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Hungary Country Risk Report Q2 2018

Hungary Country Risk Report Q2 2018

Executive Summary

Core Views

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.


Executive Summary
Core Views
Chapter 1: Economic Outlook
SWOT Analysis
BMI Economic Risk Index
Economic Growth Outlook
Escalating Risks Pose Threat To Growth Outlook
A strengthening domestic environment will support real GDP growth in 2018 as consumer demand surges and the investment outlook
remains positive. However, rising overheating risks and political uncertainty threaten the sustainability of growth and subsequently we
maintain a below consensus outlook over the coming years
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
Domestic Demand Surge To Shrink Current Account Surplus
Hungary's current account surplus will continue to narrow as domestic demand strengthens in 2018. Rising EU structural funding
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 AND FINANCIAL ACCOUNT BALANCE
Monetary Policy
Monetary Policy Framework
TABLE: MONETARY POLICY FORECASTS
Fiscal Policy And Public Debt Outlook
Near-Term Fiscal Risks Falling But Long-Term Threats Remain
demographic trends point to future pressure on government budgets
Structural Fiscal Position
TABLE: MAIN REVENUE AND EXPENDITURE CATEGORIES
TABLE: FISCAL AND PUBLIC DEBT FORECASTS
Currency Forecast
HUF: Strengthening Despite MNB Efforts
Countervailing forces will keep the forint around the HUF310/EUR level in the short term. However, our bearish view on the euro
throughout 2019
TABLE: BMI CURRENCY FORECAST
Chapter 2: 10-Year Forecast
The Hungarian Economy To 2027
Growth Model Threatened By Declining Competitiveness
the pre-crisis period. Among the major headwinds dampening long-term growth prospects will be a shrinking labour force, low levels of
capital investment and weak productivity growth
TABLE: LONG-TERM MACROECONOMIC FORECASTS
Chapter 3: Political Outlook
SWOT Analysis
BMI Political Risk Index
Domestic Politics
2018 A Key Year For Hungary's EU Relations
We believe that 2018 will be a key year for Hungary's relations with the EU as it clashes with Brussels over migrants and restrictions on
foreign NGOs. With discussions on the future of the EU and EU funding likely to intensify during 2018, Hungary's relationship with the
EU could drastically deteriorate over the coming years
TABLE: POLITICAL OVERVIEW
Long-Term Political Outlook
at a much slower pace relative to pre-crisis years. The country will face substantial challenges, including the continuing rise of far-right
population
Chapter 4: Operational Risk
Operational Risk
TABLE: OPERATIONAL RISK
TABLE: MAIN ACTIVE TERRORIST GROUPS IN HUNGARY
TABLE: POLITICAL VIOLENCE RISK
TABLE: MAJOR CONFLICT FLASHPOINTS
TABLE: BUSINESS RESPONSE TO CONFLICT RISK
Transport Network
TABLE: ROAD RISKS
TABLE: RAIL RISKS
TABLE: PORTS AND INLAND WATERWAY RISKS
TABLE: AIR TRANSPORT RISKS
Chapter 5: BMI Global Macro Outlook
EM Growth To Accelerate In 2018 While DMs Plateau
TABLE: GLOBAL MACROECONOMIC FORECASTS
TABLE: DEVELOPED STATES ’ REAL GDP GROWTH, % y-o-y
TABLE: EMERGING MARKETS ’ REAL GDP GROWTH, % y-o-y

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