20170714-法国巴黎银行-Hungary_Economic_outlook_15页_556kb

Summary of BNP Paribas Report on Hungary

Core Content

This report provides an overview of Hungary's economic outlook for 2017-2019, focusing on GDP growth, inflation trends, fiscal policy, external accounts, and monetary policy. It highlights the alignment of Hungary's economic cycle with the eurozone and the implications of various macroeconomic factors on the country's financial and economic landscape.

Main Points

GDP Growth

• 2017 Forecast: Revised up to 3.5% from 2.3%, driven by strong eurozone growth.
• 2018 Forecast: Expected to grow at 2.5%, slightly revised from 2.2%.
• 2019 Forecast: Projected at 2.0%, reflecting cyclical position and capacity constraints.
• Growth Drivers:
  • Private consumption is expected to be a key growth driver, supported by tight labor markets and wage increases.
  • Fixed investment is anticipated to rebound by almost 20% in 2017 due to EU funding, but will slow in subsequent years due to labor shortages.

Inflation

• CPI Inflation:
  • Expected to average 2.3% in 2017 and 2.7% in 2018.
  • Core inflation is forecast to rise above 3% in late 2017 due to strong wage growth.
• Inflation Drivers:
  • Recent oil price declines have slowed inflation, but rising wage and demand pressures are expected to push it higher.
  • VAT cuts on food and services are expected to reduce CPI inflation by 0.5-0.7 percentage points in 2017.

Fiscal Policy

• Budget Deficit:
  • Narrowed to 1.6% of GDP in 2016.
  • Expected to widen to 2.5% of GDP by 2019 due to further VAT and tax cuts.
• Public Debt:
  • Public debt-to-GDP ratio is projected to decline from 75.4% in 2015 to 71.0% in 2019, despite higher deficits, due to stronger nominal GDP growth.

External Accounts

• Current Account Surplus:
  • Reduced from 5.6% of GDP in 2016 to 3.0% in 2017, and further to 2.7% in 2018, due to negative terms-of-trade shocks and rising domestic demand.
• Trade Balance:
  • Expected to remain stable, with trade balance at 8.4 EUR bn in 2017 and 8.1 EUR bn in 2018.

Monetary Policy

• Policy Rate:
  • Remains at 0.90% for 2017-2018, with no immediate tightening expected.
• Exchange Rate:
  • BNP Paribas expects EUR/HUF to trade at 312 by end of 2017 and 320 in late 2018.
• Forint Management:
  • The National Bank of Hungary (NBH) is expected to maintain a weak forint to prevent appreciation, even at the cost of negative real interest rates.
  • Unconventional monetary tools are being used to keep borrowing costs low and liquidity high.

FX Outlook

• EUR/HUF:
  • Forecast to rise to 312 by end of 2017 and 320 by late 2018.
• Risks:
  • Rapidly rising unit labor costs could threaten the forint and external competitiveness.

Key Information

• Hungary's economic growth is closely tied to the eurozone.
• The short-term growth boost is unlikely to be sustained due to cyclical challenges.
• Inflation is expected to rise due to wage pressures and demand-side factors.
• The NBH will focus on maintaining a weak forint to support external competitiveness.
• The government is expected to continue tax cuts, leading to a widening budget deficit.
• The current account surplus is expected to narrow due to commodity price increases and domestic demand.
• Non-standard monetary tools have been effective in managing liquidity and keeping interest rates low.
• The report is intended for professional clients and relevant investors, and is not investment advice.

Legal Disclaimer

• The report is for investment research purposes under MiFID.
• It is not an offer to buy or sell any financial instrument.
• It does not constitute a prospectus or any form of investment advice.
• The information is subject to change and should not be relied upon as authoritative.
• BNP Paribas may have financial interests in the entities mentioned and is not liable for any losses arising from reliance on this document.
• The document is distributed only to eligible clients and investors in each jurisdiction.