Q4 GDP growth above expectation, points to a (somewhat) weaker forint

HUNGARY - In Brief 14 Feb 2018 by Istvan Racz
GDP growth for Q4 2018 came out this morning at 1.3% qoq, 4.8% yoy on sda basis, the latter up from an upwardly revised 4.2% yoy in the previous quarter. This was clearly above expectation (market: 4.1% yoy, our forecast: 4.4% yoy), a great part of the positive surprise coming from the revision of previous quarters' data. Anyway, the new figures marked further acceleration. Full-year growth jumped in 2017 from 2.2% to 4% (unadjusted) and from 2.1% to 4.2% on sda basis, the difference between the two numbers in 2017 explained by a leap year effect.Given that the economy now seems stronger (and US inflation was also higher than expected in January), whereas the MNB is believed to stick to its existing set of loose policies for the time being, the forint may go now somewhat weaker than so far. Some HUF weakness against the euro is actually developing today.Readers may remember that we said in early January that we would not be surprised if EURHUF returned to the 313-314 level held in late December, from the 310 level to which the forint strengthened suddenly in the last days of 2017, within a few weeks time. Well, it certainly took a bit longer than we expected, but now we are nearly there.

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