Oct. 21 (Bloomberg) -- Hungary cut its forecasts for economic growth, inflation and the budget deficit for this year, citing the global financial crisis.

The government expects 1.8 percent growth this year, instead of the earlier estimate of 2.4 percent, said Laszlo Keller, a deputy finance minister, at a press conference in Budapest today. The inflation estimate was lowered to 6.4 percent from 6.5 percent.

A looming recession in western Europe curbs Hungary's chances for an economic recovery after the slowest growth in 14 years in 2007. The effects of the global credit shortage also hurt domestic consumption, the government said today.

``Growth will be slower than forecast already this year because of the world economic slowdown and the narrowing of domestic credit opportunities,'' the Finance Ministry said in a statement distributed at the press conference.

The forint weakened as much as 274.56 per euro, a two-year low. It was trading at 272.22 at 12:21 p.m., compared with 270.56 late yesterday. The benchmark BUX index rose for the first time in five days and was at 12,850.1, 1.4 percent higher than yesterday's closing price. The stock index lost 32 percent of its value so far this month.

Lower Forecasts

The government last week reduced its forecasts for next year, to 1.2 percent from 3 percent for growth and to 3.9 percent from 4.3 percent for inflation. Hungary expects annual consumer price growth to slow to about 5 percent by December and to about 3 percent by the end of next year from last month's 5.7 percent rate, Keller said.

Economic growth was 1.1 percent last year, the slowest since 1993, as government measures to cut a record budget gap stifled expansion. Exports, the engine of the country's growth, will probably expand by 7.6 percent this year instead of the earlier forecast of 11.5 percent, the ministry said.

The government has postponed tax cuts aimed at boosting growth from a 14-year low to focus on reducing reliance on external financing as investors shun riskier assets in a flight to safety.

Hungary now plans to narrow the shortfall to 3.4 percent of gross domestic product from last year's 5 percent, rather than an earlier plan of 3.8 percent. This month's gap is expected at 13.5 billion forint ($65.7 million), pushing the 10-month deficit to 2.7 percent, Keller said.

The monthly gap compares with a shortfall of 58.4 billion forint in September and 49.8 billion forint a year ago. This year's deficit will be ``hopefully'' less than the new target, Prime Minister Ferenc Gyurcsany said on Oct. 18.

Gyurcsany has cut public jobs, raised taxes and slashed subsidies to narrow the gap from a record 9.2 percent in 2006 to 5 percent last year, the narrowest since 2001. The government plans to meet terms next year for membership in the European Union's so- called exchange rate mechanism, a prerequisite for euro adoption.

To contact the reporter on this story: Zoltan Simon in Budapest at zsimon@bloomberg.net.

Last Updated: October 21, 2008 06:36 EDT