Hungary has been stamped out, even 430 euros can come
On Wednesday afternoon, the fall of the forint continued, one euro was already 416 forints, and one US dollar was 407 forints on the interbank foreign exchange market. government bond yields also increased. The fall cannot be caught on the Western European stock markets today, because the leading indices are in plus, and the BUX has fallen a little since the morning. The external and internal causes of the weakening wave that has been going on for weeks are complex.
The HUF is unreasonably weak compared to regional currencies
Gergely Suppan said that most recently, the drastic increase in natural gas prices across Europe triggered the weakening of the forint. The expert emphasized that the reason for the increase in natural gas prices is that Russia has cut back on gas deliveries, as well as the fact that workers in the natural gas sector are on strike in Norway, which is why production is halting.
Thus, a total gas crisis is emerging in Europe, he underlined.
The seriousness of the situation is shown by the fact that in Germany they are already talking about which industries will be cut off from consumption if the gas shortage hits. And this would cause an endless, severe recession, which could drag us down with it
– he said.
On Tuesday, the resulting fears weakened the euro, and the forint is sensitive to the exchange rate of the euro, if the euro weakens, then the forint also weakens – he added.
In addition, the forint is excessively undervalued and is under constant attack, which is the reason why it performed worse than the regional currencies – the expert opined.
Unfortunately, Hungary has been singled out as if we have the worst situation at the moment, but this is completely unfounded
– he emphasized. You can constantly hear about how vulnerable our country is due to the gas situation, even though, for example, the Czechs are not in a better position in this field, yet they do not beat the Czech crown. They are also worried about the labor deficit, which is significantly less worrying than it seems at first. We are the only ones being punished because of the price-limiting measures and the special taxes, even though other countries also use similar tools. pulled by the product, they exaggerate the concerns related to the internal and external balance – under.
Regarding the weakening of the forint, in addition to the above, many people raise why the MNB does not raise interest rates, he added. However, if we look at the most recent inflation figure of 10.7 percent, together with the most recent interest rate, which is 7.75 percent, it means that our real interest rate is currently around minus 3 percent – explained. If we can compare this with the Czech data, for example, inflation there is over 16 percent with a base interest rate of 7 percent, so the real rate is 9 percent when rounded off there Similarly, in Poland, inflation was 14 percent and interest was 6 percent, so the real interest rate there was also -8 percent. But we could also mention Romania, where the real interest rate is also around -9 percent, he listed.
This poses a problem, why is the real interest rate in Hungary – 3 percent?
he asked the question.
It is therefore completely unfounded that the forint is weakening in such a precise way. But even though it is unjustified, they continue to beat the Hungarian currency, he said.
He pointed out that one of the reasons for the attacks on the forint is that we have not yet received the new funds from the recovery fund.
However, what will happen to the forint in the future is currently unpredictable. The only factor that could stop the weakening of the forint in the short term would be if we could come to an agreement with the European Union. Unfortunately, this is made more difficult by the fact that the summer vacation in Brussels is coming soon, so we will not be able to reach an agreement with anyone until September, and moreover, there is a lack of good will on the part of the EU if the Hungarian government is open to compromise. However, the agreement also depends on the other side, not only on us – he believed.
In addition, if we reached an agreement with the EU, the euro would immediately be 370 forints, but if not, then anything could happen and the forint-euro exchange rate could go up to 430
said the analyst.
Gergely Suppan also touched briefly on the situation of the OTP, which, as he said, is similar to that of the HUF. In fact, they hit OTP unjustifiably, which is why the banking group’s papers are extremely undervalued. The risks related to OTP are all priced multiple times, be it the conflict in Ukraine or the extra profit tax, he emphasized.
Regarding Hungarian economic growth, he said that in the case of Hungary, a recession is not expected at all. The reason for this is that real wage growth, even if it will decrease slightly, will be permanent, which supports consumption, meanwhile, FDI flows into the country non-stop and is both in progress and in prospect in a very large amount. The outlook is also improved by the fact that tourism is in the recovery phase and indeed, to a small extent, the organization of the festivals that were missed last year and the year before spring also adds to the growth. Overall, there are several factors that have a positive effect on the outlook. In addition, a slowdown in growth seems inevitable, due to the external environment, interest rate hikes and the slowdown in real wage growth – he explained. However, unless there is a gas crisis in Europe, they do not expect a recession, instead they expect the rate of quarterly growth to drop to 0.5 to 0.6 percent at most.
The HUF is the easiest prey to hunt down
Regarding the weakening of the forint, Orsolya Nyeste emphasized that there is currently an extremely unfavorable global mood. Markets began to price in very serious recession risks, causing them to go into risk-averse mode and at the same time the dollar started to soar. On Tuesday, July 5, it gained one and a half percent against the euro in just one day. The strengthening of the dollar and and the expectation that the dollar will soon reach parity with the euro exchange rate, usually emerging markets suffer, including the forint explained the expert.
In this situation, unfortunately, the Hungarian forint once again became the easiest prey, since the perception of the Hungarian currency was already unfavorable, which is the reason for its lack of integration with the European Union. And in this regard, it seems that the good would no longer expect reassuring messages from the government, but would like to see actual progress
he said.
A key factor in the expected improvement of the forint exchange rate in the future is the conclusion of the agreement with the EU, he underlined.
In addition, the MNB naturally raises the interest rate continuously, which plays a very important role, since the key in such a situation is that the interest rate differential in favor of the forint is getting higher and higher, because then an activity that plays to the weakening of the forint can become extraordinarily expensive in the market. It is possible to raise the interest rate to a level where it would be very painful to continue market positions that play to the weakening of the forint – he emphasized. For this reason, he believed that tomorrow the MNB will be forced to act and may once again implement an extraordinary interest rate increase on the one-week deposit. It would also be important to take action because the weakening of the forint now generates a very serious inflation risk, the expert pointed out.
Regarding Hungarian economic growth, he said that for the time being, no recession is expected in Hungary, but they may see some chance that in the next two quarters the GDP may be at the same level, although this is not their basic expectation, and in annual terms the GDP could still grow minimally. Basically, however, they expect that growth will fall back, slow down, but it will not stop. They are currently counting on positive quarterly growth rates. A recession at such a level that annual GDP rates are also negative is currently not a possibility either in Hungary or elsewhere in Europe. However, the obvious condition for this is that energy supply problems and risks priced by the market do not occur – he explained.