London-based emerging market analysts expect the forint to see a negative correction and rates to rise in the coming months, according to forecasts compiled by MTI's London correspondent. Hungary's current account deficit after the National Bank of Hungary (NBH) announced a better-than-expected Q3 deficit figure on December 29.
Analysts at Goldman Sachs said they expect the forint to weaken from an average 254 to the euro in December to 282 over the coming six months. They added that National Bank of Hungary (MNB) could still raise rates 25 basis points to 8.25%, before ending its tightening cycle, though the bank's decision to keep rates on hold in November and December could also mean an end to its campaign of rate rises.
When the government's austerity measures cause the economy to slow in the H2 of the year, the bank will start lowering rates, bringing them back down to 6.5%, the analysts said. Analysts at BNP Paribas expect the forint to weaken to at least 260 to the euro in the Q1 of 2007. They expect the MNB to raise rates another 75 basis points to 8.75% by April. Rate cuts thereafter will be slow. The analysts put the year-end base rate at 8.50% and say rates will not fall under 8.00% until the middle of 2008. They put the year-end rate for 2008 at 7.50%. (Mti-Eco, Népszava)
London-based emerging market analysts report an improving outlook for Hungary's current account deficit after the National Bank of Hungary (NBH) announced a better-than-expected Q3 deficit figure on December 29, reports compiled by MTI's London correspondent show. Hungary ran a €1.129 billion c/a deficit in Q3 2006, well under analysts' estimates of €1.46-1.48 billion. Analysts at JP Morgan lowered their estimate for Hungary's full-year c/a deficit to around 6% of GDP from an earlier projected 7.1%. The house projects Hungary's 2007 c/a deficit will fall €1 billion to €4.3 billion, or 4.5% of GDP, as government austerity measures cause import demand to drop.
Analysts at Merrill Lynch say that if the government's successfully implements measures to reduce the budget deficit and growth in the eurozone continues, Hungary could run a trade surplus as early as 2007, narrowing the c/a deficit for the year to 5.0-5.5% of GDP. Goldman Sachs projects Hungary's c/a deficit will fall from an expected 7.9% of GDP in 2006 to 6.0% of GDP in 2007, because of falling import demand and improved exports. (Mti-Eco, Népszava)