Report: Forint to depreciate as monetary policy is eased

Ratings

Chief Economist Jörg Krämer of Germany-based Commerzbank predicts a depreciation of the Hungarian forint as the country’s monetary policy is eased, according to the latest “Economic and Market Monitor” report issued by the lender today.

Commerzbank predicted slower GDP growth this year, at 2.2%, down from last year’s 2.9%, due to a peak in auto production and a drop in the inflow of EU funds.

The lender also anticipated Hungary’s credit rating would rise to investment grade this year, thanks to improvements in the country’s budget deficit and domestic and external debt. Moody’s and Fitch now both have a positive outlook for Hungary.

It was noted in the report that the forint recently benefitted from dovish developments at the Fed.

The European Central Bank is also expected to add to monetary expansion, prompting the National Bank of Hungary to follow suit and resume its rate cutting cycle, as well as lower its three-month deposit rate from 1.35% to 1% before the end of this year, according to the report. The central bank is also likely to expand its quantitative easing program.

Commerzbank predicts the forint will fall in value to 325 against the euro by the end of 2016.

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