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COUNTRY INSIGHTS

Fidesz' membership in the EPP is suspended, the party undergoes a rule of law investigation
HUNGARY · In Brief · 21 Mar 2019

The political convention of the European People's Party decided yesterday to suspend Fidesz' membership in the organisation until a freshly appointed three-member committee investigates Fidesz' domestic activities, to find out if those are in conformity with the EPP's basic values, especially in ...

January BOP fundamentals do not support the forint's existing strength
HUNGARY · In Brief · 19 Mar 2019

The forint has continued to strengthen against the euro recently, up by 2.5% between end-2018 and today's MNB fixing. Obviously, this started with the MNB's verbal intervention on January 16, and has been maintained since then by the expectation of an eventual policy tightening by the central ban...

It is high time to change the course of MNB policy
HUNGARY · Report · 15 Mar 2019

The uptrend of consumer inflation continued at an accelerated pace in February. CPI-inflation now exceeds the MNB’s medium-term target by all existing measures, including core inflation adjusted for indirect tax changes, the central bank’s favorite index. Importantly, inflation rose in the face o...

The government is proposing to make household bonds free of the income tax
HUNGARY · In Brief · 13 Mar 2019

The finance minister yesterday handed in a proposal to the National Assembly, according to which the interest earned from household bonds, the special kind of government debt that is only available to domestic individuals, would be free of the flat 15% income tax, as regards any new series of suc...

February inflation data sends a clear message to the MNB
HUNGARY · In Brief · 09 Mar 2019

The recent uptrend of consumer inflation continued by all existing measures, and it even accelerated, in February. The direction was widely expected but the pace was not. Headline CPI-inflation was 0.6% mom, which pushed the yoy rate back up to 3.1%, following the 2.7% figures recorded in both of...

The EPP is starting an exclusion procedure against Fidesz
HUNGARY · In Brief · 06 Mar 2019

The European People's Party's management has just announced that it is starting an exclusion procedure against Fidesz immediately, after 13 member parties from nine different countries initiated to exclude PM Orbán's party from the organisation. The EPP's rulebook says that such a procedure must ...

An ambitious plan from the MNB on government debt
HUNGARY · In Brief · 02 Mar 2019

On February 27, MNB governor Matolcsy, who is reappointed now for another 6-year term in his office, starting with March 4 2019, revealed an ambitious and somewhat perplexing plan regarding government debt. He said that in the future, all government debt 'will have to be' in domestic hands, and t...

Matolcsy to remain MNB governor, Pleschinger to stay on the MC for another six years
HUNGARY · In Brief · 27 Feb 2019

Parliament's Economic Committee voted to support another six-year term for György Matolcsy as governor of the MNB yesterday, after PM Orbán proposed Mr. Matolcsy's reappointment to the president of the republic. The head of the Economic Committee also said that the committee's Fidesz majority was...

The Monetary Council today: no policy change, eyebrows let just slightly lower
HUNGARY · In Brief · 26 Feb 2019

It seems the Monetary Council does everything to provide the market with as little guidance as possible. There was once again no policy change announced after today's monthly rate-setting meeting, and they did care not to make any marked change in the language of the communiqué. In one little cha...

Another upgrade to BBB/Stable, from Fitch Ratings this time
HUNGARY · In Brief · 24 Feb 2019

Just one week after S&P's similar move, Fitch Ratings upgraded the government of Hungary to BBB/Stable on February 22, from the previous BBB-/Positive level, at which Hungary had been staying since November 2017. The agency's reasoning was quite similar to S&P's: they were impressed by the recent...

Higher coupons on HUF government bonds sold to households
HUNGARY · In Brief · 21 Feb 2019

ÁKK is raising the coupons it pays on the HUF-denominated half-year government bond sold only to households to 2.5% from 2%, and on the similar one-year bond to 3% from 2.5%, from February 25. In addition, the 5-year inflation-indexed household bond's coupon will jump to 4.5% from 4.1% after the ...

Ugly inflation data and an upgrade from S&P
HUNGARY · Report · 18 Feb 2019

Over the past month, bad news came along with good news, none of them completely unexpected. On the dark side, adjusted core inflation continued its upward march and reached the trigger point at which the MNB formerly said would consider monetary tightening. Given this event, and especially the s...

An upgrade from S&P, possibly leading to a stronger HUF in short term
HUNGARY · In Brief · 17 Feb 2019

On Friday, February 15, S&P upgraded the Hungarian State to BBB/Stable from the BBB-/Positive level, at which it had been staying since August 2017. This was not entirely unexpected. The agency was impressed especially by regular high growth and the systematic reductions of the government debt ra...

Q4 GDP growth, the new growth target and monetary policy
HUNGARY · In Brief · 15 Feb 2019

1. GDP growth was reported at 4.8% yoy on sda basis for Q4 2018, down from a revised 5.1% yoy in Q3. The full-year growth rate was recorded at a preliminary 4.9% in sda terms (4.8% according to unadjusted data). In fact, GDP grew by close to 5% yoy throughout the whole of 2018.2. On February 10, ...

We were wrong on January inflation, a problem for the economy
HUNGARY · In Brief · 12 Feb 2019

Well, the problem is certainly not so much that we undershot the January inflation actual (though the analyst consensus got it right). They will most likely survive it somehow. The real problem is that the current growth rate of GDP, around 4% annually, less and less appears to be compatible with...

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