We have to wait longer for the turnaround in lending

Hungary’s economy performed better in 2014 than it was previously expected, but the country didn’t manage to return to a track that would ensure long-term growth. In 2015 the Hungary’s economy is likely to do much worse than last year, when the 3.6-percent growth was higher than the EU’s 1.3-percent average. The number of people employed increased by 5.3 percent; unfortunately half of the growth comes from expansion in the so-called public work sector. Employment level will grow by about 1 percent at the maximum in 2015. In 2014 the unemployment rate was 7.7 percent and this is expected to reduce further by 0.3 percentage points. Last year the contraction of Hungary’s GDP continued and we can count on no change this year. Most probably there will be no turnaround in lending neither on the supply nor on the demand side. At best stagnation is expected in lending, with perhaps a small increase in the domain of corporate lending. The banking sector’s profitability will keep reducing in 2015. Consumer prices dropped 0.2 percent last year. This year prices will probably stay put, the Central Bank of Hungary (MNB) is expected to reduce the base rate further, while the euro to forint exchange rate will be around 315.