In the remaining two quarters, economic growth is expected to stagnate or weaken, however, inflation will continue to decrease, chief financial analyst Bálint Háda of Quaestor Pénzügyi Tanácsadó Zrt summarized the company's expectations for 2011.
The fact that Hungary continues its war on debt, is a positive sign for foreign investors, Háda said. However, they are awaiting the 2012 budget figures, which will determine the country’s investment climate, he added. Hungary's government will submit next year's budget bill to parliament on September 30. Parliament will approve the bill on December 19-20 and the Budget Act will be published on December 28, according to the National Economy Ministry's budget schedule.
Quaestor projects a GDP growth of 1.6%, as against the government's 2%, a 4% inflation, which compares to the central bank’s 3% target, a 2.9% budget deficit and a 6% base rate at the end of 2011. The HUF-CHF rate is expected to remain between 225-230 as long as the Swiss National Bank can keep the recently announced CHF-EUR rate target.
Among the blue chips, Questor is most positive about oil and gas company MOL. In case of OTP Bank, the bad loan portfolio is expected to further deteriorate. The main risk for drug makers Richter and Egis is the current Hungarian regulatory environment.
Risk-free investment is a thing of the past, Háda stressed. In addition, the buy-and hold strategy no longer works, either.
Slower growth in Europe
In Q2, economic growth decelerated in Europe, too, Háda said. Inflation in the eurozone seems to improve, next year’ inflation could drop below 2%. An increase in CDS prices reflects the prolongation of the debt crisis. Hungary’s CDS price is at the same level as that of Spain and Italy, he added.
There are still serious tensions in Europe’s banking system, as new bonds, primarily those of the eurozone’s debt-laden periphery countries, have become toxic assets since the 2008 crisis. The recent decision of the Swiss National Bank could be the first step towards a stronger European integration, according to Háda.