Contents. What to watch next week. What to watch in the week ahead Summary of recent macro and market events Forecast tables Macro diary

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1 Contents What to watch in the week ahead Summary of recent macro and market events Forecast tables Macro diary What to watch next week Local market movers No major data releases are scheduled for next week. CSO is set to publish the most recent unemployment statistics, that are likely to point to an extremely tight labor market. Besides the regular weekly 3M T-bill offering, GDMA is going to offer 12M T-bills on Thursday. External developments Brexit developments will remain in the spotlight in Europe. Euro zone flash November HICP figures alongside with the most recent German Ifo and EZ economic sentiment index are likely to underline the challenges the ECB is facingo n the road to normalization. US consumption and income data may have the potential to shape 2019 interest rate expectations.

2 Summary of recent macro and market developments NBH: nothing has changed (almost) As expected, the base rate and other monetary conditions remained unchanged at the NBH Monetary Council's November meeting. Although it was essentially ruled out by market participants that the monetary conditions at this meeting may be modified by the central bank (and updated macroeconomic projections should also be expected only in December), it was still seen in expectations that the post-release communication could evaluate the recent inflation and growth data than came higher the central bank's expectations. However, the communication did not change either in terms of the material judgment of inflation or the monetary policy outlook. Regarding the former, the NBH continued to emphasize the significant role of fuel and food prices, adding that the inflationary impact of wage growth continued to be moderate and the external (euro area) inflationary effect was also moderate and may remain so in the coming years. Consistent with the previous months' communication, it has been emphasized that the sustainable achievement of the inflation target is expected to arrive in the middle of In order to ensure this outcome the Monetary Council considers that maintaining the current base rate and loose monetary conditions is necessary. In our view, as a result of rising inflation and growth expectations and also rising core inflation indices, the central bank's communication on monetary guidance may change in December. At the same time, although the Inflation Report is expected to include higher inflation and GDP projections, we continue to expect the maintaining of the current monetary conditions.

3 Source: CSO, NBH Slightly stronger forint, but EUR/HUF still above 320 After the slight weakening wave seen in mid-november, the week left behind us delivered a minimal strengthening (below 0.5%). Even with the appreciation, the EUR/HUF cross exchange rate still did not reach the 320 level, and even a lasting break of the 321 level did not occur. The exchange rate fluctuated in an even narrower range than in mid-november in recent days, typically between Against the dollar, there were also only minimal shifts. At the time of closing our research report, with USD/HUF levels between to , essentially matching the levels one week earlier. In the government securities market, along with the stability of the short side of the yield curve, we saw declining yields at longer maturities. The 10Y benchmark fixing on November 22 was 3.37%, which is more than 30bps lower than the peak yield seen in the middle of the month. At the same time, the spread over the German curve at the 10Y maturity also fell to close to 300bps.

4 CE3 GOVERNMENT BOND YIELDS HU PL CZ EU SPOT (bid) yield (%) spread (bp) yield (%) spread (bp) yield (%) spread (bp) yield (%) 1Y 0, , , ,64 3Y 1, , , ,53 5Y 3, , , ,23 10Y 3, , , ,37 60-DAY AVG yield (%) spread (bp) yield (%) spread (bp) yield (%) spread (bp) yield (%) 1Y 0, , , ,63 3Y 1, , , ,47 5Y 3, , , ,17 10Y 3, , , ,44 Source: Reuters

5 Maroeconomic and market forecasts Unit GDP growth, y/y - CIB forecast GDP growth, y/y - Market consensus Industrial production, y/y Trade balance % 2,0 4,0 4,6 3,2 % - 3,8 4,3 3,2 % 0,9 4,8 4,7 4,9 EUR mln CPI, y/y, average CPI, y/y, average - CIB forecast % 0,4 2,4 2,9 3,5 - Market consensus % - - 2,9 3,2 CPI, y/y, end of period - CIB forecast % 1,8 2,1 3,9 2,8 CPI, y/y, end of period - Market consensus % Budget balance / GDP (ESA, including one-off revenues) % -1,7-2,0-2,3-2,4 EXCHANGE RATES, END OF PERIOD (eop) EUR/HUF CHF/HUF USD/HUF EUR/CHF 1,16 1,19 1,19 1,20 EUR/USD 1,17 1,19 1,22 1,23 GBP/USD 1,32 1,27 1,30 1,32 GBP/HUF EXCHANGE RATES, QUARTERLY AVERAGE 2018 Q Q Q Q4 EUR/HUF CHF/HUF USD/HUF EUR/CHF 1,17 1,19 1,19 1,20 EUR/USD 1,18 1,18 1,22 1,23 GBP/USD 1,36 1,27 1,30 1,32 GBP/HUF INTEREST RATE FORECASTS (eop) NHB base rate 0,90% 0,90% 0,90% 0,90% HU 3M BUBOR 0,26% 0,25% 0,40% 0,54% Fed Funds rate 2,00% 2,50% 2,75% 3,00% ECB refi rate 0,00% 0,00% 0,00% 0,25% SNB 3M Libor target -0,75% -0,75% -0,75% -0,75%

6 Macro diary Week 48 MONDAY 11/26/2018 DE 10:00 Ifo index November 102,8 102,3 TUESDAY 11/27/2018 US 15:00 Case-Shiller house price index, y/y September 5,5% 5,3% US 16:00 Consumer confidence index November 137,9 136 WEDNESDAY 11/28/2018 HU 9:00 Unemployment rate October 3,8% EZ 10:00 M3 growth rate, y/y October 3,5% 3,6% US 14:30 GDP growth rate, 2nd estimate, q/q, SAAR Q3 3,5% 3,6% US 14:30 Core PCE index, 2nd estimate, q/q, annualized Q3 1,6% 1,6% US 16:00 New home sales, mln unit October 0,553 0,575 AUCTIONS Amount Previous Forecast Result HU 11:30 3M T-bill HUF 30 bln -0,06% THURSDAY 11/29/2018 DE 9:55 Unemployment rate October 5,1% 5,1% EZ 11:00 Economic sentiment index November 109,8 109,1 DE 14:00 HICP, y/y, flash November 2,4% 2,3% US 14:30 Personal consumption expenditures, m/m October 0,4% 0,4% US 14:30 Personal income, m/m October 0,2% 0,4% US 14:30 Core PCE index, m/m October 0,2% 0,2% US 14:30 Initial jobless claims, thousands w/e 224 US 16:00 Pending home sales October 0,5% AUCTIONS Amount Previous Forecast Result HU 11:30 12M T-bill HUF 30 bln 0,36% FRIDAY 11/30/2018 HU 9:00 PPI, y/y October 6,75 EZ 11:00 HICP, y/y, flash November 2,2% 2,1% EZ 11:00 Core HICP, y/y, flash November 1,2% 1,3% EZ 11:00 Unemployment rate October 8,1% 8! US 14:30 Chicago PMI November 58,4 59

7 Week 47 MONDAY 11/19/2018 No major data release Country Time TUESDAY 11/20/2018 Data Period Previous Forecast Result HU 14:00 NBH rate decision: base rate November 0,90% 0,90% 0,9% HU 14:00 NBH rate decision: O/N depo rate November -0,15% -0,15% -0,15% US 14:30 Housing starts, mln unit October 1,21 1,225 1,228 US 14:30 Building permits, mln unit October 1,27 1,267 1,263 AUCTIONS Amount Previous Forecast Result HU 11:30 3M T-bill HUF 30 bln -0,06% -0,06% Country Time WEDNESDAY 11/21/2018 Data Period Previous Forecast Result US 14:30 Durable goods orders, m/m October -0,1% -2,5% -4,45 US 14:30 Initial jobless claims, thousands weekly US 16:00 Existing home sales, mln unit October 5,15 5,20 5,22 US 16:00 Leading index October 0,6% 0,1% 0,1% US 16:00 UM consumer confidence index, final November 98,3 98,3 97,5 THURSDAY 11/22/2018 HU 9:00 Gross wages, y/y September 10,1% 10,4% EZ 16:00 Consumer confidence index, advance November -2,7-3,0 AUCTIONS Amount Previous Forecast Result HU 11:30 3Y bonf HUF 20 bln 1,64% 1,47% HU 11:30 5Y bond HUF 20 bln 3,04% 2,83% HU 11:30 10Y bond HUF 15 bln 3,97% 4,08% FRIDAY 11/23/2018 DE 8:00 GDP growth rate, q/q, final Q3-0,2% -0,2% -0,2% EZ 10:00 Manufacturing PMI, flash November 52,0 51,7 51,5 EZ 10:00 Services PMI, flash November 53,7 53,5 53,1 EZ 10:00 Composite PMI, flash November 53,1 52,9 52,4 US 15:45 Manufacturing PMI, flash November 55,7 55,9 US 15:45 Services PMI, flash November 54,8 55,0 US 15:45 Composite PMI, flash November 54,9 HU 18:00-24:00 Moody's rating on Hungary Baa3 Baa3

8 Contacts Resarch Sales Equity Sales FI, FX Mariann Trippon Head of Research Sándor Jobbágy Senior analyst Balázs Borók Balázs Pápay Balázs Tóth Zsolt Márvány Head of Treasury sales Sándor Fenyvesi FI sales Zoltán Verzár FI sales Mária Juhász FX sales Péter Kelemen FX sales Gábor Horváth FX sales THIS DOCUMENT IS NOT A PROSPECTUS, AN OFFER OR AN INVITATION TO BUY OR SELL ANY SECURITIES UNDER HUNGARIAN OR FOREIGN LAW. THIS DOCUMENT IS BEING FURNISHED TO YOU SOLELY FOR YOUR INFORMATION AND MAY NOT BE REPRODUCED OR REDISTRIBUTED TO ANY OTHER PERSON. NEITHER THIS DOCUMENT NOR ANY COPY OF IT MAY BE PUBLISHED IN THE PRESS OR ANY OTHER MEDIA.ANY INVESTMENT DECISION WITH RESPECT TO ANY SECURITIES OF THE RESPECTIVE COMPANY MUST BE MADE ON THE BASIS OF AN OFFERING CIRCULAR OR PROSPECTUS APPROVED BY SUCH COMPANY AND NOT ON THE BASIS OF THIS DOCUMENT. THIS DOCUMENT HAS BEEN PREPARED USING SOURCES BELIEVED TO BE RELIABLE AND ACCURATE. AS THE INFORMATION CONTAINED IN THIS REPORT HAS NOT BEEN INDEPENDENTLY VERIFIED, NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED IS MADE AS TO THE FAIRNESS ACCURACY OR COMPLETENESS OF THE INFORMATION AND OPINIONS CONTAINED IN THIS DOCUMENT. THE INFORMATION AND OPINIONS IN THIS REPORT ARE SUBJECT TO CHANGE WITHOUT NOTICE. ANY OPINIONS AND PROJECTIONS CONTAINED IN THIS DOCUMENT ARE ENTIRELY THOSE OF THE AUTHORS. NEITHER THE RESPECTIVE COMPANY, CIB BANK CLOSELY-HELD CORPORATION, NOR ANY OTHER PERSON ACCEPTS ANY LIABILITY WHATSOEVER FOR ANY LOSS HOWSOEVER ARISING FROM ANY USE OF THIS DOCUMENT OR ITS CONTENTS OR OTHERWISE ARISING IN CONNECTION THEREWITH.