HUNGARY HOPES DEVALUATION WILL END TRADE DEFICIT National Bank of Hungary first vice-president Janos Fekete said he hoped a planned eight pct devaluation of the forint will spur exports and redress last year's severe trade deficit with the West. Fekete told Reuters in an interview Hungary must achieve at least equilibrium on its hard currency trade. "It is useful to have a devaluation," he said. "There is now a real push to our exports and a bit of a curb to our imports." The official news agency MTI said today Hungary would devalue by eight pct and it expected the new rates to be announced later today. Fekete said the rates would come into effect tomorrow. He said one reason for the devaluation was that Hungary had a higher rate of inflation over the past two years than its main partners (around eight pct in 1985 and between five and 5.5 pct in 1986). This was partly an after-effect of action Hungary took to prevent inflation from soaring during the oil price shocks of the 1970s, he added. Hungary devalued by a similar amount last September and by between three and four pct early last year. But the country's hard currency trade balance nevertheless fell into a deficit of 539.4 mln dlrs from a surplus of 295.3 mln in 1986 and 1.2 billion in 1985. Fekete said Hungary was hoping for a hard currency trade surplus of between 200 and 300 mln dlrs this year, but that a more likely outcome would be closer to equilibrium on total hard currency trade of around 10 billion dlrs. One Western commercial attache here said: "Devaluation of itself will not change anything. It will only be useful if they also make efforts to restructure industry and improve the quality of their export goods." Fekete said he hoped to raise credits on good terms this year to invest in restructuring industry. It would be his role to persuade international banks to cooperate in this process. He noted Hungary had been given an AA rating enabling it to raise money on the Japanese Samurai bond market. Hungary's net hard currency debt soared to 7.79 billion dlrs last year from 5.01 billion in 1985, partly because of a current account deficit of 1.42 billion dlrs and partly because the fall in the dollar increased the dollar value of debt denominated in marks or yen. He said he feared net debt would also rise slightly this year, but he was in favour of borrowing for the purpose of modernisation. "I am for credits to invest for that purpose," he said. "I am against credits for consumption." He forecast gross domestic product growth of two pct this year, from one pct in 1986. Fekete said Hungary would continue to restructure its debt profile by prepaying high interest shorter and medium term loans with cheaper long term money for which it was looking more and more to the fixed interest rate bond market, where he considered rates to be low. Hard currency foreign exchange reserves would stay at around 3.5 billion dlrs, he said. On the budget deficit, which tripled to a provisional 47 billion forints last year after quadrupling in 1985, Fekete said the finance ministry was working out measures to reduce an approved target deficit for this year of 43.8 billion forints to between 30 and 35 billion forints.