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PREVIEW-Hungary govt seen winning key budget vote next Tues

Published 10/30/2009, 07:04 AM
Updated 10/30/2009, 07:06 AM
EUR/HUF
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TGT
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* What: Vote on key 2010 budget figures

* When: Tuesday

* Bill seen passing with Socialist, Free Dem votes

By Krisztina Than

BUDAPEST, Oct 30 (Reuters) - The Hungarian parliament is expected to approve the main numbers of the 2010 budget in a vote next Tuesday seen as a key test of the minority government and the core of the country's programme agreed with the IMF.

Once the key figures, including a deficit target of 3.8 percent of gross domestic product, are approved, they are carved in stone and cannot change significantly in the final vote due on Nov. 30.

Prime Minister Gordon Bajnai, whose government took office in April and regards itself a crisis manager cabinet of experts, has said he would resign if the budget failed to pass in parliament.

Approving and implementing spending cuts agreed with the International Monetary Fund and the EU for next year is key for Hungary to be able to meet its obligations under a $25.1 billion deal which saved it from financial collapse last year.

Both Finance Minister Peter Oszko and analysts said they expected the Socialists, who rule in a minority, to back the budget along with sufficient number of votes from the liberal Free Democrats, after the parties indicated their support earlier this year.

"My expectation is that it (key budget figures) will pass (in parliament)," Oszko told Reuters earlier this week.

Political analysts agreed with Oszko's assessment.

"I expect that the government will be able to show sufficient backing behind itself," said Attila Gyulai, political analyst at think tank Political Capital.

Gyulai said it was not in the interest of the Socialists, whose poll ratings hover around a dismal 11 percent, to upset Bajnai's programme which has rebuilt the trust of foreign investors and stabilised the forint and Hungary's finances.

The Socialists are widely expected to lose elections next year to the main opposition party Fidesz.

Fidesz has said it would rewrite the 2010 budget if it wins elections to make it more growth-friendly.[ID:nLN683810]

STABILISING, BUT RISKS AHEAD

The forint has firmed to around 272 versus the euro from all-time lows of 317 in March and Hungary looks increasingly able to come off external aid and finance itself from the markets again, though the IMF buffer is still there.

Although the country has escaped meltdown and its deficit is among the lowest now in the EU, its public debt at around 80 percent of GDP is very high and continued fiscal discipline is essential for bringing the debt back onto a declining path.

The IMF, the central bank and analysts have all warned that there are upside risks to the deficit targets both this year and in 2010, as a deep recession erodes tax revenues, and further structural reforms are needed to make finances sustainable.

Zsolt Kondrat, an economist at MKB Bank, said the 2010 deficit goal was achievable if the economy stays on the projected track but there were risks mainly stemming from growth outturn at Hungary's key European trading partners.

"If growth does not pick up next year worldwide with the economic stimulus measures running out, then tax revenues could lag estimates and unemployment related spending will be bigger in Hungary as well," he said.

The government forecasts the economy will shed 0.9 percent next year, after a fall of 6.7 percent this year.

For a recent analysis on Hungary, click on [ID:nLO495024] (Reporting by Krisztina Than; Editing by Andy Bruce)

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