Writing in the ‘beyondbrics’ blog on the Financial Times, Kester Eddy notes that despite heaving lobbying from Hungary’s central bank and solid-looking economic numbers, the national currency’s weakness continues to baffle the markets. He cites central bank governor Gyorgy Matolcsy’s praise for rising employment and for the country’s “stable and predictable path”.
Unfortunately for prime minister Viktor Orban, the markets aren’t persuaded as easily as state-employed journalists, something the FT’s author supports with the observation that the forint slid 6 percent last year and has been flirting with HUF 320 per euro. Poland’s zloty lost just 3.3 percent while the Czech koruna a mere 1.2 percent. Political risk, in short, appears to be taking a toll, and Orban’s currency among Hungarians has been sliding, if anything, more precipitously than the forint. Eddy quotes William Jackson, senior emerging markets analyst at London-based Capital Economics, warning that if this leads to new anti-business moves by the government, badly-needed foreign investment could be delayed.
Hungary, says Jackson, “has high levels of FX debt, public debt and problems in the banking sector, such as high levels of non-performing loans. Although these vulnerabilities have eased in recent years, Hungary still looks more vulnerable than the Czech Republic and Poland.”
