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K&H CEO: Predictable economic policy expected

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The management of K&H Bank expects Hungary’s new government to follow a stable, predictable economic policy, hopeful that the financial transaction tax and bank tax rates will be reviewed as the country is entering a phase of economic growth, CEO Hendrik Scheerlinck said in an interview with national news agency MTI on Tuesday.

The time has come for rating agencies to upgrade Hungary, he added.

Scheerlinck welcomed the fact that the newly elected government can start work in a more favourable economic environment compared with 2010. K&H is projecting 2% economic growth this year, though with many neighboring countries expecting 3% growth, Scheerlinck opined that Hungary must attain more robust growth.

The CEO noted some negative phenomena present in Hungary’s national economy. Among these, Scheerlinck mentioned the high likelihood of increasing state involvement in the energy sector. Also, while a few major banks closed the year 2013 in the black, the greatest part of the banking sector took losses for the fourth consecutive year. Poor performance across the sector is partly due to the low-quality loan portfolios resulting from the worldwide crisis, while bank tax and financial trasaction tax played a major part in deteriorating performance in banking, according to Scheerlinck.

Lending activity in Hungary’s entire banking sector would benefit from a recovery in the retail mortgage segment, Scheerlinck argued. In recent years, a large part of mortgage borrowers have been “bitten” as a result of the practice of foreign currency lending, therefore, it is of crucial importance to try and create a program of government aid to those still stuck in the mire of FX debt that is equally acceptable to the state, to the general public, and to the banks themselves, he said.

It would be a mistake to offer a solution that encourages foreign currency debtors to stop paying, as the high percentage of debt default is already a major burden for Hungary’s banking sector, significantly lowering the indicators of successful operation, according to the CEO.

K&H analysts are projecting one more base rate cut in late April by the National Bank of Hungary’s monetary council to 2.5%, to be followed by a relatively longer period with a stable rate.

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