Grim predictions for Hungarian economy in 2025: inflation and EUR/HUF 420 exchange rate

The Hungarian economy has been struggling with fluctuating exchange rates and inflation. What can we expect in 2025? With the currency’s recent weakening against the euro and dollar, experts predict mixed prospects for the year ahead. Will the Hungarian economy find stability, or are tougher times ahead?

Forint exchange rate

As Forbes writes, the Hungarian economy faces a mixed outlook as the forint’s exchange rate continues to fluctuate. Despite recent weakening against the euro and dollar, Szilárd Buró, head of financial innovation, anticipates a gradual strengthening in the first half of the year, supported by technical trends. However, further depreciation could emerge later in the year, with the euro potentially reaching 420 forints and the dollar 400 forints.

Factors such as accelerated interest rate cuts by the National Bank of Hungary (MNB), a widening budget deficit, or delays in European Union funding could exacerbate pressures. Key ratings from agencies like Standard & Poor’s in April, Moody’s in May, and Fitch in June will also influence investor sentiment. Sustained high interest rates or a recovery in growth could stabilise the forint and boost confidence in the Hungarian economy.

Fighting inflation

Inflation continues to challenge the Hungarian economy, with the weakening forint contributing to rising domestic prices, as 25% of the currency’s depreciation filters into consumer costs. Coupled with elevated energy prices and a predicted oversupply in the oil market, average inflation is expected to surpass the central bank’s 4% target this year. This leaves the National Bank of Hungary with limited scope for interest rate cuts, though a 50 basis point reduction is anticipated in the second half of the year. GDP growth is forecast at a modest 2.2% in 2025, driven by household consumption and a recovery in agriculture. However, subdued manufacturing activity in Germany, Hungary’s key export market, tempers expectations for a stronger economic rebound.

Will Trump affect the Hungarian economy?

January has brought significant focus to the Hungarian economy as investors monitor the impact of Donald Trump’s economic policies and upcoming government bond rate hikes scheduled between 19 and 27 January. Trump’s unpredictable tariff policies have raised concerns about potential disruptions to both the US and global economies, with Equilor warning of risks to growth and inflation.

Such uncertainty could affect the Federal Reserve’s interest rate path, which is anticipated to include a 50 basis point cut this year. In contrast, the eurozone’s focus on growth challenges may push the European Central Bank to persistently lower rates, amplifying the dollar’s strength in early 2025. These developments are poised to influence Hungary’s economic trajectory as it navigates a volatile global financial landscape.

Read also:

• Is the Hungarian economy set to revive in 2025 after years of stagnation?
• Hungarian forint continues its freefall, faces two-year low against USD

Featured image: depositphotos.com