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2020/06/15 / Erste Group Research

Economy to recover slowly from 3Q after crisis hit

The economy grew by 2.2% y/y in 1Q20, but will not manage to avoid recession in the following quarters. In FY20, GDP is set to decline by 4.6% annually, with the second quarter being the low point. Prospects of exports are hit by deteriorating external demand, while the virus-driven economic drop is causing strong job losses in many sectors of the economy, implying declining consumer consumption. Investments are also to drop this year; however, the monetary policy intention of speeding up corporate lending and more easily available EU funds might party offset the negative effects of the worsening business sentiment.

The change of the monetary toolkit resulted in tightening conditions at the short end of the curve. Meanwhile, long-term bond yields managed to stabilize well below their crisis' peak levels, as the MNB provides sufficient liquidity for banks to buy bonds via its fixed-rate loans. In addition, the MNB bought limited amount of bonds in May and halted the process after yields consolidated. Higher rates and the improving global market mood are helping the forint appreciate from its low seen in April. As the epidemic situation and growth prospects are still uncertain, we would not expect further relevant strengthening of the forint.

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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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