Swift strengthening on the horizon? Key factor for strong Hungarian forint restored

After last year’s collapse, the Hungarian forint has entered a strengthening trend. Now, the numbers show that there is a fundamental economic basis for this. This means that we can expect even more marked strengthening for the Hungarian currency.

Hungarian forint is returning to stability

As napi.hu reports, the March external trade statistics have been published. They clearly show a return to the stability that had been lost in 2021 due to a steep rise in gas prices and a fall in exports due to the impact of the COVID pandemic. Already in February, there was a surplus on the balance sheet; and, in March, it increased to a very large one, close to EUR 1 billion.

Exports in March were EUR 14.1 billion and imports EUR 13.2 billion, a surplus of EUR 900 million and an improvement of EUR 1.7 billion compared to March last year. Until mid-2021, the external balance of trade remained in surplus, although the balance of payments, which includes several factors, lost its surplus earlier, napi.hu explains.

Many factors help the forint

Even though the forint exchange rate weakened already from 2018, this may have been the result of a conscious economic policy decision rather than market developments. This is due to the face that there was no balance of payments problem at that time – so, there was basically no greater demand for the euro than supply.

Finally, the Hungarian central bank has recently taken extraordinary measures to protect the forint. At the same time, gas prices have started to fall and the forint has stopped falling as well. The trend has reversed and the exchange rate has now reached the 370 level again. The question for the coming weeks is whether it can break through this level and get even stronger.