The government approved the report on January 27 and submitted it to the European Commission and Council on January 29 after informing the Economic Committee of the National Interest Coordination Council.

    The report forecasts 4.1pc inflation for 2010, 2.3pc for 2011 and 2.6pc for 2012.

    The convergence programme envisages an ESA budget deficit of 3.8pc of GDP for this year, 2.8pc for 2011 and 2.5pc for 2012.

    Hungary's gross national debt is projected to fall from this year's 79.0pc of the GDP to 76.9pc in 2011, and to 73.8pc in 2012.

    Hungary did not have the opportunity to use budgetary tools to boost demand and thereby lessen the negative impact of the crisis due to the country's fragile external balance position, the report said. In order to partly offset the revenue loss as the growth forecast has been repeatedly downgraded in the first half of 2009, the government has decided to cut budget expenditures. As a consequence, while the general budget deficit remains basically unchanged as a percentage of the GDP between 2008-2010, the structural balance calculated based on the cyclical position of the economy has improved almost 2.5 percentage points.

    Hungary's risk rating has improved, which is reflected both in falling government securities yields and in the stabilisation of the forint exchange rate. Therefore, as global financial processes returned to normal, it has become possible to return to financing the government debt from the market.

    Hungary called down little of its IMF-EU-World Bank standby-loan during the second half of 2009, while the call-down deadline for the loan was extended from March 2010 to the autumn of this year.

    The country's current-account balance improved in 2009, recording a surplus of 0.6pc during the year, compared to a deficit of 7.2pc in 2008. The report predicts that Hungary will run a mild current-account deficit of 0.2pc this year.

    Hungary's external financing position changed from a 6.2pc of GDP financing requirement in 2008 to a 2.2pc financing capacity in 2009 and is expected to show again a surplus of 1.6pc in 2010, decreasing to 1.4pc in by 2012.

    The report expects Hungary's unemployment rate to rise to 10.8pc in 2010 from 10.1pc last year and recede to back to the latter rate in 2011 before dipping to 9.5pc in 2012.