Key economist says growth won’t return to Hungary until at least 2011

Hungary’s economy will see further shrinkage before it starts growing again in 2011 at the earliest, economist Laszlo Bekesi told Nepszabadsag daily on Wednesday.

The assessment of the one-time finance minister is based on a best-case scenario of optimal conditions both at home and abroad, said the paper.

Bekesi said the government must continue making cuts to spending, reducing the tax burden and speeding up European Union financed investments.

But added to the mix of Hungary’s financial woes are forecasts for the next few months of industrial stagnation, farmers facing a drought, a depressed building sector, which stands at the mercy of investments from the distressed EU, and the continued deterioration of small and medium-sized firms, said the paper.

Prime Minister Gordon Bajnai said on Tuesday that budget measures taken by the government would help return the economy to growth in 2011. He said that growth could reach 3.6-3.7 percent in that year. The government expects the economy to contract 6.7 percent this year and 0.9 percent next year.

Bajnai also said that it may not be necessary to use all of Hungary’s 20 billion forint IMF-led loan; whatever the country does not spend will boost its reserves, he said.

The country’s gross domestic product shrank by an annual 6.7 percent, unadjusted, in the first quarter of 2009, the Central Statistical Office said on Tuesday.