Economy
Hungarian central banker argues rating upgrades are timely
Pleschinger’s key remarks were the following:
- As the government lowered the bank tax and the country’s foreign currency exposure is significantly smaller than previously and the debt-to-GDP ratio is reduced in a sustainable manner, albeit not as fast as originally planned, it will be difficult for the credit rating agencies to find fault with anything else. He argues that in the meantime Hungary’s budget balance turned out as planned and economic growth continues.
- Experts of the three large credit rating agencies will visit Hungary again in the spring in relation to their rating reviews. You find the schedule in the table below.
- Pleschinger - who also attends these meetings with the delegations of the rating agencies - thinks they can always find newer and newer reasons to stall the upgrade, but it would be a much more grounded decision from their part if they upgraded Hungary’s rating. He thinks investors have upgraded Hungary a long time ago.
- When MNB’s analysts made their forecasts they have already taken into consideration a slowdown in China and on emerging markets in general, as well as that EU funds will flow into Hungary at a slower pace this year therefore we should not be concerned that GDP will rise by less than 2.5% due to spillover impacts.
- However, if necessary the MNB can choose to implement unconventional means on top of those that already exist in order to stimulate growth, naturally while observing price stability and financial stability.
- As a result of the currently running central bank programmes banks’ loan portfolios could rise HUF 250-400 billion this year, which alone would give a serious boost to the economy.
- Pleschinger has acknowledged that the interest rate swap tenders beefed up to HUF 1 trillion (by which the MNB partially assumes the interest rate risks from the banks) may cause some loss to the central bank but the MNB considers this risk tolerable and low considering the hoped advantages.
- The rate-setter stressed that when taking a decision the Council considers macroeconomic objectives (price stability, financial stability, growth) therefore the decisions are determined not by the bank’s results.
- As regards the decreasing oil price Pleschinger noted that if the situation turns out to be permanent, the inflation path may need to be revisited but for now he sees no deflationary risks.
- He does not consider it to be problem if Hungary’s inflation gets close to the 3% target only by the end of the forecasting horizon, i.e. the second half of 2017. The paper noted that for the sake of flexible inflation targeting the MBN set up a +/- 1 percentage point tolerance range last year.
