Nomura: Hungarian government changes financial narrative under pressure


The Hungarian financial narrative is changing, chiefly due to increasing pressure on governing party Fidesz and Prime Minister Viktor Orbán, Nomura analysts believe, according to a report issued by the Japanese firm today.

According to Nomura analysts, a realization within the Hungarian government lead to the decision that “there was a need for a greater (populist) reaction to the political pressure Fidesz is under in the education and healthcare sectors as a result of previous wage freezes and a lack of other reforms dogging employees in particular”, the report says. 

Nomura analysts see that the government and the National Bank of Hungary (MNB) have “come to the realization that a more dramatic push is needed to secure growth targets (3.0-3.5% in the medium term) through higher credit growth to SMEs and higher export growth than is currently occurring”. In Nomuraʼs view, a realization between the government and the central bank showed that broad, unorthodox “monetary policy couldn’t simply do all the heavy lifting – as such, fiscal had to come to the party as well.”

The analysts of the Japanese firm believe that this move is the simplest to make it through weaker HUF and short-term curve steepeners, Nomura said in a report issued today. “The credit profile is deteriorating as a result, but, with a lack of external issuance, the upside in that asset class remains limited”, the report says.

“For the past year, the narrative in Hungary has been relatively simple, maybe even boring: a central bank that wanted to minimize rates to maximize growth, that was maximizing profit to remit to the government over time, that wanted lower foreigner participation in HGBs and a flatter curve, a fiscal policy that was tight given monetary expansion and to ensure a ratings increase,” the report says adding, not a whole lot is going on apart from this.


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