CEE currencies partly wiped out Friday losses yesterday. While a better than expected PMI supported the Polish zloty, Hungary’s PMI disappointed. Nevertheless, given well-known volatility of the index, markets appreciated its staying above the level dividing expansion from contraction. Moreover, the forint was supported by publication of a long-awaited cabinet solution to persisting FX loans problem. The solution, however, brings little more than an extension of the current exchange rate cap scheme. The current scheme fixes CHF mortgage payments´ exchange rate at 180 CHF/HUF (below the current rate of around 240 CHF/HUF) with banks and the government sharing costs of the exchange rate difference. The new proposal allows also so far not eligible borrowers with arrears overdue more than 90 days or those with debts exceeding HUF 20 millions to participate in the scheme.
In our view, the presented solution can be a makeshift solution rather than the final solution. Economy Minister Varga has recently announced that the cabinet proposal would be delayed because of some persisting legal issues. In our view, it is unlikely that a mere extension of the current scheme would be to blame for the delay. Due to forthcoming election, it is presumable that Fidesz will incline to propose much more populist measures than the current one – and hence we expect that the true final solution will be unveiled only later.