Looking good, for nowFinance Minister János Kóka last week told MTI news agency that he believes Hungary will meet the criteria for adopting the euro in 2009. He said that fiscal consolidation (that is, the unpopular package of tax increases and public sector spending cuts introduced last summer) would bring the national budget deficit to within the stipulated threshold of 3% of GDP.
Short-term outlook for the economyWith the arrival of the holiday season, markets are shifting to the usual summer trading mood – characterised by slower than usual trading activity with many investors being on holiday far away from their desk. It is the perfect time for a brief look at the prospects of the Hungarian macroeconomic environment for the second half of the year. Obviously the fiscal policy agenda remains the key factor for the short-term economic outlook.
Tokaj fears acid rain, EU plans to ban adding sugar to wineWinemakers in Hungary’s world famous Tokaj region are up in arms because of plans across the border in Slovakia to build a huge coal fired power station. The mayor of Sátoraljaújhely, 20km from the site of the proposed plant, has called on the government and environmental groups to oppose the plan.
Bank fools the analysts
the Monetary Council’s rate decision last Monday, analysts were almost
unanimous in expecting that the Central Bank would not lower the base rate in
June from 8.0%. Although analysts predicted a total rate cut of around 0.75% to
1.0% in the remainder of the year, the timing of the current 0.25% cut came as
An MSZP councillor in
the southern county
of Bács-Kiskun was named
as a suspect in a case of misappropriation of funds amounting to some HUF 50
million (EUR 200,000) by weekly news magazine HVG last week. The State
Prosecutor’s Office has been investigating seven foundations and organisations
that applied for and received government funding, of which over HUF 50 million
(EUR 203,205) seems to have disappeared.
Electricity in the air
conditioners have been in overdrive in response to the heatwave,
prompting the managers of Hungary’s electricity grid to hold emergency
talks. At the same time, there are numerous projects, both concrete and
theoretical, aimed at addressing the problem of electricity supply.
External factors outweigh good news at home
volatility of the forint intensified markedly since the start of June
with the domestic currency hovering in a 1.5-2.0% wide range. Hungarian
bonds were also down (the yields rose by 15-25 base points compared to
the levels in the previous month) in tandem with the depreciation of
the forint, which reflects a worsening of the risk assessment of forint
instruments. Taking into account the market environment which is more
unfavourable than earlier, in our opinion the weakening of the forint
exchange rate was triggered not by worsening domestic macroeconomic
processes, but by inflation fears in the USA affecting international
markets and growing rate increase expectations in the eurozone.
Big investment talk promises bigger investment actionThe days of Communist-era prefabricated hotels, poor quality “Zimmer frei” bed and breakfasts and dingy sausage stalls will become a thing of the past if the ambitious plans of a Hungarian company come to fruition.Â SCD Holding, a property development and management company, plans to turn Balaton into an attractive holiday destination.Â SCD will invest more than HUF 100 billion (EUR 395.01 million) in a total of 28 projects near the lake by 2014. The projects at 21 locations around “Hungarian Sea” would create some 20,000 new hotel beds, 600 to 800 modern bungalows, 2,200 to 2,600 camp site spaces and 260 to 300 new landing stages for yachts. Large-scale theme and amusement parks are also envisaged.
MNB Monetary Council proving itself with steady approachIt is two weeks since the central bank rate decision on 22 May and the National Bank of Hungary (MNB) inflation report published on the same day, yet the development of monetary policy and related expectations are still the main driving factors on the forint and bond markets. This should give no cause for surprise. Firstly, market surveys carried out prior to the decision reflect the division of opinion among analysts, and, secondly, the latest inflation forecast of the MNB caused a negative assessment.
Hunt on for tax-dodging politicianFollowing the publication of an editorial in the May edition of Manager Magazin that contained allegations of financial impropriety by an unnamed government politician, the deputy leader of the conservative Hungarian Democratic Forum (MDF) has called for the Prime Minister to deal with the case and name the politician in question.