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Analysts see Hungary inflation slowing down in April

Both London-based and Hungarian analysts believe inflation slowed in Hungary last month, with analysts polled by the business daily Napi Gazdaság estimating April twelve-month inflation at 5.6%.

The Central Statistical Office (KSH) is due to publish the April inflation figure on Tuesday.

Analysts from JP Morgan's London investment office said they expect 5.7% twelve-month inflation in April after March inflation came out at 5.9%.

Analysts from the BNP Paribas bank group's London investment office predicted a steeper slowdown at the weekend, forecasting 5.4% twelve-month inflation for April.

The Barclays Capital investment group predicted 5.5% twelve-month inflation for last month.

The analysts polled by Napi Gazdaság said the disinflationary process, halted in March, likely continued in April. The analysts' consensus put April twelve-month inflation at 5.6%. They said April inflation is primarily influenced by the base effects.

Gergely Suppan of Takarékbank said the forint's record low last year is positively influencing inflation this year. The effect made consumer durables cheaper than last year, which could have a positive impact on the headline index, Zoltán Török of Raiffeisen said.

Fuel prices, however, rose again in April, just as in earlier months, Zsolt Kondrát of MKB noted. Fuel prices rose 25% yr/yr and 2% month-on-month, and food prices also have a negative impact.

Higher gas prices will appear in bills only in May, which could push the inflationary curve higher from the current month, János Samu of Concorde said. The almost 12% increase in gas prices will probably contribute 0.3% to the twelve-month consumer price index.

Inflation will then fall to around 5% by July, and will erode to around 3.5% as last July's VAT increase is removed from the base, and will probably stay at that level until the end of the year.

Next year, inflation could fall to 2.5%, Suppan said, as the excise duty, raised at the beginning of this year, is removed from the base. This could be distorted if the forint drops against the euro in the long term and there is also an uncertainty surrounding energy prices. The outlook will improve if the prices of public utility services do not increase or rise only slightly in January next year, Suppan added.

The recent forint weakening will only influence inflation significantly if the euro rate stays close to HUF 280 in the long term, the analysts said. In that case, it would push the inflationary curve 0.2-0.4%-point higher. The weak forint would primarily make energy imports more expensive, but if the global price of crude oil falls, that would offset the impact of the depreciation. (MTI – Econews)