Page 75 - CE Outlook Regions 2022

commitment to fight inflation and pursue a long tightening cycle.
MNB deputy Barnabas Virag forecast that by the end of the
monetary tightening, Hungary will have the highest real interest
rates in the region, persistently higher than before the crisis.

Rising rates and lower inflation, leading to higher real interest
rates, should support the forint, but gains won’t be sustained
unless the markets see the government’s commitment to tight
fiscal policy, according to ING Bank, which sees the EUR/HUF
rates hovering in the 360-370 range in much of 2022. The
National Bank has no official exchange rate target, and the
government is not publishing forint forecasts on a regular basis.

Policymakers decided to close down the central bank’s Bond
Funding for Growth Scheme in mid-December at the last
rate-setting meeting as part of the drive to phase out
unconventional monetary policy tools in the fight against inflation.
Under the programme launched in mid-2019, the MNB bought
HUF1.5 trillion in corporate bonds to help Hungarian companies
access cheap financing. As a result, the corporate bond market
jumped from 1% of the GDP to 4-5%.

Moody's upgraded Hungary's sovereign rating to Baa2 from
Baa3, bringing its rating of Hungary up to the same level as
sovereign ratings assigned to it by Fitch and S&P. A faster fiscal
consolidation of the government could trigger an upgrade in
2022.

There were no new IPOs in the premium segment of the
Budapest Stock Exchange, which has a €26.6bn market
capitalisation, the second-largest after Warsaw in the region. The
Xtend market for SMEs saw a couple of new listings, including
OXO Technologies, which invests in startups.
After a 10% decline in 20201, the benchmark BUX index
appreciated 20%, below the Czech PX index but in line with the
Polish WIG index.

The benchmark index is now more than 10% off its historic high
of 56,233 in early November. Of the four blue chips accounting
for 80-90% of trade volume, shares of CEE’s leading lender OTP
are up 27% year-to-date, followed by oil and gas giant MOL and
pharma group Richter, gaining 15-16%.

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