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2018/03/13 / Erste Group Research

Hungary Macro Outlook

GDP growth accelerated in 2017, due to the rebound in the utilization of EU funds related investments, as well as because of the significantly stronger household demand. The annual growth rate was 4%. We expect the pace of economic growth to be roughly the same, at 3.7% in 2018, as strengthening of household demand and the utilization of EU funds should continue. Net exports may contribute negatively to headline GDP growth again in 2018, since the pick-up in internal demand generates additional import growth. Inflation should moderately rise this year, while the external balance position remains strong.

Monetary policy is expected to preserve its extra dovish stance for a prolonged period. The central bank will continue to buy mortgage bonds and maintain the IRS tenders. We foresee no meaningful changes in the stance of monetary policy in 2018; interbank rates should be unchanged. As a result, the forint may float in the range of 310-320 against the euro. Two out of three rating agencies classify Hungary in the lowest investment grade category, while two assigned 'positive' and one a 'stable' outlook to the rating. We expect at least one upgrade this year, which may help keep yields depresssed.

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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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