Policy Divergence

December 2005 | Economic Analysis

The NBH’s Convergence report, published in early November, has widened the gap between its critical stance on the country’s twin deficit front and the downplayed responses of the two dominant political parties. Against a backdrop of European Commission threats to withhold development funds unless Hungary meets its fiscal targets, and a Reuters poll revising Hungary’s euro entry date to 2012, the central bank warned of a worsening budget deficit in 2006. It also released startling predictions that the budget gap could reach 10.6% by 2008. Despite encouraging inflation figures, which reached a record y-o-y low of 3.2% in October, it

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