Companies will almost certainly pass on the extra profit tax to consumers. Equilor warns that the HUF 480 petrol price cannot be sustained until Russian crude oil arrives. Price hikes could cause a shortage of countries.
Markets expect a prolonged Russian-Ukrainian conflict and high inflation. Lajos Torok (chief analyst at Equilor Befektetesi Zrt.), spoke at the press conference. He said that the price stop happens rarely, but not always. This is something the Hungarian economy has already done before the regime change. It led to shortages and it was impossible to buy certain goods in shops.
Although 1432 products have been frozen in Argentina already, inflation has not stopped and similar regulations in Venezuela are not in place. The fuel price of HUF480 can be kept at maximum until the arrival Ural-type crude oils, although there could still be problems with the European Union.
Although the additional profit tax is popular with the public, it does not cover companies that are neither profit-making nor have extra profits. For example, airlines have suffered for years and it would not be fair to increase their suffering. Most taxes will be passed to consumers, but it is unlikely. Retail will suffer the most, but retailers at lower prices will likely pass this EUR 10-15 to consumers. These factors will also increase inflation.
Mol Plc will be the largest contributor to special taxes. OTP Plc. with costs of $250 billion and the latter at 80 billion. It is risky to extend the transaction tax to securities transactions because it makes it harder to take care yourself, small regular purchases of securities that could have been savings for retirement, for instance.
High risk to economic growth
Analyst Zoltan Varga said that although the median expectation for economic growth this year is higher than 4 percent, there are many calculations between 1-5 percent. Equilor still estimates that inflation is at 9 percent. It will be hard to keep the deficit target, as special taxes will have an indirect inflationary impact and the Recovery Fund’s receipt will remain uncertain.
The unemployment rate on the labor market is less than 4 percent. There is also a shortage of labor in certain sectors. Although the price-wage spiral could get worse, there will still be some firms whose declining profits slow down wage increases.
Today’s MNB interest rate decision meeting. According to previous statements made by Vice President Barnabas VIrag, an increase in interest rates is likely to be slower than previously expected. Equilor anticipates that the base rate will reach 50 basis points, and the one week deposit rate will reach 7.9 percent by September’s end. This is in increments of 30 basis points. The base rate could stay below 5 percent for a long time, while the 10-year yield could reach double digits next fiscal year.
If the MNB is not involved in the exchange rate, the exchange rate for the forint could exceed HUF 400. It may even surpass HUF 410. The euro / forint might even exceed HUF 425-450.
Christine Lagarde, president of the European Central Bank, said more about the possibility of a new cycle of interest rate increases in the eurozone. A 25-25 basis point increase in interest rates could be possible this year. Inflation is high in the eurozone. A 1 percentage point increase in interest rate in 2022 will be priced in the market pricing.
The bear appeared also on the stock exchanges
The disappearance of central bank money freed stock markets from their previous highs. The U.S. market is also affected by the disappearance of central bank free money, however, BUX outperforms. With the US government bond yields increasing, the bond market is weak. The VIX index (also known as the fear index) has not fallen below 10 points since the outbreaks of the covid epidemic.
Meanwhile, the commodity market has seen a boom. One-eighth the calories traded worldwide are from Russia and Ukraine, which account for 28 percent of world’s wheat trade, 15% of corn, and 85 percent respectively of world sunflower oil. WFP estimates that 250million people are currently starving in the world, and this number could increase due to the Russo–Ukrainian conflict.
It is unclear how farmers in Hungary will be able pass on rising costs. The increase in diesel, fertilizer and transport charges may be greater than the rises in commodity market rates. Due to the rising prices of processed foods, consumers are less inclined to buy baked goods, cold cuts, and cheese. Instead, the turnover of cheaper foods like bread is rising. In one year, the price per tonne of feed corn jumped from HUF 75,000 on the Budapest Stock Exchange to HUF 1120,000 and that for wheat went from EUR 200 to EUR 450 in Paris.
What about oil?
The oil market is experiencing an imbalance in supply and demand. OPEC cannot exploit its oil reserves because of a lack investment. In Central and Eastern Europe, the amount of crude oil from Russia will decline.
Lajos Torok stated that if crude oil can be brought to Hungary by a pipeline, Hungary would win five times the lottery in terms of economic terms. Because of Hungary’s ability refine Uralic crude oil, and other countries, such as China and India, that are not able to refine it, they do not have limited or no access to energy. This could reduce the price of Ural relative to other crude oils.
The Russian gas product is the only choice. The EU has had to import refined petroleum products from Russia since the beginning. Problem is, if oil and gas cannot be transported by pipeline, the EU’s carbon footprint will be huge.