The Hungarian forint retreated on Wednesday again behind 281 EUR/HUF level, and although in the afternoon it rebounded some of earlier looses it ended weak at 280.25 EUR/HUF. The fall of the Hungarian currency reflects sustaining uncertainty over NBH interest rates and as well implementation of fiscal measures.
Yesterday Hungary’s government retracted one-day old proposal on VAT hike and decided to support its original proposal to raise only middle VAT rate from 20% to 25%, instead of raising both middle and top rate by smaller amount, which would generate more state revenue.
It is worth adding that the government yesterday presented its plan for gas price hike, which will be steeper than previously expected and from August 1 the price will rise depending on consumption by 25%, 30% and 35%. After the rise in prices the government will provide subsidies to lower-income households. In spite of this measure the gas prices will remain lower than market prices and further steps will be necessary.
Today the domestic calendar is empty thus the development on other emerging markets will be decisive. We expect the forint again to hover around 280 EUR/HUF.
(CSOB - Investment research)