The forint is under moderate downward pressure today, fiscal policy, trade data and Sweden's NATO accession may be the factors behind this

HUNGARY - In Brief 05 Feb 2024 by Istvan Racz

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With EURHUF at 385-386, with an apparent slight mobility in the upwardly direction, one could legitimately say that the forint is under some moderate pressure today. For sure, this is nothing dramatic, yet the explanation may be interesting. Anyway, this state of the local currency appears to justify, in hindsight, the MNB's cautious approach to cutting the base rate at the Council's latest meeting on January 30, even if Mr. Nagy, the economy minister, does not seem to be happy with that decision at all. So, it was exactly Mr. Nagy who has just said that the fiscal deficit ratio will be reduced to 4.5% of GDP this year and further to 3.7% in 2025. The Reader will correctly reiterate two things: first, that Mr. Nagy is by no means the finance minister, but apparently he is the economic policy No.1 in these days, and second, that the parliament-approved deficit target for this year has been 2.9% of GDP. Apparently, an amendment to the latter is coming. A third fact to observe is that while finance minister Varga mentioned the 4.5% figure for this year already a few days ago, he then said that this year's original target would be reached in two years, rather than in 2024, and so today's announcement by Mr. Nagy represents a further loosening up of fiscal policy as compared to the so far known path set for fiscal adjustment. We are not very much surprised by this course of events. The new figures given by Mr. Nagy are still slightly smaller than the ones we predicted in our January forecast, and we would add here that the 4.5% number which now appears as the government's new target is pretty much the highest figure that can still secure that the debt ratio does not increas...