Budapest - The Hungarian currency, the forint, firmed up Wednesday morning to within the psychological comfort zone of 300 to the euro, despite gloomy data released by Hungary's official statistics office.

Seasonally adjusted figures showed that the Hungarian economy shrank by 2.5 per cent in the last quarter of 2008 compared to the same period a year earlier. It meant the recession is deeper than originally thought, as a preliminary report had the contraction at 2.1 per cent.

Overall, the Hungarian economy grew by a paltry 0.5 per cent last year, and the government, banks and analysts have predicted that it is set to shrink by around 3.5 per cent this year. This figure may now have to be revised.

Despite this grim news, Hungary's currency remained firm after three days of a confidence building drive by the Hungarian National Bank.

The central bank has been on the warpath since holding two emergency meetings at the weekend after several weeks in which the forint hit new record lows day after day.

The bank's monetary policy council pledged to use "all available means" to prevent further devaluation. Hungary began buying forints on the international money markets in a bid to drive up exchange rate.

National Bank governor Andras Simor reiterated through the press and on domestic television that the market value of the forint - which fell as low as 317 to the euro on Friday - was not a true reflection of Hungary's economic fundamentals.

A weak national currency is particularly worrying in Hungary, where most mortgages and personal loans are denominated in Swiss francs and euros. As the forint has fallen, monthly repayments have risen by as much as 50 per cent, prompting fears of a wave of defaults.

Simor's emphatic insistence that Hungary was far from being on the brink of an Argentinian-style economic collapse was echoed on Tuesday evening by Thomas Mirow, head of the European Bank for Reconstruction and Development.

"This is not a crisis with runs on banks, or with sovereign defaults. The economic performance in most countries of eastern Europe remains no weaker, and often stronger, than that in western Europe," Mirow said in a talk at the London School of Economics. (dpa)