Published: July 16, 2012
Negotiations are "last window of opportunity", says economist.
Hungary and the IMF begin talks tomorrow that analysts view as “make or break” for Hungary’s economic outlook.
Gerry Rice, a director at the fund, confirmed in a press conference last week that talks between the IMF and Hungary regarding a stand-by arrangement loan will begin on Tuesday.
In a research note issued on Monday, Bank of America Merrill Lynch economist Raffaella Tenconi said the talks will be “the last window of opportunity for Prime Minister [Viktor] Orban to strengthen the economy and improve his odds of re-election in 2014, provided the loan negotiations are sealed before the end of the summer”.
Although the team at BofAML predict that a loan will be agreed reasonably quickly, they add that there will be challenges in achieving this. “In our view the toughest part of the upcoming negotiations will relate to the 2013 budget, as a result of the recent approved stimulus (0.8% of GDP) and the changes to the financial transaction tax,” Tenconi wrote, adding: “We acknowledge that negotiations could extend well into the winter or may even end abruptly right away.”