure.

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