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2020/11/27 / Erste Group Research

Second wave of pandemic made the recovery uncertain

The economy this year is set to plummet by 6.1% annually, followed by yearly growth of 3.9% in 2021. The carryover effect of the 4Q20 lockdown and – as a result – looming unemployment will likely weigh on consumer consumption. Investment activity should also remain subdued, given the possible delay in EU funds and overall low business sentiment. The economy should rebound more spectacularly from 2Q21, although broad-based vaccination seems to have become a decisive factor for economic sentiment to durably restore.

Despite lower inflation rates and a worsening short-term growth outlook, we expect the central bank to keep short-term effective rates at current levels. The MNB is to continue to support the economy with its generous corporate lending programs and strong purchasing activity on the local bond market, offsetting the relatively tight monetary conditions at the short end of the curve. As a result, we expect stable, only slowly rising yields for the upcoming quarters, until major bond yields start to visibly increase. The forint exchange rate might remain rather volatile, mainly reflecting changes in global risk assessment.

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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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