Experts’ grim prognosis for Hungarian forint: 450/EUR on the horizon?

In recent months, the Hungarian forint has demonstrated significant strength, yet its exchange rate hovers around 380/EUR, and indications suggest this trend is not poised for an immediate shift. Despite its stability at the 380/EUR level, experts anticipate a substantial weakening in the long run.

As reported by Tőzsdefórum, a Hungarian business-centric online news outlet, the forint’s current stability at the 380/EUR exchange rate level may result in a commendable 5% strengthening against the euro in 2023—a positive development.

However, analysts warn that 2024 may witness a notable forint weakening, although predictions dismiss the likelihood of reaching new historic lows.

Additionally, financial experts highlight that the Hungarian National Bank’s (MNB) monetary policy is the main influencing factor behind the fluctuation of the foreign exchange rate. And the MNB’s upcoming decision on interest rates in December is anticipated to lead to another probable decrease.

Zoltán Varga, an analyst of Equilor, told Világgazdaság that the interest rate cuts are expected to result in a gradual forint weakening. On the other hand, they are a crucial element in the MNB’s stimulus package. In other words, while advantageous for the business sector, as they facilitate cost-effective production in Hungary, they present challenges for employees receiving salaries in forint, particularly those wishing to make purchases in euros or acquire imported products.

Forint remains a highly volatile currency

Equilor projects an average currency exchange rate of 400/EUR in 2024, escalating to 405/EUR in 2025. Meanwhile, the Egyensúly (Balance) Institute predicts a range of 393-403/EUR for 2024 and 406-419/EUR in 2025. These are averages, and actual rates may fluctuate between 450/EUR and 380/EUR based on accurate prognosis.

The uncertainty surrounding EU funds adds another layer of complexity. While Hungary anticipates approximately EUR 1 billion in 2024, the disbursement of euro billions remains frozen due to rule of law concerns. Any positive impact on the forint hinges on the release of these funds, though the likelihood is deemed slim. Consequently, the forint remains responsive to developments related to EU funds.