Hungary reduces interest rate to 5.75%

Italy’s office rental values predicted to fall

Belgium’s economy expands

US mortgage rates fall again

Thailand economy expands by +5.8% in Q4 2009

Hungary reduces interest rate to 5.75%

Hungary has reduced its key interest rate by a quarter-point for the third consecutive time to 5.75%, it is the lowest in 20 years as the Magyar Nemzeti Bank policy makers look to revive growth after the worst recession in 18 years.

The two-week deposit rate has been reduced by 3.75 percentage points since July 2009 as a 6.3% economic contraction blunted price pressure in 2009, with economists predicting that the central bank may halt the monetary easing before parliamentary elections in April.

Neil Shearing, a London-based Capital analyst, said: “The timing of future interest rate cuts will be dictated by fluctuations in investor confidence. We think that rates will fall to 5% by the end of the second quarter. More important, we expect rates to remain at record lows over the next eighteen months or so.”

Policy makers had halted rate cuts in the first half of 2009 as the forint had fallen to a record low against the euro, as the country was forced to seek a €20bn International Monetary Fund-led bailout in 2008. As a result Hungary trailed central banks including the US Federal Reserve and the European Central Bank as well as Czech and Polish policy makers in cutting interest rates because of its currency losses.

Italy’s office rental values predicted to fall

Italian office rental values have been predicted to fall in 2010, as downward pressures due to an increase of supply and lack of demand, will force them to decrease by -10% having fallen -7% since their peak in the second half of 2008, according to Capital Economics.

In Rome, rental values have fallen by -5%, compared to Milan where they have dropped -9%, as Rome has benefited from stable demand from the public sector, where fiscal tightening is low so demand should remain constant. Whilst in Milan an abundance of newly completed property in 2009 has resulted in the increase in vacancy rates as they shot up from 6% to 8.5%, compared to Rome where completions remained low and the vacancy rate only increased by +0.2% to 6.4%.

Fergus Hick, Capital Economics’ property economist, stated: ‘ Rome does not seem to have escaped from an increase in supply altogether. Rather, with completions expected to rise to around 150,000sqm this year and further in 2011, it seems that Rome is merely lagging behind Milan. Although the actual amount of new stock which will be delivered is uncertain, the supply-side of the market looks like a big risk in both cities.’

Capital Economics predicts a growth in gross domestic product (GDP) of +1% in 2010, after a rise of +0.6% in Q3 2009 but a decline of -0.2% in Q4. Italian GDP saw a 6.4% peak-to-trough fall and was one of the largest in the Euro-zone.

Belgium’s economy expands

Belgium ’s economy expanded in Q4 2009 as it continued to recover from its worst slump in six decades, according to the National Bank of Belgium.

Gross domestic product (GDP) increased by +0.3% in Q4, having gone up by +0.7% in Q3 2009, however it fell -0.8% on the Q4 2008. For all of 2009 GDP contracted by -3%.

Guy Quaden, head of the Belgian central bank, said: “Despite its great sensitivity to international trade and the difficulties experienced by the big banks, the Belgian economy proved more resilient than that of the euro area as a whole, nonetheless this is still a vulnerable recovery.”

The Belgian central bank increased its 2010 growth forecast in December 2009, projecting a +1% expansion, as reviving global growth boosts the nation’s exports.

US mortgage rates fall again

Mortgage rates in the US dropped as 30-year fixed-rate mortgages fell to an average of 4.93% on 18th February 2010, down from 4.97% the week before and from 5.04% in February 2009, according to Freddie Mac.

Fifteen-year fixed-rate mortgages averaged 4.33% for the week ending 18th February which were down from 4.34% the previous week and from 4.68% a year ago.

Frank Nothaft, vice president and chief economist at Freddie Mac, said: "Mortgage rates eased for the second week, while economic data releases suggest that the housing market may be in a slow state of recovery."

According to the National Association of Home Builders, US home builders were feeling more confident that the housing market is recovering as they were encouraged by the low interest rates and the restoration of federal home-buyer tax credits.

Nothaft said: "The National Association of Realtors reported that existing home sales rose in 48 states and the District of Columbia between the third and fourth quarters of 2009 and 32 states experienced double-digit growth. In addition, 67 metropolitan areas saw positive annual house price growth in the fourth quarter, more than double than in the third quarter, according to the NAR."

Thailand economy expands by +5.8% in Q4 2009

Thailand’s economy expanded by +5.8% in Q4 2009 as gross domestic product (GDP) increased to 3.6% in the quarter, double the 1.8% predicted by economists and well above Q3’s 1.7% and was the fastest the economy has grown in ten years, according to data from the Bank of Thailand.

Tarisa Watanagase, governor of the Bank of Thailand, stated that the current economic recovery supported the case for a normalising in monetary policy.

Analysts have said that growth in the export-driven economy will be supported in 2010 as Government spending accelerates and exports and manufacturing rebound, however the outlook for policy rates is muddied by political uncertainty and could still derail the economy.

The economy had contracted by -2.3% in 2009 as the economy emerged from its first recession in 11 years during the second quarter.