Policy-makers show signs of hyperactivity

HUNGARY - In Brief 19 Dec 2015 by Istvan Racz

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Less than two weeks after a series of MNB comments on what they were going to do to loosen policy soon, by which they managed to talk DOWN the forint moderately, and just days after the December rate-setting meeting of the Monetary Council, at which they took no new measures at all, policy-makers from the government and the MNB moved back to the limelight in the second half of this week, trying and managing to talk UP the forint moderately. As a result, EURHUF went first from a range of 310-313 to 317-318, then settled down at 316-317 after the December 15 Council meeting, and strengthened back to 314 on Friday, where it eventually started the weekend. In their most recent wave of talking, Economy Minister Varga forecasted that the forint could strengthen to EURHUF 308-310 before end-December, that the end-year government debt ratio target of less than 76.2% of GDP is likely to be met, and that Hungarian government debt yields may not rise on the FED's rate hike as investors start to differentiate between emerging economies. In terms of measures, he said the government has set a government deficit target of 1.7% of GDP for 2017 and a 1.6% target for 2018 (after 2% in 2016), that MKB Bank and Budapest Bank are likely to be privatized next year, the Treasury is preparing to issue EUR 400-450 million worth of renminbi bonds in 2016, and that new government guarantees issued to support bank lending to the economy will be doubled (to HUF50bn) next year. In addition the MNB announced that MKB Bank will be cleaned from the remaining HUF213bn of non-performing project loans on its books before end-2015, as these assets will be taken over by the MNB's Hungarian Resolution Asset...