Hungary: Fiscal consolidation and euro plan come into focus – Societe Generale

Hungary’s four-year roadmap for adopting the euro assumes GDP growth of 2.4% next year and sets a more ambitious target of above 3% from 2030, pairing fiscal consolidation with growth ambitions. As the government sets out further details, Societe Generale notes continued gains in Hungarian bonds. A planned reduction in the deficit to 2.8% by 2030, dependence on EU funds and a new tax package shape the outlook for Hungarian assets.

Hungarian bonds extend rally as euro adoption plans take shape

"In CEE, the HUFGB rally continues after the government unveiled further details of its fiscal plans. The four-year euro adoption plan combines fiscal consolidation with ambitious growth targets."

"Separately, the EC approved a €5.4bn SAFE defence loan programme for Hungary. The 10y HUFGB outperformed EM peers yesterday with yields falling by 12bp to 5.44%"

"The assumption for GDP growth for next year is rather conservative at 2.4%, broadly in line with the 10y average. The medium-term target of growth above 3% from 2030 against a backdrop of fiscal consolidation is more ambitious. "

"The deficit is targeted to shrink to 2.8% in 2030.The government is partly relying on €16.4bn of EU funds and substantial interest savings from convergence towards euro-area rates."

"The government also unveiled a tax package, to be submitted to parliament tomorrow. Levies will be increased for several sectors, the corporate tax rate will go up for large companies and a new wealth tax will be introduced."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)