Nomura analysts question MNB’s growth program

MNB

Although the National Bank of Hungary (MNB) has been on a mission to boost lending and growth over the past two years, it “has failed due to underlying deleveraging”, analysts of Japanese Nomura said in an announcement issued yesterday.

According to Nomura, there was another attempt by Hungary’s central bank yesterday “with more complexity and more incentives,” to turn the Funding for Growth Scheme into the Growth Supporting Program (GSP).

MNB yesterday announced the January launch of GSP with the aim of increasing the banking sectorʼs lending to SMEs by HUF 250-400 bln, or 5-10% of total corporate lending stock, in 2016, Hungarian news agency MTI reported. According to MTI, GSP comprises the final phase of FGS, as well as a package of incentives for active lenders dubbed the Market-Based Lending Scheme (MLS)

Nomura’s analysts say that “We remain skeptical about the impact on growth that may result due to the low uptake on previous schemes, though a better targeting of exporters and incentives should help, but it tilts growth risks to the upside. Overall, this is a monetary loosening and should support a flatter swap… and bond curves, a wider ASW... and at the margin, a weaker HUF.”

Nomura added that “while the details lay out how FGS (Funding for Growth Scheme) will be retired through the end of next year and replaced with new segmented facilities, it is easier to think of FGS being upgraded and the policy package as a whole being aimed at increasing lending by HUF 250-400 bln for SMEs specifically. However, because of the amounts involved, what strikes us is the low ‘efficacy’ of the program.”

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