London, September 1 (MTI) – Hungary’s economic growth seems to be losing some steam but it “does not change the macro story” which overall remains positive, London-based emerging markets economists said on Tuesday.
In its “CEEMEA Economic Autumn Outlook” report released to clients in London, Morgan Stanley said that the Hungarian economy had “less momentum than we anticipated” in the second quarter, therefore “our previous forecasts for 3.5 percent GDP growth this year and 2.5 percent next year now look out of reach (…) We therefore downgrade our GDP forecasts to 2.9 percent in 2015 and 2.4 percent in 2016”.
However, this somewhat slower than expected growth “does not really change the underlying macro story” as Hungary continues to enjoy a recovery in domestic demand from depressed levels. Fiscal policy is turning expansionary after years of austerity, rates are at record lows and consumers got a large wealth transfer from the banks following the FX loan conversion earlier this year, and face a debt-service burden of sub-8 percent of disposable income, the lowest in over ten years, Morgan Stanley’s analysts said.
On the inflation front, the new oil profile has triggered a downgrade. “We now see CPI at 1.9 percent (year-on-year) at end-2015 and 2.5 percent at end-2016 (…) These forecasts are approximately 0.3 percentage points lower than we previously had.”
In this environment, even keeping policy rates on hold will amount to implicit monetary easing. With inflation set to approach 2 percent by year-end, Hungarian real policy rates will move firmly into negative territory and stay at around -1 percent throughout next year, Morgan Stanley’s London-based analysts said.