Hungary’s government, which requested financial aid from the International Monetary Fund 11 months ago, used full-page newspaper advertisements to declare it “won’t give in to the IMF” on austerity measures.
The country expects “respect and trust” from the IMF and the government “won’t give up Hungary’s independence,” the ad on the back page of business daily Napi Gazdasag said. Other slogans rejected cutting family benefits or introducing a property tax. The government said it isn’t fighting against the IMF and intends to inform the public with the campaign.
Prime Minister Viktor Orban on Oct. 1 ruled out an IMF loan agreement that entails cuts in pensions, jobs or wages, conditions that last month he said were demands of international lenders. The IMF wants “more balanced” policies that improve the growth outlook and doesn’t recommend austerity measures on top of government plans, the fund’s representative in Hungary said on Oct. 4.
“This campaign is essentially a continuation of the double talk on the part of the government,” Eszter Gargyan, an economist at Citigroup Inc. in Budapest, said by phone. “If there’s an agreement they’ll present it as a ’good’ deal without austerity measures. If there’s no deal they’ll sell it as a political success story in that the government has stood up for the country’s interests.”
The uncertainty surrounding the final outcome of aid negotiations “remains unchanged,” she said.
Hungary faces the second-biggest debt repayment load in the world next year as a ratio of gross domestic product, Orban said today. Government debt will be 78.5 percent of GDP at the end of the year, according to a European Commission estimate.
“Undoubtedly it would be easier with an agreement than without, but it can be done even without” obtaining a loan from the IMF, Orban said at a Budapest meeting with ethnic Hungarian politicians from outside the country.
The forint weakened a second day, dropping 0.1 percent to 283.45 per euro by 3:10 p.m. in Budapest. It is the best-performing currency in the world in 2012 with an 11 percent advance as investors bet the Cabinet will reach a financing deal with international creditors.
The campaign is aimed at informing the population “in the most accurate manner and on the widest possible scale,” said Andras Giro-Szasz, a government spokesman, according to state news service MTI. The government isn’t “fighting” against the IMF, Giro-Szasz said, MTI reported.
Hungary’s talks for a loan of about 15 billion euros ($19.5 billion) were delayed repeatedly because of Orban’s resistance to legal and economic conditions set by the IMF and the European Union. Hungary, the European Union’s most indebted eastern member, is suffering its second recession in four years as demand for exports declines, investments drop and domestic demand shrinks.
Today’s ad campaign is a “surprising move,” which could be interpreted as “laying the ground for an agreement or a parting of ways with the IMF,” Janos Samu, an economist at Budapest-based brokerage Concorde Zrt., said in a phone interview. The base case is that there won’t be a deal unless external market conditions force the government into one, he said.
The monthlong media campaign, with a cost of 200 million forint ($917,220), will include television and radio spots as well as outdoor ads, according to the contract published on the Cabinet’s website today.
The government scrapped a plan to tax financial transactions at the central bank, removing a stumbling block in IMF talks, and approved measures that will improve the budget balance by 397 billion forint in 2013, Economy Minister Gyorgy Matolcsy said on Oct. 5.
The Cabinet raised its budget-deficit target to 2.7 percent of gross domestic product for both 2012 and 2013 from 2.5 percent and 2.2. percent respectively, predicting the economy will shrink this year and grow less than previously expected in 2013 .
Hungary’s GDP will contract 1 percent this year, recovering to 0.8 percent growth in 2013, the IMF said in its World Economic Outlook, published today.