Despite a strong inflow of positive news the
Hungarian forint retreated slightly
yesterday and the EUR/HUF pair bounced
back above the 260. The negative price
action should be explained by profit-taking,
which was visible in the whole region
yesterday and in particularly the Polish zloty.
Regarding the positive news: first, Economy
Minister Koka announcement that the
government abandoned its plans to
completely fund its expensive motorway
program and instead it would use a mix of
bond sales (EUR 1.18 will be issued in
2006), official loans and privatization
sources (the motorway company – AAK - will
listed on the BSE). According Minister Koka
the government is now confident that
Eurostat will treat the AAK as a private
company. So, its liabilities will be left outside
the public accounts, which will make it easier
for he country to cut the budget deficit. The
second positive news came also from the
fiscal front as a release of the April public
budget.
The actual deficit was materially
below the Finance Ministry’s forecast. While
the Ministry’s projection was HUF 984.4 bn,
the accumulated public sector deficit in
January-April reached just HUF 904.2 bn
(58.5 % of the full-year target). However, as
mentioned the market shrugged off this
positive domestic news and we do not
overestimate it either. Finance Minister
Veres added to the release of the budget
figures that the government will submit an
awaited program of budget tightening
measures to Parliament by the end of May.
Hence, let’s wait for the end of May to get a
better picture of the country’s fiscal outlook.
Today, the April foreign trade figure is in
focus. The foreign trade posted a deficit of
EUR 266 mln. The figure came out above
the market consensus (EUR 191 mln), but
the CSO said that the trade was affected by
the import of fighter jets. Hence after
adjusting these items, the figure should be
more in line with the market forecast. So the
impact on the forint should be rather neutral
and the FX market could continue watching
to emerging markets universe ahead of the
FOMC meeting.
(CSOB - Investment research)