The Hungarian forint profited on Tuesday from positive correction in CE markets and firmed in the morning from opening value at 264.00 EUR/HUF up to 263.00. Throughout the rest of the session it held a tight range around 263.3 EUR/HUF.
It is worth adding that the IMF delegation published after weeklong consultation with Hungarian government its report. The fund believes that Hungary’s budget deficit should be cut more than new government is contemplating. According to IMF’s estimates the deficit will reach 8.5% of GDP in 2006 with an allowance for the cost of pension reform. The IMF also warned that sticking to unrealistic ERM II. Entry target date can be damaging and that 2-2.5% of GDP reduction of the budget deficit is utmost level what can be achieved. Although markets did not react on this press release immediately, it could affect the perception of fiscal measures. In such circumstances the presentation of detail fiscal measures, unless they are truly huge, will come as disappointment for the forint.
(CSOB - Investment research)