EUR/HUF remains stable supporter by solid growth

Slightly deteriorating international sentiment has pushed the EUR/HUF pair close to 314 again this morning, after the sudden appreciation driven by Mr. Draghi’s speech yesterday. Technically speaking we expect further sideways trading of the EUR/HUF between 310 and 315. Additional resistance levels are at 312 and 317 in short term. Hence, the forint remains more or less stable thanks to solid domestic growth too.

Recall that the Hungarian statistical office confirmed the 2.7% Y/Y growth of Hungarian economy in 2Q15 (from 3.5% Y/Y in 1Q15). Although the economy has slowed down, the swing may carry on this year. The detailed figure shows that the agriculture was the main reason of the deteriorating economic performance, which fell by 16.8% Y/Y in 2Q15. The other sectors on supply side were still increasing, although both industry and construction slowed down (the former from 7.8% Y/Y to 6.1%, while the latter from 9.5% Y/Y to 6.5% Y/Y). The service sector dynamic was almost the same as in the previous quarter; it increased by 2.4% Y/Y up from 2.3% Y/Y. It reflects that the domestic consumption is relatively stable and strong. The households consumption increased by 2.1% Y/Y, while investments were up by 5.2% Y/Y. The export dynamic is slowing down, so our expectation that the domestic consumption started to take over partly the external demand is coming through.

Looking ahead the detailed figure confirms our view that economy may grow by around 3% in this year, but a substantial weaker performance may come in next year. It is quite clear that the domestic consumption is not able to take over fully the slowing global conjuncture; additionally the new EU budgetary period is likely to push back the investments as well in next year, so GDP might grow between 2% and 2.5% Y/Y in next year.