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Hungarian Economic-Sentiment Index Turns Positive After 16 Years

Hungary’s economic-sentiment index was positive in April for the first time in almost 16 years as business confidence grew and consumers became less pessimistic after Prime Minister Viktor Orban won a second four-year term.

The index rose to 1.7, the highest since 1998, from minus 0.7 in March, the GKI research institute in Budapest said in an e-mailed statement today. The business gauge rose to a 16-year high of 7.7 from 4.7 and the consumer-confidence index improved to minus 15.3, the strongest level since 2006, from minus 15.9.

Orban, whose Fidesz party retained its two-thirds parliamentary majority in April 6 parliamentary elections, is seeking to accelerate an economic recovery following a recession in 2012. Orban has pledged to continue the line of economic policy that lowered the budget deficit to below 3 percent of gross domestic product by levying extraordinary taxes on financial, telecommunication and utility companies.

“The perception of Hungary’s economic outlook improved in all industries and also among consumers,” GKI said. Optimistic companies outnumbered pessimists in all areas except construction. GKI’s indexes are a balance of positive and negative answers to questions about the outlook for the economy.

Stable Outlook

The outlook on Hungary’s junk-rated sovereign debt was raised to stable from negative at Standard & Poor’s on March 28 as economic growth accelerates and the government is projected to keep its finances under control. S&P kept its rating for Hungary’s credit at BB, two steps below investment grade and on par with Croatia and Portugal. S&P cited risks including the highest debt level among the European Union’s eastern members and lack of government policy predictability.

The economy expanded 2.7 percent in the fourth quarter from a year earlier, the fastest pace in seven years, fueled by a bumper harvest, stepped up production by carmakers such as Volkswagen AG’s Audi and Daimler AG’s Mercedes-Benz units as well as pre-election spending on construction projects such as soccer stadiums.

The government is embarking on a third round of utility-price cuts for households this year after lowering regulated tariffs by 20 percent in two steps last year, with plans to expand energy-price cuts to companies.

The cabinet also plans to eliminate exchange-rate risk for about $15 billion in foreign-currency mortgages by next year to help borrowers struggling to repay the loans, Fidesz parliamentary leader Antal Rogan said in an April 2 interview.

The central bank, seeking to help the government boost growth, has reduced the benchmark interest rate to a record-low 2.6 percent and launched a 2.75 trillion forint ($12.4 billion) Funding for Growth plan to provide cheap financing to small- and medium-sized companies. The central bank is stepping in the place of lenders, which are cutting back lending as they deal with rising non-performing loans and Europe’s highest bank tax.

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