During difficult economic times, a report that Hungary’s annual deficit is shrinking faster than had previously been expected, will likely boost confidence among investors in this emerging East/Central European market.

Originally, officials in Hungary’s Ministry of Finance had announced that this year’s deficit would stand at 3.8 percent of the GDP. Earlier this fall, however, the government indicated that this initial prognosis was too conservative, and that the deficit would actually fall to around 3.4 percent by the end of the year.

But Hungary’s largest online daily newspaper, Index, crunched the numbers for itself and found that the deficit will almost certainly be even lower than the already modified amount, mainly because December represents a good month in terms of government income, especially from tax revenues.

The rapidly shrinking deficit is very positive news for two reasons. First, Hungary must keep its annual deficit under 3 percent for it to adopt the euro as its currency. Thanks to the healthier state of government finances, it now seems likely that the deficit would pass this threshold for the first time early next year.

This would open the door for Hungary to join the Euro Zone in either 2011 or 2012. The second reason why Hungary’s lower than expected budget deficit is important, is that it will likely renew confidence in the country’s economy among foreign investors.

The fact that the government was able to lower the deficit from a staggering 9 percent in 2006 to around 3 percent only two years later is a sign of both political and economic stability.