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Hungary Exited Recession in First Quarter, Poll Says

Hungary’s economy probably exited its second recession in four years in the first three months of 2013, posting growth from the previous quarter for the first time since 2011, a survey of economists showed.

Gross domestic product probably grew a seasonally adjusted 0.1 percent in the first quarter, according to the median estimate of eight economists in a Bloomberg survey. The economy shrank 1.4 percent from the year-ago period, according to the median estimate of 19 economists. The statistics office will publish the data at 9 a.m. in Budapest.

Prime Minister Viktor Orban sacrificed growth last year to reduce the budget gap and remove the threat of cuts in European Union funding less than a year before parliamentary elections. The government boosted revenue from Europe’s highest bank levy and taxes on energy, retail and telecommunication industries, which damaged lending and investments.

“Growth has quasi-started, we expect 1 percent growth for this year,” Sandor Csanyi, the chairman and chief executive of OTP Bank Nyrt., the nation’s largest lender, said on Inforadio on May 13. “It’s another question that its rate isn’t appropriate. The government took the necessary steps for fiscal stability and to stop debt growth, but these have the inconvenient side effect of not really being growth friendly.”

The forint traded at 294.31 per euro at 7:06 p.m. in Budapest, little changed from the previous day. The cost to insure the country’s debt against non-payment for five years using credit-default swaps rose two basis points to 280. The benchmark BUX stock index rose 0.1 percent to 18,704.01, its highest close in more than two months.

Growth Outlook

While the government forecasts 0.7 percent economic growth this year, Orban said the pace of expansion may reach 1 percent, the state-run news service MTI reported on May 7. The European Commission estimates Hungary’s economy will grow 0.2 percent this year.

Hungary passed multiple rounds of fiscal cuts last year to prevent the loss of EU funds, which finance 95 percent of infrastructure development projects in the country. The shortfall was 1.9 percent of GDP.

Last week, the government said it would freeze 92.9 billion forint ($409 million) of planned spending this year and in 2014 and is ready to save another 80 billion forint next year mostly by delaying payments for projects such as soccer-stadium construction. If those are insufficient to exit EU budget monitoring, Hungary is also prepared to raise the bank tax and the financial-transaction levy.

The commission will publish its recommendation on whether Hungary should be allowed to exit the so-called excessive deficit procedure on May 29. The shortfall may be 3 percent of GDP this year and 3.3 percent next year, the commission said on May 3. The EU’s budget deficit limit is 3 percent of GDP.

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