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2018/09/10 / Erste Group Research

Hungary Macro Outlook

We have revised upwards our GDP forecast for this year from 4% y/y to 4.3%
y/y. Strengthening of household demand and investments should further
contribute positively to this year's GDP growth. Net exports, however, may
contribute negatively, since the pick-up in internal demand generates additional
import growth. Inflation exceeded the 3% target this summer, as a result of the
oil price shock, and it is expected to sustainably reach the 3% target of the
central bank in 2019. Surpluses on the trade and C/A balances may further
decline, but remain substantial.

Monetary policy is expected to preserve its dovish stance; however, the current
loose monetary conditions can no longer prevail up to the end of the 5- to
8-quarter horizon of monetary policy, according to the MNB's view. The central
bank could continue to buy mortgage bonds and maintain the IRS tenders at
least until the year-end. The forint depreciated substantially, mainly thanks to
changed risk perception on global markets, and is expected to float in the
range of 320-330 against the euro. Neither Fitch nor S&P upgraded Hungary
this summer, in spite of their positive outlook on ratings.

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General information

AuthorErste Group Research
Product nameCEE Country Macro Outlook
Topic in focusFX, Macro/ Fixed income
Economy in focusHungary
Currency in focusHungarian Forint
Sector in focus-


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