Hungary will probably postpone euro adoption from 2008 to 2010 because of high inflation and budget deficits

Hungary will probably postpone euro adoption from 2008 to 2010 because of high inflation and budget deficits, Finance Minister Tibor Draskovics said. The National Bank of Hungary (MNB) has argued for faster adoption, saying it will boost growth. Draskovics detailed some proposed cuts in state expenditure. Plans include reducing the number of higher civil servants, such as government advisors and state secretaries; the number of state-run foundations; and support for ethnic Hungarians abroad. January inflation was higher than the Finance Ministry expected, at 6.6% yr/yr and 2.1% month-on-month. It expects annual inflation in 2004 to be near the higher end of its 6%–6.5% target band. The February budget deficit is anticipated to be about Ft 180 billion (Ђ684 million), boosted by interest payments, Finance Ministry sources said. The estimated February gap would push the two-month figure to Ft 399 billion, or 43% of the full-year target. Industrial output grew 6.4% in 2003, after a 2.8% increase in 2002, the Central Statistics Office (KSH) said. In December output fell 0.8% month-on-month. Real wages rose by 9.2% in 2003, as the result of a 14.3% rise in average net wages and twelve-month consumer price inflation of 4.7%, the KSH announced. The government wants to raise R&D spending to 1.8%–1.9% of GDP by 2006, and to 3% by 2010, Prime Minister Pйter Medgyessy said. Last year the figure was barely above 1%. The number of operating businesses in Hungary rose 2.6%, to a total of 969,559 in 2003, including not-for-profit and budget-funded businesses, the KSH said.