Hungary deficit cut to unfreeze EU funds, says City

In a report released to investors in London, economists at BNP Paribas said they believe “Hungary will manage to tighten its belt” and that the government will implement additional measures, cutting the deficit towards 3.0pc of GDP this year.The impact on the economy of these additional savings would be milder than if Hungary were to lose the EUR 495m of EU capital transfers that the European Commission has proposed to suspend. The cumulative GDP loss over 2013-14 would amount to 0.85pp should Hungary lose this EUR 495m from the EU. On the other hand, the economic cost of the added fiscal savings should not exceed 0.25pp of GDP in 2012-14. So “it is pretty obvious” that the government should deliver additional savings and by doing so allow the unfreezing of the cohesion funds. Furthermore, the implementation of structural fiscal measures will undoubtedly lead to smoother negotiations with the IMF/EU on the new financial aid package, analysts at BNP Paribas said.

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