Who benefits from the weak forint?

Following the Fed’s raise in interest rates and the normalisation of American monetary policy, the European Central Bank has also embarked on a path of contractionary policy (a strategy that the National Bank of Hungary is yet to pursue). The change in international financial conditions, the possibility of a global trade war, the shock experienced by the Turkish financial system, as well as the uncertainty in the Italian political scene have all led to an outflow of capital from developing countries, including Hungary. After a few years of constant but modest decline in value, the forint depreciated significantly: from April to early July, the EUR/HUF exchange rate decreased by 6 percent, and the USD/HUF exchange rate fell by 10 percent, followed by a slight appreciation of the currency.

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Hungarian economic growth probably reached its apex

The Hungarian economy grew by 4.4 per cent in both the last quarter of 2017 and the first quarter of 2018. A growth rate faster than this was registered only once in the past decade. This is the fourth or fifth highest rate in the CEE region, and Hungary is likely to be at the peak of its current business cycle. The rate of increase in investments financed by EU transfers and in household consumption, boosted by the elections as well, is expected to slow down during the rest of the year. In addition, external demand is expected to deteriorate rather than grow further.

You can download the forecast from here.

The archive of earlier forecasts is available here.

More information.

GKI’s economic sentiment index reached another peak in July

After its historic peak in June, GKI’s economic sentiment index continued to rise further in July. According to an empirical survey conducted by GKI with the support of the EU, business expectations became more optimistic than ever before, whereas consumer ones, albeit still very favourable, fell to their lowest level this year.

You can download the report from here.

You can download the survey data in Excel 2007 format from here.

You can reach the archive of survey summaries here.

 

Hungary’s economic policy goals and the room of manoeuvring for the economy after the elections

The Hungarian economy grew by 4.4 per cent in both the last quarter of 2017 and the first quarter of 2018. A growth rate faster than this was registered only once in the past decade. This is the fourth or fifth highest rate in the CEE region, and Hungary is likely to be at the peak of its current business cycle. The rate of increase in investments financed by EU transfers and in household consumption, boosted by the elections as well, is expected to slow down during the rest of the year. In addition, external demand is expected to deteriorate rather than grow further. However, based on the better than expected figures of the first quarter, GKI raised its GDP forecast for 2018 to 4 per cent from 3.8 per cent and its consumption forecast to 4.5 per cent from 4 per cent. GKI raised its inflation projection to 3 per cent due to the rise in world oil prices and lowered the expected general government deficit to 2.2 per cent of GDP as a result of a shift in the government’s economic policy.

You can download the forecast from here.

The archive of earlier forecasts is available here.

More information.

GKI’s economic sentiment index reached a new historic peak

GKI’s economic sentiment index reached another peak in June. According to the empirical survey conducted by GKI with the support of the EU, business expectations in June were close to their peak reached in February, and consumer ones remained hardly below their peak as well.

You can download the report from here.

You can download the survey data in Excel 2007 format from here.

You can reach the archive of survey summaries here.