Economy
Hungary EcoMin talks further contribution cut, sees EURHUF at 300-310
Highlights of Varga’s remarks:
- Hungary will cut payroll taxes by additional 0.5 percentage points to 19.5% next year due to strong wage growth in 2017. The announcement does not surprise us, given that the date we have seen so far this year clearly showed that wage increase will exceed 11% yr/yr in 2017, which was the condition for the additional reduction of the social security contribution.
- Economic growth could exceed 4.0% in the second half of this year, buoyed by construction and manufacturing. Given that the Economy Ministry’s official full-year forecast is 4.1% and H1 growth was below 4.0%, Varga’s remark is consistent with the ministry’s official projection.
- The privatisation of Budapest Bank is still being prepared, and Hungary is looking for optimal procedure to sell, which includes stock exchange listing.
- Hungary is not under pressure to sell Budapest Bank, and may wait until after 2018 election.
- The forint likely to remain within 300-310 range versus the euro over the next few months, barring any “radical" action by major central banks. (We are not sure that this remark has made the National Bank of Hungary (MNB) jump for joy, considering that it has recently deployed verbal intervention to weaken the forint even when it was at 302 to the euro, i.e. well within the range Varga mentioned, and even when EURHUF was at 308 on Tuesday, the bank argued in favour of an even looser monetary policy. When Varga’s remarks were published, the forint was quoted around 310.50 against the euro, i.e. outside the range mentioned, which the MNB probably did not mind at all.)
