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COUNTRY INSIGHTS

Correction of fuel prices amid rising core inflation creates policy uncertainty
HUNGARY · Report · 18 Dec 2018

Q3 GDP growth was revised higher in the second estimate, pushing the seasonally adjusted year-on-year rate slightly above 5%. Growth is increasingly propelled by domestic demand rather than the export-driven industrial sector, which suggests that the trade balance must significantly deteriorate. ...

The MNB received help from tumbling fuel prices in November
HUNGARY · In Brief · 11 Dec 2018

The Statistical Office (KSH) this morning reported November CPI-inflation at -0.3% mom, 3.1% yoy, the latter sharply down from the six-year high of 3.8% yoy, measured in the previous month. Portfolio.hu, the leading economic media domestically, called the news as a major positive surprise, agains...

Robust short-term performance but major fundamental risks for medium term
HUNGARY · Presentation · 07 Dec 2018

Hungary’s current macro performance appears robust, with real GDP growth of 4-5%, low unemployment and low inflation by emerging market standards. However, major problems for the medium term include growth and a budget heavily reliant on unsustainable EU grants, inconsistent labor markets and gro...

Q3 GDP came out even stronger in second estimate
HUNGARY · In Brief · 06 Dec 2018

KSH's second estimate of Q3 GDP growth was reported at 1.3% qoq, 5.2% yoy, on seasonally and day-adjusted basis, revising the preliminary figures of 1.2% qoq, 5% yoy. The upward revision is no big deal in itself, but the new quarterly GDP total and details allow analysts to revisit their full-yea...

CEU's departure from Budapest unlikely to lead to direct negative consequences
HUNGARY · In Brief · 04 Dec 2018

The Central European University (CEU) announced yesterday that it would move from Budapest to Vienna early next year, as the government had failed to sign an agreement with the State of New York, which would be legally required for CEU to have an operating license in Hungary from January 2019. As...

The Gruevski case: a further crack on EU relations right at the outset of budget talks
HUNGARY · In Brief · 30 Nov 2018

In recent days Hungary's government granted right of asylum to Nikola Gruevski, former prime minister of the FYR Macedonia, who was sentenced to a two-year prison term in his home country, for various wrongdoings involving corruption and abuse of power. This followed a somewhat unclear escape by ...

Moody's kept Baa3/Stable rating for Hungary unchanged yesterday
HUNGARY · In Brief · 24 Nov 2018

Moody's failed to improve the government's Baa3/Stable rating on the occasion of this year's last revision date for any major rating agency yesterday. Analysts typically did not expect an upgrade, but a number of them expected an improvement of the rating outlook to positive, just as it happened ...

Excellent fiscal data for Q3
HUNGARY · In Brief · 19 Nov 2018

The general government sector's net borrowing requirement was the equivalent of -0.5% of GDP in Q3, i.e. the government had a small net financing surplus in that quarter. That was a major positive change from Q3 2017, when the net borrowing requirement was a considerable 3.2% of GDP. As a result,...

Macroeconomic policy is at crossroads
HUNGARY · Report · 16 Nov 2018

GDP growth remained markedly more robust than expected in Q3 2018, due to strength of the non-government services sector. Rapid growth was also supported by construction activity, whereas industrial output was held back by car manufacturing and the weakening cycle in the Euro Area, and consumer d...

Q3 GDP was stronger than expected
HUNGARY · In Brief · 14 Nov 2018

GDP growth in Q3 was reported by the KSH at an unadjusted 4.8% yoy, just slightly down from 4.9% yoy in Q2, and substantially stronger than the 4.3% yoy analyst expectation (which we were in agreement with). This means 4.7% yoy cumulative growth for the first three quarters. On seasonally and day...

Q3 GDP data tomorrow: moderate slowdown is expected
HUNGARY · In Brief · 13 Nov 2018

Portfolio.hu's analyst poll expects a moderate slowdown for Q3 GDP, to an unadjusted 4.3% yoy growth rate in real terms, after 4.9% yoy in Q2. We agree with that consensus: preliminary and partial data are indeed hinting at some moderate deceleration for the third quarter. Importantly, the same a...

Surprise, surprise: bad news on CPI-inflation
HUNGARY · In Brief · 08 Nov 2018

CPI-inflation for October came out at 0.5% mom, 3.8% yoy this morning, up from 3.6% yoy in the previous month, beating Portfolio.hu's 3.7% yoy analyst consensus (and even more our 3.6% yoy forecast, to tell the truth). KSH's core inflation rose to 2.6% yoy, from September's 2.4% yoy, and non-fuel...

CPI-inflation to remain unchanged in October, consumer demand is moderately cooling
HUNGARY · In Brief · 07 Nov 2018

KSH is scheduled to come forward with its CPI-inflation data tomorrow. We expect the headline rate at 0.3% mom, 3.6% yoy, unchanged from September, as a result of the combination of a 1.4% mom rise by fuel prices and 0.2% mom non-fuel inflation. Our fuel-price forecast is the same number by which...

Further delay in Brexit talks represents a risk for the EU budget and Hungary
HUNGARY · In Brief · 04 Nov 2018

Well, Brexit is not only a problem for the EU budget because it will most probably take away some 9% of the latter's revenues, but also because delays in the conclusion of Brexit talks may cause a serious delay to the upcoming negotiations on the EU budget framework for 2021-2027. Very simply, th...

Elements of fiscal adjustment are appearing here and there
HUNGARY · In Brief · 28 Oct 2018

Following the cutback of maximum advance payments on EU-backed development projects in September, new elements of fiscal restraint appeared, thus far sporadically, in recent weeks. These included:- the discontinuation of a 30% government subsidy on payments into building society schemes, effectiv...

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