Hungary is not out of the danger zone yet, further steps on the way - Orbán

Forint at monthly high vs. EUR after PM press conference - 15:56

On Wednesday afternoon, the forint appreciated to below 269 against the euro, which means it gained 3.5 units since opening.

The strengthening of the HUF is not unique in the region, as improved global investor sentiment helps the forint’s peers too.

Tough times ahead - 15:22

In its autumn work the government will focus on the reignited crisis in the Eurozone, which created “serious challenges" not only for the bloc but also for Hungary, the PM said.

“The country needs to be prepared that in the next few months at least [people] will need to get ahead in an economic environment that is more difficult than it is today," Orbán said.

He noted that the government will also need to operate under “extremely difficult financial and economic conditions".

“We have to face the fact that the euro crisis means serious challenges for Hungary, primarily for foreign currency borrowers," he added.

The PM also said the government “will not allow [...] the price of the crisis, the consequences of previous bad decisions to be paid by the people."

Orbán reminded that thanks to the government’s measures over the past year or so “the country has got farther from the core of the danger zone but is not completely out of it yet." “We cannot shrug off" the dangers originating from the external environment, he added.Repayments not to rise more than 15% also beyond 2014

The government has also decided that for those distressed household mortgage debtors who choose to fix the exchange rate on their monthly instalments (CHF/HUF at 180, EUR/HUF at 250 and JPY/HUF at 2) and get the difference from the market rate accrued on a special (forint) account, the rise in instalments cannot be larger than 15% even beyond 2014, the PM added. This limit was to be in place only until the programme winds up at the end of 2014.

Impacts of lower-than-expected GDP growth

Hungary’s gross domestic product grew by a mere 1.5% yr/yr in the second quarter of 2011, greatly undershooting the market’s call (2.3%), and the quarter-on-quarter figure showed zero growth.

Asked whether the government would revise its growth and budget deficit projections Orbán responded that the deficit goal is practically carved in stone. Regarding the GDP estimate he said they would not revise it, rather “the government will be adjusting itself to reality."

Hungary's government will reassess its macroeconomic prognoses in September after the breakdown of second-quarter GDP figures is published, András Kármán, Secretary of State at the Economy Ministry, told Reuters on Tuesday.

"New macro forecasts will be linked to the (2012) draft budget and that may include changes (in the forecasts)," Kármán said.“The government will meet its previously announced budget deficit (target). We will take it below 3% (of GDP) and we will attain this no matter what happens in the world," Orbán said.

The other pledge the cabinet “will certainly meet" is to reduce state debt, he added. “Hungary must not drift back on the Greek path," the PM said, adding that “in the autumn and also next year we will take further measures to lower public debt."

Orbán also said that they would not give up their plan to revamp the tax regime either.

HUF 100 bn missing from the budget

If economic growth indeed turns out to be 2% this year instead of the planned 3% “there is a hole of at least HUF 100 billion in the budget", he said. The PM noted that inflation looks likely to undershoot the projections, which means further expenditure for the budget.

“Attaining this year’s budget (deficit target) requires additional measures, both on the spending and the revenue sides," Orbán said. He declined to disclose details, saying the government will decide on these in the autumn. More will be revealed after the joint Fidesz-KDNP session kick-off faction meeting between September 7 and 9, he said, adding that “serious bureaucracy cuts and layoffs" could be expected.