Is there a chance for the forint to recover?
How far can the forint fall? When will this negative trend end? And is there still a chance for recovery? These are the questions that all Hungarians ask nowadays, but all of them are hard to answer. In turbulent times like this, giving an answer is like shooting in the dark. It is not possible to predict the future with a hundred percent certainty. However, in this article, we will try to bring you some answers.
From the report of Napi.hu, we can get some idea about the current problem and its duration. The main issue is that there are too many variables in this situation. A lot depends on the result of the negotiations between the European Union and Hungary in regard to the rule of law. If it is successful and the European Union transfers the money to the country, then there might be light at the end of the tunnel. According to experts, until the decision is not made, the forint will keep on depreciating. However, in case of an agreement, the forint might gain back its strength and some predict that it could go below HUF 400 against the euro. Nevertheless, it is also entirely possible that the forint will reach the HUF 500 exchange rate against the euro in the forthcoming future.
Causes and effects
In the background, there still lurks the shadow of the Covid pandemic. The recession caused by the virus has not ended, but now it has been exacerbated by other factors like the war in Ukraine. Prior to this, the Hungarian National Bank (MNB) introduced a new policy to avoid inflation. This meant that the bank started raising the base rates, which works very well for a while. Although the MNB announced that it would not raise the base any further this was quickly defied,
In a globalised environment, the MNB cannot allow itself to not react to other countries’ actions like the United States. If they raise the base rate then Hungary must do so too to avoid the further devaluation of the forint. A great achievement would be if the forint would stabilise because that would create a calculable environment — said József Gáll in an interview with dehir.hu. The inflation will not stop, but the rate should start decreasing sooner rather than later. Overall, everything depends on the decision of the European Commission. This is the most serious factor that will influence the value of the forint.
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Source: Napi.hu, dehir.hu
But the real question is, why is the forint doing so much worse than the Polish currency? Or the currencies of other nearby nations not using euro? I think one big reason not mentioned here is the huge amount of money the EU is withholding from Hungary because the politicians running the government here are more interested in stuffing their pockets and staying in power than in having anything approaching true rule of law.