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| Strengthening CHF Raises Hungary's Economic Risks - Official |
| Budapest, 24.07.2011 |
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| BUDAPEST (Dow Jones)--A significant strengthening of the Swiss franc is raising risks around Hungary's economy, Mihaly Varga, state secretary of the prime minister's office, said in a late night interview on Hungarian commercial radio station Gazdasagi Radio.
"If current franc-forint exchange rates prove permanent, that could cut Hungary's gross domestic product growth by 0.3-0.5 percentage point," the former finance minister said.
The forint, similarly to other currencies in the region, weakened significantly versus the franc at the height of euro-zone debt concerns, reaching a record-high level of HUF238.45 Monday. By 0935 GMT Friday it had settled back to just 224.73.
Hungary is being hit hard by a strengthening franc as the majority of household mortgage holders took out franc loans by 2008, when it was much cheaper than forint-based ones. Their monthly installments have almost doubled since, and a government act to fix the franc-forint rates for them still hasn't been introduced.
If the Greek crisis escalates further, Hungary may even need to recalculate its fiscal measures, Varga said.
"Although Hungary's financing is a resolved issue for this year, a negative scenario would necessitate reconsidering the government's overhaul plans in the areas of employment, [the medical] drugs market, public transport, or pension system--to see in which areas might reforms be postponed or canceled," Varga said.
-By Veronika Gulyas, Dow Jones Newswires; +361-267-0623; veronika.gulyas@dowjones.com
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