HUF supported by EU fund inflow

Better news for the Hungarian forint which is receiving support from an increase in EU fund inflow: the EC had suspended more than EUR 1.2bn of EU funding because of disputes surrounding the project selection process; but lifted this suspension in September -- and the money is now flowing in. 

The Hungarian government yesterday announced that it expects a total HUF 510bn additional capital inflow on this account by year-end, and confirmed that, of this total, HUF 215bn has already come in during recent weeks. The impact of this type of 'start-stop' in capital inflow based on administrative bottlenecks may be expected to be front-loaded -- blocked funds will enter together at the beginning, but things will settle down later. 

"In the near-term, therefore, we see EUR-HUF remaining near the lower limit of our 310-315 expected range. In 2016, EU fund inflow will dry up as the programme window switches from the 2007-2013 to the 2014-2020 one, and this will both depress economic growth and be a source of pressure for the forint", estimates Commerzbank.