WIIW The Vienna Institute for International Economic Studies - Wiener Institut für Internationale Wirtschaftsvergleiche

The Hungarian economy will slide into recession this year due to the austerity measures required to reduce the fiscal deficit to below 3% of the GDP. Further, but smaller consolidation measures will be necessary in 2013 as well. An agreement with the IMF and the EU may help partially restore confidence in the government’s economic policy; nevertheless, that would also mean the end of the ‘unconventional’ policy measures and probably a revision of some of the earlier introduced ones, such as the radical tax cuts. In the absence of an agreement with IMF and EU, the consequences may include a remarkable weakening of the exchange rate and serious difficulties in rolling over external debt.