Experts worried that PM Orbán’s brutal wage rise will bring inflation and a HUF 500/EUR exchange rate
PM Orbán talked about a shockingly quick wage rise in Hungary between 2025 and 2028 in his latest interview in the Kossuth Rádió. He said the average Hungarian wage should reach HUF 1 million, the minimum wage should be EUR 1,000, and the minimum wage would equal 50% of the average income. The maths only makes sense if the forint-euro currency exchange rate worsens significantly.
450-500 EUR/HUF exchange rate may come by 2027-2028
Officials of the Hungarian government and PM Viktor Orbán talked about the significance of salary rise in Hungary. That is not surprising: in spring 2026, there will be general elections in Hungary, and Orbán has a challenger, Péter Magyar, whose support is steeply increasing.
Orbán and his government determined three numbers in that regard. They said the average wage should be HUF 1 million (EUR 2,500), the minimum wage should be EUR 1,000, and the minimum wage should be 50% of the average salary. The calculation’s result is HUF 450/EUR, which is astonishing considering the public outrage that followed the end-2022 forint historic forint fall when the Hungarian currency reached 426/EUR. Thanks to the Hungarian National Bank’s intervention and the sky-high base interest rate they introduced, the forint stabilised at the 390/EUR level.
If we bring the regular average wage in Hungary into the calculation, which, experience shows, is 10% below the average salary (HUF 900,000), the currency exchange rate increases to 500/EUR.
Before, the Hungarian government talked about a HUF 375,000 (EUR 933) gross minimum wage as their target until 2027. However, Orbán’s wage rise means the minimum wage should increase by 50% in the next three years. That would be a 16% annual rise concerning the average wage and 14.5% in the case of the minimum wage, provided the euro exchange rate remains at HUF 400/EUR.
Experts worried that the wage rise would bring inflation and forint fall
Only a powerful Hungarian economy could generate such an increase in the well-being of the Hungarians. However, the Hungarian economy is struggling. We wrote about the falling industrial output and a possible recession HERE.
The other option is skyrocketing inflation, which would burn the “extra money” of the Hungarian households, just like it did between 2022 and 2024.
Since Orbán wants outstanding economic growth (3-6%) in the next few years, the Hungarian National Bank will not be able to stop the fall of the forint with a high base interest rate.
As a result, both Portfolio and G7 suggest the government’s aims are not coherent. If they want robust economic and wage growth, they will need to sacrifice the forint and create inflation. Another consequence can be that many small and medium companies will cease operation because of the wage-price spiral.
What’s more, Bank of America analysts wrote that the forint is significantly overvalued, and a HUF 430/EUR currency exchange rate was realistic. They added that the Hungarian economy’s productivity stagnated, and the difference between the interest rates of Hungary and the EU decreased.
National Federation of Workers’ Councils agrees with govt targets
The National Federation of Workers’ Councils agrees that the minimum wage needs to be increased to the equivalent of 1,000 euros and the average wage from the current amount, some 600,000 forints (EUR 1,500) to 1 million forints, and that this would be possible within 2-3 years, the organisation said on Friday in response to an announcement by the prime minister earlier in the day.
PM Orbán told public radio on Friday morning that a cabinet meeting earlier this week discussed ways to achieve the 1,000 euro minimum wage and the increase of the average wage to 1 million forints. Orban said the plans could be fulfilled if they managed to agree with employers and employees.
The National Federation of Workers’ Councils said it would offer all the professional help needed for the plan’s success. It is important that social partners including workers’ interest representation bodies and trade union alliances are involved in the process to achieve a more active coordination of interests, and it could result in a reform of regulations on minimum wages, it added.
Read also:
- Hungarian forint doing something unprecedented: further slip expected – read more HERE
- Morgan Stanley predicts euro could reach 410 forints amid worsening economic outlook
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