A comparatively advanced economy among new EU members, with well-diversified economic and export structures. Declining inflation and the containment of inflationary expectations. Moderate net government external indebtedness, and external liquidity ratios at comfortable levels. High fiscal deficit and debt levels. The economy's vulnerability to unfavorable external and/or domestic developments stemming from the combination of high fiscal and current account deficits. The ratings on the Republic of Hungary are supported by good economic prospects, with Hungary's GDP growth forecast to accelerate to 3.8% in 2006-2008 following a projected slowdown to 3.5% in 2005, from 4.0% in 2004. The rate of expansion for 2005 is lower than previously anticipated, reflecting weaker EU growth prospects and the only gradual recovery of domestic demand
