Hungary’s Euro Plan and Fiscal Consolidation: Societe Generale

2.4% is Hungary’s GDP growth assumption for next year. Societe Generale notes that Hungarian bonds continue to gain as the government sets out a four-year roadmap for Euro adoption, pairing fiscal consolidation with growth ambitions. From 2030, the growth target rises to a more ambitious level above 3%. The outlook for Hungarian assets also hinges on reducing the deficit to 2.8% by 2030, reliance on EU funds and a new tax package.

Four-year euro roadmap underpins Hungarian bond rally

"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.)