No stopping: Hungarian forint hits another record low after weak GDP report

The Hungarian forint has taken a new hit, falling to a record low against the euro following the release of disappointing GDP data. The data paints a bleak picture of Hungary’s economy, showing a slowdown that has once again tipped the nation into a technical recession. According to reports from Portfolio.hu, the euro reached HUF 405.8 by 9 AM today, a level unseen since November 2022.

The latest currency drop follows an overnight spike, where the euro-forint exchange briefly surged to 405.7, setting a fresh low not experienced since January 2023, Portfolio reports. The downturn in the forint coincides with the announcement of Hungary’s third-quarter GDP figures, which revealed an economic contraction and an official return to technical recession status. Analysts are bracing for further fluctuations as additional data from the EU and the U.S. are set to be released, likely impacting market dynamics. For instance, Spanish economic data already spurred a rise in the euro, which in turn saw the forint gain slightly against the dollar.

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Shocking GDP data signals technical recession for Hungary

Data from Hungary’s Central Statistical Office confirmed a 0.7% quarterly drop in GDP during Q3, a contraction much steeper than experts had predicted. Forecasts collected by Portfolio suggested only a minor dip of 0.2%.

However, the reality proved far worse, as Hungary’s economy has now experienced back-to-back quarters of decline, putting it squarely back in a technical recession.

On an annual basis, GDP shrank by 0.7% after seasonal and calendar adjustments, and the raw data showed a larger 0.8% decline. For comparison, analysts had expected a modest growth of around 0.3%.

The last time Hungary faced such economic difficulties was during the energy crisis of late 2022. Since then, GDP growth has been inconsistent, with the economy shrinking in six out of the last nine quarters.

Economic Development Minister Márton Nagy had hinted at the likelihood of this downturn, suggesting during the Budapest Economic Forum that third-quarter growth would hover close to zero. This statement from the minister implied an anticipated economic decline compared to the previous quarter, leading market forecasts to be adjusted downwards.

However, today’s release still managed to shock investors, triggering a further plunge for the forint.

Market reactions and fluctuations

Following the release of GDP figures, the forint experienced a sharp decline against the euro, reaching a low point of 405.8, marking a level not seen since late 2022. Amidst the broader landscape of European economic updates, fluctuations in the currency market were noticeable. For instance, Spain’s strong economic performance, along with an unexpected inflation increase in October, bolstered the euro. France also reported better-than-expected GDP figures, prompting optimism around a potential economic recovery in Europe. With the European economy showing signs of life, the European Central Bank may delay interest rate cuts, which could strengthen the euro further against the dollar.

These developments have caused the forint to strengthen slightly against the dollar, with a 0.2% rise bringing the exchange rate to below 374 HUF/USD. However, the forint’s position against the euro remains largely unchanged, reflecting investor caution due to Hungary’s weak economic outlook.

Read also:

• Forint hits new low: Weakest since 2022 amid economic struggles
• Hungarian forint breaks currency exchange level, additional weakening on the horizon

Featured image: depositphotos.com