The health of Hungary’s economy and finances seems to be improving more rapidly than previously expected, as the country’s budget deficit continues to decrease by greater proportions than anyone would have thought and as inflation declines as well.

According to the newest figures released by the Ministry of the Economy (GKI), the deficit will drop to 2.5 percent in 2009.

This level is well below the 3 percent threshold that Hungary must reach in order to adopt the euro as the country’s currency.

The improvement is particularly impressive when one takes into consideration the fact that only two years ago, the deficit stood at a record-breaking 10 percent.

The Hungarian government must now ensure that the deficit remains below 3 percent for the following two years, after which point the EU will likely permit this former Eastern bloc country to join the euro zone.

If Hungary can keep to the prescribed benchmarks, it will likely adopt the euro in or before 2012.

Inflation also appears to be decreasing in Hungary and the most recent GKI statistics suggest that the level of inflation will decrease to 5 percent by the end of the year, and then to only 3.9 percent by late 2009. Only a year ago, it stood closer to 7 percent.

While not all predictions released today are nearly this positive—for example, growth will decline to anaemic levels, due the global recession—the fact that the Socialist minority government in Budapest has been able to turn the country’s economy around within such a short period will likely be viewed very positively by investors.