By Tim Ash, Standard Bank
It has been easy in recent weeks to get carried away with big emerging market (EM) currency movements. A range of them – including the Russian rouble, Turkish lira, Polish zloty, South African rand and Brazilian real – have hit their lowest point this year against the US dollar.
But this is mostly about the dollar’s recovery, the broader US recovery and assumptions that the US Federal Reserve is way ahead of the European Central Bank (ECB) in terms of policy normalisation. Indeed, the ECB seems still to be going the other way, loosening monetary policy; the euro also appears to be on a hiding to nothing.
So who will be the winners and losers from the dollar’s recent ascent?
Airline passengers to Hungary, be warned: Budapest’s Liszt Ferenc International airport is having its Woodstock Week, with anything from 200 to 250 youths – with associated rucksacks, tents, sleeping bags and tin pots – camping out in the terminal every night since Sunday awaiting flights.
“We expect them to be here for three to four days. They’ll be gone by the end of the week,”” Mihaly Hardy, airport spokesman, told beyondbrics. Read more
Hungary’s government said on Thursday it had agreed a deal to buy MKB, one of the country’s largest commercial banks with more than 80 branches, from BayernLB, its German owner. The state will pay €55m for MKB and BayernLB will waive claims of €270m in receivables.
The deal marks what Mihaly Varga, Hungary’s economy minister, said was “the first step” in increasing Hungarian ownership of the country’s commercial banks. Viktor Orban, prime minister, has long insisted that he wants to see “at least” 50 per cent of the Hungarian banking system in domestic hands. Read more
The National Bank of Hungary (MNB) surprised the markets on Tuesday by lopping 20 basis points off its policy interest rate to leave it at 2.1 per cent a year, a new record low.
But Gyorgy Matolcsy, central bank governor, said Tuesday’s cut marked the end of the bank’s two-year cutting cycle. Read more
Viktor Orbán, the Hungarian prime minister now beginning his second successive term in office, named his cabinet on Thursday with seven out of 10 ministers maintained in a government that is expected to emphasise continuity.
“Out of the 10 ministers named today, seven are the same as in the (previous) Orbán government [so] the prime minister has kept his promise: the government will simply continue what they were before the elections,” Tamás Boros, director of Policy Solutions, a Budapest political think tank often critical of the government, told beyondbrics. Read more
Almost ten years to the day after its first flight, Wizz Air, a low-cost airline centered on central and eastern Europe (CEE), said on Thursday that it plans to raise €200m by listing on the London Stock Exchange in June to raise funds to expand its operations.
Jozsef Varadi, Wizz Air chief executive, speaking via video to a press conference in Budapest, said Wizz Air Holdings, the parent company based in the Channel Islands, would use the cash to strengthen its balance sheet and expand operations.
The airline sees considerable potential for further growth in its core CEE market, given that the ‘propensity for air travel’ in the region is currently just 0.36 seats per capita, compared to the western European averages of 1.58 seats per capita. Read more
Economic growth in emerging Europe surged in the first quarter as Germany’s dynamism drove manufacturing output and fears of that the Ukraine crisis would exert a damping did not materialise, data announced on Thursday showed.
“In spite of fears of spillovers from the crisis in Ukraine, there are no signs (so far a least) that this has affected the recovery in Central and South Eastern Europe,” said William Jackson, emerging markets economist at Capital Economics in London.
Four out of six emerging European countries to report preliminary GDP growth data showed a significant expansion in the first quarter year-on-year (see chart). Hungary, Poland, Slovakia and the Czech Republic posted an acceleration in GDP growth, while Romania and Bulgaria slipped back. Read more
The Hungarian economic comeback really is underway – or so it would seem, given the release of first quarter preliminary figures from the statistical office, which put economic growth at 3.5 per cent, up from 2.7 per cent in the fourth quarter of 2013.
True, when adjusted for calendar and seasonal effects, the figure is a tad more muted, at 3.2 per cent, and the final figures could be reviewed when released next month. Regardless, the result is “extraordinary”, according to Gergely Gabler, senior analyst with Erste Bank in Budapest. Read more
It’s been hovering at or near zero for a good six months but in the cold light of day it’s still a bit difficult to take it in. Inflation in Hungary – which for two decades after the collapse of communism was often one of the gloomiest economic indicators in the monthly roster – has moved into negative territory; in other words, deflation. Read more
Will he, won’t he… get it?
That was the question on Magyar political analysts’ lips on Monday – he being Viktor Orban, Hungary’s go-go, rapid-fire prime minister, “it” being the two-thirds parliamentary vote he most definitely covets for a “super-majority” again during his second term in office.
He’s on the brink – it depends on a few thousand votes cast outside the country or in other districts. But regardless of this, the one time anti-communist student firebrand is sure to be at the helm in Budapest for four more years, and still with a commanding parliamentary majority. Read more
Has the Great Magyar Rate-Cutting Cycle come to an end? To many, it looks that way, following the central bank’s decision on Tuesday to snip just 10 basis points off the base rate, to leave it at 2.6 per cent a year.
And even this trim, the smallest made so far in a 20 month long trimming spree, is possibly more symbolic, an effort to keep up the momentum in front of elections, scheduled on April 6, just 12 days hence. Read more
Inflation watching in Hungary is getting tiring on the eyes: following an unprecedented zero change in prices in January, annual inflation crept up by a whole 0.1 per cent in February, according to figures released on Tuesday.
The figures reinforce the belief that the central bank will continue with its marathon rate-cutting cycle with at least one more cut later this month. Read more
By Tamás Pesuth, Head of Economic Research, Nézőpont Institute
“Hungary is a small country, but it looms larger on investors’ screens.” So the Financial Times wrote at the beginning of February this year, while calling the governor of the National Bank of Hungary (MNB) “a maverick.”
As György Matolcsy marked his first year in office today, a more rounded appraisal of his work is required. The FT article looked mainly at the forint exchange rate and the low base rate in reaching its “maverick” judgement. Read more
Predicting what the Hungarian central bank is going to do is becoming something of a fools game. Last month, the bank cut rates for the 18th time in a row. So far, so predictable – except the bank changed from 20 basis point cuts (as it had used five times previously) to 15bp.
On Tuesday, the bank cut again – a 19th consecutive cut – but confounded most analysts who had predicted that the weakened currency would give the MPC reason to reduce by a smaller margin. No chance – the bank stuck to its new 15bp reduction, dropping rates from 2.85 per cent to 2.7 per cent. Where will it end? Read more
The markets just aren’t reading the script, it seems. On Thursday the Hungarian economy ministry issued its latest upbeat economic release: “The number of people in work exceeds 4m” – that’s 235,000 more in work than when the Fidesz government took over in 2010, it announced in triumph. Minister Mihaly Varga was equally upbeat in a guest post on beyondbrics this week.
So if Hungary is in such good shape, how come the forint has been so badly hit? Read more