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What Would Be the Brexit’s Effect on Hungary?

The British vote to leave the European Union could slightly slow down economic growth in Hungary, analysts have told the state news agency MTI in reaction to the British electorate’s decision to leave the European Union.

Takarékbank analyst Gergely Suppan said that a reduction in EU funding should not be expected for the time being because it is fixed by contract and Britain’s payment obligations will be maintained until its exit is completed, possibly even until the end of the 2014-2020 financing period. Erste Bank macroeconomic analyst Gergely Ürmössy said despite the relatively small direct economic and foreign trade relations between Hungary and the UK, the indirect effects of Brexit could still hinder Hungary’s economic growth. In the most extreme case, a recession is not impossible but even if that happens, Hungary will not become insolvent, he added. Yields on Hungarian government securities are probably going to increase in a turbulent market environment and the risk premium will also increase compared to German government securities, he said. CIB Bank senior analyst Mariann Trippon told MTI that the forint is not expected to weaken permanently but could get stuck at 310-320 against the euro. The first reactions following Brexit reflected a “mini panic”, she added. Negative effects could be muffled by the strong fundamentals and in case of lasting market tensions, the central bank could introduce measures to expand liquidity, she said. Less than 5% of Hungarian exports are directed at the UK, so the direct effects of Brexit are limited. However, she added that downward risks on the government’s and the bank’s near 3% growth prognoses for this year have increased.

The forint traded at 317.05 to the euro around 10:00 in the morning on Friday, weakening from 313.86 late Thursday after UK citizens voted to leave the European Union in a referendum. The forint weakened as far as 321.97 to the euro in the early morning before meeting resistance around the 322 mark. It slipped to 284.36 from 276.41 against the dollar and softened to 292.71 from 288.58 against the Swiss franc. At 9:00 in the morning on Friday the forint was at 318.22 to the euro, at 288.42 to the dollar and at 295.38 to the Swiss Franc.

via hungarytoday.hu/hungarymatters.hu

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