Fidesz has two-third majority in the Hungarian

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Fidesz has two-third majority in the Hungarian

parliament, while the market looks not too happy with it

The votes of people living in foreign countries have not changed the result of the Hungarian parliamentary election. So the question that will have Fidesz two-third majority again in the parliament has been answered. YES, Fidesz will have 133 mandates from the maximum 199 seats in the parliament.

It takes roughly 2-3 weeks until the result will be officially approved and the parliament will have the opening session. The new government may be formed around mid-May. There are rumors that some of the ministries may be divided into two or three part. One ministry may be the Ministry of National Economy, while the other one may be the Ministry of National Resources. The former ministry into two parts – Ministry of Finance and Ministry of Economy – while the later one even into three parts – Ministry of Healthcare, Ministry of Education and Ministry of Resources – may be divided. Prime Minister, Mr. Orban didn’t say any details about the economy policy they may follow in the next four years, he mentioned only that they would like to continue the work they started in the last four years. So we maintain our view that Fidesz may focus on the domestic sectors and companies, tries to maintain a supportive environment for them. Probably government may allow the reduction of bank tax if the lending activity is increasing or the banks moderating the monthly installments of foreign currency debtors in the household sector. Tight fiscal policy may be continued, the nationalization of foreign owned companies may slow down a little bit, but the risks remains that in case of worsening environment government may increase the tax wedge of multinational companies. So we don’t expect radical changes of government policy.

The EUR/HUF pair reacted slightly more on the Ukraine development than other currencies in the region. It may be partly also because of the two-third majority winning, as the market would be more happy with a simple strong majority based on the expectation before the election. Although the EUR/HUF pair was not able to break the 100-day moving average level and moved close to 308, we see still more chance for 10bp rate cut (from 2.6% to 2.5%) on 29 April. Recall that inflation in March remained very low (0.2% Y/Y), though its core part decreased only from 2.8% Y/Y to 2.7% Y/Y. The government rebuilt their reserves, so there would be no financing problem even in a case of market turbulences because of Ukraine. According to us the NBH won’t cut the base rate only if the EUR/HUF moves back above 315 in the next two weeks.