Are Hungarians investing more money outside of the country?

There is a common claim nowadays that more and more Hungarians are keeping their money abroad, or at least in foreign currency. A new investigation was started to verify if this is true or not.

Official data from the Hungarian National Bank (MNB) confirms that the volume of foreign savings among the Hungarian population increased significantly over the past two years. However, the proportion of these savings remains below 10 percent. The strengthening of the Hungarian forint at the beginning of the year also may have disappointed many, writes Portfolio.

Domestic market

Due to high inflation, there has been a significant reshuffling in the Hungarian savings market in the first quarter of this year. The Hungarian population has shifted their savings from current account deposits and cash towards government securities and investment funds. While more money flowed into these investment accounts, the intensified search for yield has not been enough to preserve the stability of savings.

Foreign markets

We have less information on savings held in foreign currency or abroad. However, it can be observed how much money the population holds in:

1. foreign bank deposits
2. foreign bonds
3. foreign investment funds
4. foreign currency

In this regard, there has been a significant growth in 2021 and 2022. In the former for investment funds and in the latter for deposits, bonds, and currency.

Last year, a net amount of 531 billion Hungarian forints flowed into foreign deposits, 241 billion into foreign bonds, and 117 billion into foreign currency. At the end of March this year, Hungarian households held 12 percent of their deposits, 4 percent of their bonds, 12 percent of their investment funds, and 7 percent of their cash in foreign currency or abroad. The average across these four categories was 8.6 percent.

Is it worth it?

While these ratios are higher than they were, the first quarter of this year did not prove fruitful. Especially not for those who later plan to use these savings in forint. Contrary to the expectations of many, the forint strengthened. This resulted in a loss of approximately 4.8 percent in the value of savings held in euros between December 31st and March 31st.

The value of foreign deposits decreased by HUF 91.7 billion, bonds by HUF 6.6 billion, foreign investment funds by HUF 13.7 billion, and currencies by HUF 25.8 billion in the first quarter. With the exception of investment funds, these declines can largely be attributed to the strengthening of the forint. This phenomeon seems to have had an impact on currency exchange offices and bank branches as well, as the volume of currency purchases decreased in January and February compared to previous months.

Source: Portfolio