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2020/09/11 / Erste Group Research

Economy to recover after huge fall in 2Q

We have revised our forecast for this year's GDP to -5.8% y/y, from -4.6% y/y. The recession in the second quarter proved much deeper, while the second wave of the pandemic has increased uncertainties surrounding a revival of external demand and the prospects of the labor market. Different economic policy measures are aimed at boosting investments, although the positive impacts should appear later, when sentiment improves. The economy is expected to rebound in the medium term and the GDP figures might be strongly supported by the accepted EU Recovery Funds beyond 2021.

The central bank reduced its policy rate to 0.6% this summer to support the economy. However, rising inflation figures do not create room for more easing and short-term rates should remain clearly above zero, according to the recent communication of the MNB. The forint exchange rate has remained volatile. The ongoing rebound of the euro supports the domestic currency, while in other cases, the MNB should use the wide range of its tools to protect the exchange rate. Long-term bond yields are expected to move sideways. Increasing weekly QE buying should offset the effects of the increased bond supply stemming from the much higher budget deficit.

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General information

AuthorErste Group Research
Product nameCEE Country Macro Outlook
Topic in focusFX, Macro/ Fixed income
Economy in focusHungary
Currency in focusHungarian Forint
Sector in focus-


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