The confirmation of Hungary's commitment to the agreed fiscal plans is positive but market participants would have been happier to see more action on the expenditure side, London-based emerging markets analysts said after Prime Minister Viktor Orbán had announced extra taxes on the telecommunications, energy and retail corporate sectors, coupled with a one-year suspension of state transfers to private pension funds.
Christian Keller, a senior emerging markets economist at Barclays Capital in London told Econews after Wednesday's announcements that it is “clearly good to see” that the government is committed to the fiscal targets they had agreed to earlier with the EU.
But for “all those who may have expected that after the local elections we may see a somewhat more strategic approach towards the fiscal adjustment in a multi-year framework, meaning announcements of some deep structural reforms regarding local governments, the healthcare sector or state enterprises ... those people may be disappointed”, Keller said.
However, Hungary's credit risk pricings significantly tightened in London after the Prime Minister's speech.
According to data from CMA DataVision, a major CDS market monitor in London, the mid-spread of Hungary's five-year credit default swaps (CDS) were down to around 259bps in late trading from the 270.2bps close.
A CDS contract valued at 259bps means that the cost to insure every €10 million worth of bond exposure against default is €259,000 a year for the benchmark five-year horizon. (MTI-Econews)