Euro Target Date Omitted

August 2006 | Market Alert

The decision not to include a target date - previously 2010 - to join the eurozone in Hungary's new convergence plan, due to be submitted to the European Commission on 1 September, is a pragmatic step given the pressing problems facing the Hungarian economy. The move publicly acknowledges what BMI and international observers have known for over a year, and finally relinquishes the 'utopian' target to focus on the key issue of tackling the country's ballooning twin deficits. To illustrate the situation we forecast this year's budget deficit soaring to 8.6% of GDP and the current account deficit to register 7.1% of GDP. The former is currently the largest budget deficit in the EU and more than twice the 3% required for euro adoption.

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