Hungary gov't measures limited by financing, exact measures still opaque - Macrocomment from Concorde Securities

The government has started laying out its anti-virus economic program on Monday and during the weekend. Fiscal easing would total to 1.7% of GDP, and additional actions (guarantees and central bank measures) could complement the measures to roughly 20% of GDP. The size of the fiscal measures is modest and in line with reality, as financing of the fiscal steps is not straightforward, given the lack of appetite on the bond market in recent weeks, also the MNB’s limited options to engage in debt monetization due to concerns related to the forint exchange rate.

 

The government has, in the weekend and during a short announcement on Monday at noon by the Prime Minister, announced the broad layout of the economic policy’s reaction to the coronavirus-related slump.

The details are not pretty clear as of now, further clarification are expected during the coming days. Amongst them stands out the central bank’s involvement in the program, to be clarified on Tuesday.

The Prime Minister said today the total amount of the package would add up to roughly 18-22% of the GDP (roughly HUF 9,500 billion), inclusive of the MNB’s programs.

The government is planning to set up two funds, worth a total of HUF 1,345 billion for restarting the economy, and 663 billion for measures to contain the spread of the virus. Their size is not utterly interesting, given the opacity related to the composition of the funding (mainly coming from reshuffling in the 2020 budget appropriations) and their main tasks. Some issues to be handled are:

• increase wages in the healthcare system,
• pay some-private sector wages,
• offer loan guarantees,
• boost spending on infrastructure and
• pensions hikes (starting only in a year’s time)