July 15, 2020 / 6:57 AM / a month ago

Hungary central bank to further ease terms of cheap loans scheme

FILE PHOTO: A view of the entrance to the National Bank of Hungary building in Budapest,Hungary February 9, 2016. REUTERS/Laszlo Balogh

BUDAPEST (Reuters) - The National Bank of Hungary will further ease the terms of its 1.5 trillion forint (£3.84 billion) cheap loans scheme to help businesses access cheap funding amid the coronavirus pandemic, a deputy governor said on Wednesday.

NBH Deputy Governor Csaba Kandracs told national news agency MTI that the bank would cut capital requirements attached to the lending under the programme by as much as 2% and introduce regulatory support for participation in a bond buying scheme launched last year.

Together the moves could free up tens of billions of forints that could in turn be lent to businesses, Kandracs said.

The bank, which unexpectedly cut its base rate by 15 basis points to 0.75% last month in response to greater-than-expected damage to the economy from the pandemic, launched the lending programme in late April.

Faced with a lower than expected take-up, the bank eased the terms of the programme earlier this month, allowing businesses to finance current expenditures such as wages or inventories and foreign investments and to pre-finance projects backed by domestic government funds. [L8N2E93IT]

Hungary’s economy is expected to have shrunk by about 10% in the second quarter and annual growth could decrease by 3% in 2020, according to government expectations, before rebounding to 4.8% annual growth next year.

The central bank’s own scenarios call for modest growth even in 2020, although an analyst consensus expects economic output to shrink by 5.1% this year.

Reporting by Marton Dunai; editing by Jason Neely

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