Pénzcentrum, one of Hungary’s leading economic analysis websites, shared why the Hungarian economy and the forint are struggling now. They also wrote what to expect by end-2022 and in 2023 regarding the forint, but you may not like their forecast. Below, you can read the opinions of other experts on the issue as well. Furthermore, we also included the most recent inflation forecast of Hungary’s Central Bank.
The analysis of Pénzcentrum states that the Hungarian forint weakened by 10 percent against the euro this year. Meanwhile, in the case of the Polish zloty, that rate was only 6.5 percent. The portal says that we should expect a currency exchange rate of around 400 forints/euro by year-end. That is because the compromise with the European Commission will stabilise the economy and the forint alike. They expect a 385HUF/EUR annual average for 2022.
However, that will go up to 410 HUF/EUR in 2023. Since that is only an average, it might happen that, in 2023, there will be periods when the exchange rate will be much higher than 410. That is bad news for those receiving their salaries in forint. Meanwhile, some foreign investors buying Hungarian real estate for euro might make good deals.
Index.hu writes that the only option for the forint to regain some of its strength would be if the European Commission would say anything positive about Hungary’s access to the EU funds. Károly Beke, an analyst of Portfolio, talked about the issue to the ATV. He added that the new historic low of the HUF against the USD and EUR this Thursday was because the markets expected a higher base rate hike on Tuesday. They calculated 14-15 percent, but the Central Bank’s decision was “only” 13 percent.
The only chance for the forint is an optimistic statement from Brussels, Mr Beke highlighted. The Hungarian government said multiple times that they would reach an agreement by end-2022, but the European Commission remained silent.
According to the portfolio.hu, experts would not exclude a 430-440 exchange rate in December.
Hungary’s central bank has said it expects inflation will continue rising in the remainder of the year, though from October its upward pace will start gradually easing. To a large degree, inflation is expected to be driven by factors outside of the scope of monetary policy, central bank director András Balatoni said on Thursday, presenting the NBH’s latest quarterly Inflation Report. Disinflationary effects will start showing up in the first half of 2023 and become more pronounced in the second half of 2023, he added.
Headline inflation will fall to 4 percent, the upper threshold of the National Bank of Hungary’s tolerance band, in the first half of 2024, he said. Annual inflation this year is expected to average 15.0-15.5 percent, before declining to 10.6-12.9 percent in 2023 and 2.6-3.5 percent in 2024, the report shows. The bank expects economic growth at 3.0-4.0 percent in 2022, slowing to 0.5-1.5 percent in 2023 and then picking up to 3.5-4.5 percent in 2024.
It projects a decline in investments and in household consumption expenditures in 2023. Household savings are also expected to fall temporarily. Balatoni said Hungary’s current-account deficit would “rise markedly” in 2022 owing to higher energy prices. The NBH forecasts a current-account deficit equivalent to 7.7-8.7 percent of GDP for 2022 and a gap of 5.8-7.0 percent for 2023.
Source: Pénzcentrum, index.hu, portfolio.hu