Budget Details Bode Well For Stabilisation

The details of Hungary's planned fiscal austerity package are encouraging, as they show large and extensive reductions in state spending and the tax burden on employment, both of which bode well for the country's longer term macroeconomic future. We affirm our view that the general budget deficit will fall to 3.0% of GDP by end-2009, but caution that political risks to this outlook will remain and that the removal of fiscal support to aggregate demand will only deepen Hungary's recession.

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