Hungary's government will release a report on the state of the economy and budget at 08:30 GMT on Saturday, after its highly confusing comments on public finances drove down the currency and markets sharply on Friday.
The new centre-right Hungarian government, which was sworn in a week ago, has said it will announce an action plan to tackle economic problems within 72 hours after it publishes the figures about the "true" state of the 2010 budget.
The news conference will be held by the prime minister’s spokesman, Peter Szijjarto, and a top government official, state secretary Mihaly Varga, who heads the committee in charge of examining the state of public finances.
Markets were spooked by comments from Szijjarto on Friday that he supported the view his country had only a slim chance of avoiding a Greek-style debt crisis, although he said his government would act swiftly to avoid the Greek path.
The forint plunged over 2 percent versus the euro to a new one-year low at one point, while five-year credit default swaps (CDS) jumped, as investors were shocked by the government’s comments and urged clarity on its plans.
The euro slumped against the dollar on fears that Hungary could become the next casualty in the European debt crisis.
On Thursday, the ruling Fidesz party’s vice chairman, Lajos Kosa, was cited as saying by news website napi.hu that it had found public finances in a much worse shape than previously expected and there was only a slim chance of avoiding a Greek-style scenario.
The new government has repeatedly warned in the past few weeks that the 2010 deficit could be close to double of the target of 3.8 percent of GDP agreed with the EU and IMF, blaming "fiscal skeletons" left by the previous administration.
They said these could include lower than planned revenues, hospitals’ debts, one-off consolidation costs of debts of some state-owned firms and a poor state of finances of municipalities.
The central bank said on Friday that external and internal balances had improved and although the deficit this year was expected at 4.5 percent of GDP, above the target of 3.8 percent, it was sustainable and Hungary had a current account surplus.
"Although the fiscal developments show some slippage compared to the budget law, fiscal tensions stemming from the accumulated debt of state-owned enterprises do not endanger the sustainability of government finances," the bank said.
Analysts, who project a deficit of 5 percent, have said while there were risks in the budget and the target could be missed without additional measures, the government’s projections were exaggerated and its rhetoric dangerous at a time when markets are worried over euro zone debt problems.
"So how do we explain today’s (Friday) comments? At best, they appear a somewhat careless attempt to buy domestic support for a renewed fiscal squeeze. But at worst, they are further evidence that Hungary’s new government will prioritise economic populism over budget discipline," Neil Shearing at Capital Economics said on Friday.
"Either way, they risk a renewed freeze in the government bond market at a time when concerns about fiscal sustainability across the globe are increasing."
