Yesterday, the Hungarian forint outperformed compared to the Czech koruna and Polish zloty. The EUR/HUF pair fell from an opening level of 267.95 to close the session at 266.20, ignoring the downward revision in growth forecasts by the central bank. Hungary’s central bank reduced the growth forecast for this year from 3.1% to 2.9%. The GDP forecast for 2012 was even more cut (from 4.0% to 3.0%), citing a reduction in public spending and bank lending. On inflation, the HNB said that the 3% target could be reached in the second half of 2012, if interest rates remain at the current 6% for a long period.
This morning, data showed that Hungary posted a current account surplus of 366 million in the fourth quarter of 2010. The surplus is significantly more than analysts had forecasted. In 2010 as a whole, the current account posted a surplus of 2.03 billion euros, the biggest annual surplus so far, compared with only 332 million in the full year of 2009. This trend is seen prevailing in 2011, with the current account expected to post a surplus again.
Unlike two previous sessions, the Polish zloty posted modest losses on Wednesday and settled back above the 4 EUR/PLN level. Deputy Finance Minister Dominik Radziwill said on Wednesday that the public debt reached 53% of GDP last year (i.e. the better result than expected 53,5%). Reuters said that according to the budget plan the agency obtained yesterday that the debt should drop to 52,7% of GDP this year and should further decrease in following years. Let us remind that if the public debt exceeded 55% of GDP, automatic austerity measures stemming from the law would be triggered.
As far as the zloty trading is concerned, we maintain the view that prospective rate hike next week could play in favor of the zloty. The Polish hike is not fully priced in contrast with the ECB expected rate hike.