Tim Gosling in Prague -

Raising alarm over the weakness of forthcoming data, Hungary's economy minister said late on September 25 that Budapest may need to cut its GDP growth forecast for the year following the release of third-quarter data. However, the official insisted the government will be able to keep to its budget deficit target, and said the 2013 growth target will remain on the back of "hopes" that domestic demand will revive.

"It is clear that what we envisaged for [economic growth] this year won't become a reality," Gyula Pleschinger, the Minister of State at the economy ministry, told the Wall Street Journal in an interview. Government targets currently include a near-zero growth forecast for 2012. However, the economy contracted 1.3% in the second quarter, and industrial and manufacturing data offers little encouragement for the third.

Pleschinger, however, insists that the government still expects to meet its budget deficit target of 2.5% of GDP. "We have sufficient reserves to meet the budget deficit target even with a recession of 1%," he said.

What's more, growth prospects will brighten next year, he predicts. "We are positive about meeting next year's growth target of 1.6%," he said. This optimistic forecast is based on hopes that Hungarians will use their savings next year to spend on local goods and thus help the economy through increased consumption."