Today's stories: HUF 150 bn of FX swaps added, MNB calls for a debt moratorium, forint reacts negatively

HUNGARY - In Brief 16 Mar 2020 by Istvan Racz

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Well, things are moving so unusually fast that this brief note is actually coming to you a few hours earlier than the monthly report which we prepared with a cut-off on Saturday (two days ago). In the report, we wrote that the MNB was likely to continue to aim at the protection of EURHUF 340 going forward, in fear that a weaker currency could strengthen inflationary expectations, despite lower fuel prices and a prospectively decelerating economy, until at some point the need for the MNB to help out fiscal policy in defending the economy against the Covid-19 impact may / will probably arise.But it looks like this point indeed came very early. The MNB added HUF 150bn of FX swaps today, to prop up liquidity, and simultaneously called on banks to apply a debt moratorium for companies potentially getting in trouble, adding that regarding its own bank loan refinancing schemes, it will do so directly. Should banks fail to respond to this call positively, the Bank will request the government to make legal steps to the same end. Finally, the MNB relaxed its existing rules on acceptable collaterals, extending the list of the latter by the inclusion of loans to big companies (a total amount of about HUF 2500bn). Surely, this is a clear case of a major crisis-driven loosening. The MNB did not refer to any specific companies already in trouble, but there are certainly sectors and sub-sectors that will be (or are already) badly affected by the global Covid-19 situation. In the monthly report, we mention tourism, the manufacturing of electronic equipment and the car industry, but the list is potentially not comprehensive. Indeed, we see these measures as an early reaction to upcoming...