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Hungary’s tight fiscal but loose monetary policy creates ‘difficult narrative’, Nomura says

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Hungary is expected to remain a “difficult narrative with relatively tight fiscal but very loose monetary policy, yet that loose monetary policy being mainly hot money which we doubt will result in significant potential growth-boosting investments”, London-based analysts of Japanese Nomura comment in a flash sent to the Budapest Business Journal.

Hungary’s 2% GDP growth last year signals relatively limited impact from its loose monetary policy, such as an unorthodox interest rate policy from the National Bank of Hungary (MNB), while the Q4 growth of 1.6% was a “disappointment”, led in particular by weaker investment and agriculture, the comment in the flash detailing the region’s overall growth says.

“At the same time, the country is set to have an even larger EU-SF cycle than Poland, but offset by base effects of MNB hot money in 2016,” Nomura says. Nomura’s analysts now see growth marginally lower in 2017 at 2.3% from 2.4% previously, while they have also revised up 2018 growth to 2.8% from 2.5% previously. “Risks are probably slightly to the upside from the structural fund cycle,” Nomura says.

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