The solvency of the population is still in order, but the end of the credit moratorium could hit it hard

In the last six months, the financial situation of Hungarian households has improved rapidly – it turns out Intrum and GKI’s latest quarterly retail solvency index (IFI). The measure combining income, savings, debt and other indicators averaged 47 points in the second quarter of 2021, which is just below the average of the two quarters before the pandemic.

On a quarterly basis, the solvency index rose 20 percent to 39 points in the first quarter of this year. Looking at the latest values ​​of the index on an annual basis, compared to the second quarter of 2020 – this period was the peak of the recession caused by the pandemic – the improvement is more than 64 percent.

Within the second quarter, solvency also showed an increasing trend: the value of the Intrum-GKI index stood at 42.2 points in April, 46.9 points in May and 51.6 points in June. The value for June this year is higher than the last index before the coronavirus epidemic in June 2019.

“The improvement in solvency will follow the restart of the world economy after the epidemic. In Hungary, the recovery of regional economic opportunities to support Hungarian exports, as well as the revival of the service sector, tourism, retail and personal services, will improve the financial situation of the population, ”said Károly Deszpot, Sales and Development Director of Intrum.

According to Despot, a further increase in household solvency may be hindered by three factors. The first of these is the rise in consumer prices. “By mid-2021, the consumer price index was approaching a decade-high peak. The rapid rise in world oil and other commodity prices, rising import prices as a result of the opening, the weakening of the forint, the rapid outflow of domestic wages and the loose fiscal policy also played a role in this. The central bank has already started the correction in April by tightening monetary policy, but in the meantime it has also introduced new, extremely cheap housing loans. Without further action, inflation could remain high until the end of the year. “

Image: KSH / Instrum

The maturity of the credit moratorium may pose a solvency risk in the longer term: according to the GKI survey, 15-20 percent of the total Hungarian household loan portfolio may become problematic if all repayments are resumed next year. This means such a large loan portfolio that the entire national economy could be affected if decision-makers are not prepared in time to manage risks.

According to the IFI, GDP growth may also be higher than expected

At the same time, the quarterly performance of the Hungarian economy can already be deduced from the solvency index. The value of GDP generally follows the curve of the solvency index; in the first half of this year, growth compared to the previous quarter was 2 percent, in the second quarter it may be higher starting from the IFI. On an annual basis, the EU forecasts 5% GDP growth in Hungary. According to the IFI, in an optimistic scenario, growth could be higher at 7 percent if there is no unexpected event, such as a more severe wave of epidemics.

In addition to these two factors, new variants of the coronavirus and possible new closures continue to pose a risk worldwide – although the epidemic is unlikely to cause such damage as in 2020, even next year the epidemic situation may fundamentally determine the Hungarian and international economic processes.

Source: by

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