Hungary May Miss Budget Deficit Goal in 2012, Central Bank Says
December 22, 2011, 4:22 AM ESTBy Zoltan Simon
Dec. 22 (Bloomberg) -- Hungary will probably overshoot its budget-deficit target next year, the central bank said in a report today.
The shortfall may be 3.7 percent of gross domestic product, compared with the government’s 2.5 percent goal, the Magyar Nemzeti Bank said. The gap may be reduced to 2.6 percent with the “complete cancellation” of budget reserves and assuming no unexpected spending and no shortfall in revenue in 2012.
A decline in risk premium may allow keeping the benchmark interest rate unchanged at 7 percent, the highest in the European Union, or its “cautious reduction,” the central bank said in the report, citing the rate-setting Monetary Council. The rate may have to be “permanently” higher if the pace of disinflation is slower than the bank’s forecast.
The central bank raised its benchmark interest rate to 7 percent from 6.5 percent on Dec. 20. Policy makers said they may boost borrowing costs further if risk perception and the inflation outlook deteriorate “substantially.”
--Editors: Balazs Penz, Alan Crosby
To contact the reporters on this story: Zoltan Simon in Budapest at zsimon@bloomberg.net
To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net
