With budget plans, the interest rate decision comes in your pocket

We have had a strong week: the draft budget for 2025 is already in front of the parliament, a number of macroeconomic data have also come to light, and there was also a Government Info, which revealed several details about how the cabinet would stimulate the economy next year. In the week ahead, there will be an interest rate decision, detailed public finance data will also arrive, as will the latest earnings and investment statistics.

Poor October data on the public finances have been received

A week ago, the Ministry of Finance published its quick information on the situation of the central subsystem of the public finances at the end of October. In October, the central subsystem closed with a deficit of HUF 407 billion, a larger October deficit than this has only occurred once so far. This month, EU expenditure was also higher than income.

Overall, the budget is not bad: after the deficit target was raised again in autumn, so the first ten-month deficit (3,050.5 billion) corresponds to 63.7 percent of the current annual target.

Everything became more expensive again, according to Márton Nagy, everything is fine

In October, according to the government’s expectations, the rate of inflation reached 3.2 percent on an annual basis, and on a monthly basis it showed a minimal shift of 0.1 percent, the Ministry of National Economy announced. Great Martin according to the head of the ministry, “the government successfully managed inflation with its effective economic policy measures”.

In the case of foodstuffs, we see normalization after the 2022 shock, however, in September and October, the price of this product category was clearly above average on a monthly basis Trippon Mariann told Economx. The chief analyst of CIB Bank expects an increase by the end of the year due to the low base, according to him, the annual price index could be over 4 percent in December.

Ten plagues that destroyed the government’s hopes

In September, the performance of Hungarian industry was interrupted and was 7.2 percent lower than the previous year – confirmed the data of the first estimate by the CSO in its second estimate. The detailed data revealed that the domestic vehicle industry surpassed its many-year low point reached this year.

In our article, we summarized the “ten plagues” affecting the Hungarian economy based on detailed industrial production data.

The construction industry is in a deplorable state

Unfortunately, the preliminary predictions came true: in September, the volume of construction industry production decreased by 8.2 percent compared to a year earlier, and by 2.7 percent compared to the previous month, according to the KSH quick report.

In America, inflation has shot up

Since the presidential election the first key data on America’s economy has just arrived: October inflation was 2.6 percent, after September’s 2.4 percent. On Wednesday, the market awaited the American inflation data with particular attentionbecause the signs were not the best, although it seemed that the inflationary trend might break, which was finally confirmed: however, there is no reason to worry, exactly what the analysts expected happened.

European growth accelerated, the German economy grew again

The GDP of the third quarter of 2023 was exceeded by the gross domestic product of the euro area by 0.9 percent, and the gross domestic product of the EU by 1.0 percent in the third quarter of this year. In the second quarter, the annual GDP growth was 0.6 percent in the euro area and 0.8 percent in the EU.

On a quarterly basis, the euro area GDP increased by 0.4 percent with seasonal adjustment compared to the previous quarter in the third quarter, which is the strongest growth rate in two years, and in the second quarter, an increase of 0.2 percent was measured. On a quarterly basis, the gross domestic product of the EU increased by 0.3 percent in the third quarter after the same 0.3 percent increase in the second quarter.

On a quarterly basis, the German economy expanded by 0.2 percent in the third quarter, after a downwardly adjusted 0.3 percent decline in the second quarter.

Budget 2025: next year’s budget before the parliament

A week ago, Minister of Finance Mihály Varga submitted next year’s budget bill to the Parliament.

The government:

• with economic growth of 3.4 percent;
• with 3.2 percent inflation;
• with a deficit target of 3.7 percent;
• and with an annual average of HUF 397.5 euros

counts for 2025.

This week, we covered next year’s budget in several articles:

Gergely Gulyás made an announcement about housing support

The minister in charge of the Prime Minister’s Office said about next year’s budget that this is the budget of the new economic policy:

• tax credits for children will be doubled;
• employee credit is introduced;
• new home building and housing subsidies are coming;
• and help small and medium-sized businesses to an unprecedented extent.

Gergely Gulyás also spoke about: within a few years, the goal is an average gross salary of HUF 1 million and a minimum salary of HUF 400,000.

Many people are already treating it as a fact that the Minister of Finance Mihály Varga will be replaced by György Matolcsy at the head of the Hungarian National Bank next year – the Minister of Construction and Transport János Lázár also spoke out in the past few days – but Gergely Gulyás “moved away” the relevant question and only revealed that if there is concrete information on this topic, then “Viktor Orbán will speak”.

What happened at BÉT?

In addition to increasing traffic, the stock index of the Budapest Stock Exchange (BÉT) rose last week, on Friday, BUX closed at 77,771.12 points, 1,520.61 points or 1.99 percent higher than a week earlier. BUX rose to historic highs this week. The turnover of the stock market this week was 88.09 billion forints after the 80.4 billion forints reached in the previous week, the leading stocks strengthened with the exception of Richter.

It is not difficult for those who are looking for a cheap investment at home – we wrote after the reports of the four leading companies of the Hungarian stock market in November. The stable profit generation further pointed out that the domestic stock market is painfully cheap, even compared to itself.

We reported on the reports of blue chips in our articles below:

Here’s how the top stocks performed last week:

• The OTP its exchange rate rose the most, on Thursday it reached a new historical peak at HUF 21,120. The bank paper ended the week with a 5.26 percent increase at HUF 21,000 on Friday, with a weekly turnover of almost HUF 65.6 billion.
• A Magyar Telekom It gained 1.02 percent during the week, the share ended trading at HUF 1,188.0 on Friday, and its weekly turnover exceeded HUF 4.9 billion.
• A Mol its exchange rate rose by 0.15 percent, the paper closed at HUF 2,642 on Friday, and its weekly turnover reached HUF 6.2 billion.
• A Richter Having weakened by 1.56 percent, it ended trading at HUF 10,700 on Friday, the share’s weekly turnover exceeded HUF 8.6 billion.

What did the HUF do?

The exchange rate of the forint has remained stable above 400 against the euro for the past week: on Monday, after the submission of next year’s budget, it began to weaken spectacularly – from around 407 in the morning, the exchange rate was already above 411 in the afternoon -; Tuesday’s inflation data, which was more favorable than expected, could not significantly strengthen it either; but on Wednesday, the forint found itself, and by Friday its exchange rate against the euro strengthened up to 405, and then weakened back to around 408 by the end of trading.

In addition to the fact that the international environment moved the exchange rates, some analysts – for example, At Erst – they see that the forint was pulled back by the statements made by Chancellor Gergely Gulyás Gulyás on Government Information: the minister in charge of the Prime Minister’s Office said that investors should not expect an extremely loose interest rate policy from the new central bank leadership that will take office in March.

By the way, the forint was last under 400 against the euro almost a month ago, on October 23. Compared to the EU currency, overall it weakened minimally in a week (it weakened by almost 0.2 percent), but in a month it weakened by around 2 percent.

The Hungarian currency is no better against the dollar: Since the election of Donald Trump, the dollar has been strengthening against the euro – thus also against the forint – and the forint has fallen by 2 percent in a single week, and by almost 5 percent in a month.

The crypto market is also cracking

As for the foreign exchange market: bitcoin has also been doing well since the election of Donald Trump. But not only the biggest cryptocurrency, but also the crypto market has grown a lot since the beginning of November. In a single month:

• the price of bitcoin increased by a third, it is exchanged around 91,000 dollars;
• the price of the second largest crypto, ether, went up by a fifth, its price hovers around $3,100;
• while dogecoin, Elon Musk’s favorite – who was also included in Trump’s government – strengthened by more than 170 percent (!) during this period, and is currently worth 36.5 cents.

And the capitalization of the entire crypto market increased by almost 1000 billion dollars to over 3000 billion.

What will next week bring?

This week there will be an interest rate meeting at the central bank, the CSO will also publish earnings and investment data, while the Ministry of Finance will issue its detailed information on the state of public finances at the end of October.

• Tuesday The Monetary Council of the Hungarian National Bank (MNB) will hold its next interest rate decision meeting. In October, the council did not change the base interest rate, which is unchanged at 6.5 percent, and neither side of the interest rate corridor changed.
• On Friday the Ministry of Finance announces the detailed information on the state of public finances at the end of October. According to preliminary data, by the end of October, the central subsystem of public finances closed with a deficit of HUF 3,050.5 billion. In the fall, the deficit target was greatly increased, so compared to that, the budget is not doing badly based on the first ten months: the HUF 3,050.5 billion deficit corresponds to 63.7 percent of the annual target.
• Also on Friday KSH publishes the third quarter investment data. According to the raw data, the volume of investments in the second quarter of 2024 was 16.8 percent lower than in the same period of the previous year.
• And also on Friday the KSH’s earnings data for September will also arrive. In August, the gross average earnings of those employed full-time was HUF 628,800, and the net average earnings calculated with allowances in mind was HUF 433,100.
• A Friday it will be a strong day if we only look at the data releases, as manufacturing and service sector purchasing managers’ indices will arrive from the United States.