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Hungary Country Risk Report 20 2018

Hungary Country Risk Report 20 2018

Economic growth rates in Hungary will ease in the coming years, but remain comfortably higher than in more developed EU peers.

Emerging from a protracted period of private deleveraging, the economy will be boosted by stronger consumer demand. However, a large public debt load and precarious operational and political risk backdrop will weigh on Hungary’s growth potential relative to some emerging EU peers.

A major headwind facing Hungary’s economy is its tight labour market, severe labour shortages and worsening demographic profile, which poses a risk to the country’s FDI and export-orientated growth model.

Strong real wage growth will continue to push up unit labour costs, hurting external competitiveness and making Hungary’s position as a regional manufacturing hub increasingly fragile.

With the Hungarian National Bank (MNB) maintaining its ultra-dovish policy path and encouraging a weaker HUF, the risk of falling behind the curve has risen substantially. Core inflationary pressures continue to mount, and the possibility of headline inflation overshooting the MNB’s target is elevated. Our core view is that policy normalisation and rate hikes will have to come much faster than the MNB’s forward guidance suggests.


Executive Summary
Core Views
Chapter 1: Economic Outlook
SWOT Analysis
BMI Economic Risk Index
Economic Growth Outlook
Productivity Challenge Poses Threat To Growth
GDP By Expenditure Outlook
TABLE: GDP GROWTH FORECASTS
TABLE: PRIVATE CONSUMPTION FORECASTS
TABLE: GOVERNMENT CONSUMPTION FORECASTS
TABLE: FIXED INVESTMENT FORECASTS
TABLE: NET EXPORTS FORECASTS
External Trade And Investment Outlook
Import Demand And Retained Earnings Outflows Weigh On Current Account
Outlook On External Position
TABLE: CURRENT ACCOUNT BALANCE FORECASTS
TABLE: TOP 5 GOODS IMPORTS IN 2016
TABLE: TOP 5 GOODS EXPORTS IN 2016
TABLE: CAPITAL & FINANCIAL ACCOUNT BALANCE
Monetary Policy
Cost And Demand Pressures To Drive Late 2018 Inflation Surge
Monetary Policy Framework
TABLE: MONETARY POLICY FORECASTS
Fiscal Policy And Public Debt Outlook
Populism Adding To Overheating Risks
Structural Fiscal Position
TABLE: FISCAL AND PUBLIC DEBT FORECASTS
Currency Forecast
HUF: Strengthening To Come As Euro Bulls Scale Back
TABLE: BMI CURRENCY FORECAST
Chapter 2: 10-Year Forecast
The Hungarian Economy To 2027
TABLE: LONG-TERM MACROECONOMIC FORECASTS
Chapter 3: Political Outlook
SWOT Analysis
BMI Political Risk Index
Domestic Politics
Election To Produce Orban Victory
TABLE: POLITICAL OVERVIEW
Long-Term Political Outlook
Significant Long-Term Challenges
Chapter 4: Operational Risk
Operational Risk
TABLE: OPERATIONAL RISK
Business Crime
TABLE: BUSINESS RESPONSE TO WHITE COLLAR AND ORGANISED CRIME
Education
TABLE: HUNGARY AND OECD AVERAGE STUDENT PERFORMANCE SCORES, 2015
Chapter 5: BMI Global Macro Outlook
Trade Tensions Take Centre Stage
TABLE: GLOBAL MACROECONOMIC FORECASTS
TABLE: DEVELOPED STATES – REAL GDP GROWTH, % y-o-y
TABLE: EMERGING MARKETS – REAL GDP GROWTH, % y-o-y
TABLE: HUNGARY – MACROECONOMIC DATA & FORECASTS

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