euro

KSH: Hungary trade balance shows EUR 475 m deficit in April – UPDATE

Hungary economy recovery moody's

Hungary’s trade balance showed a 475 million euro deficit in April, the Central Statistical Office (KSH) said in a first reading of data released on Wednesday.

Hungary, an export-driven economy where trade surpluses are the norm, had a trade deficit for the tenth month in a row, KSH said.

Exports rose by an annual 12.1 percent to 11.052 billion euros and imports climbed by 21.1 percent to 11.527 billion.

Trade with other European Union member states accounted for 77 percent of exports and 70 percent of imports.

Further deterioration expected

Magyar Bankholding chief analyst Gergely Suppan said with growing investments and consumptions the foreign trade balance is expected to deteriorate further, but in the second half of the year it could stabilise with the easing of the global chip shortage and new production capacities coming online. Because of the war in Ukraine, the trade balance could end up being negative for this year, after a 1.9 billion euro surplus in 2021, he added.

Századvég chief macro analyst Gábor Regős said the weakness of the automotive sector is proving to be a drag on export growth, while also noting that consumption and investments are boosting imports.

Regős said price changes are also affecting the trade balance, as import prices are growing at a faster rate than export prices, because of a boom in global energy prices.

Erste Bank macroeconomic analyst János Nagy said monthly trade figures should show a deficit in the short term. Until the difficulties of the automotive sector lessen, goods export will not be able to grow dynamically. The rise in energy costs becoming persistent pose a downside risk, but starting in H2 exports could start catching up to imports with the global economy recovering and through the huge capacity expansions already announced, he added.

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Read alsoFidesz MEP: ‘We reject European left’s petty attacks’

EUR soon to cost HUF 400 again?

forint euro bills

On Tuesday evening, the price of one euro was HUF 396.56. By Wednesday morning, it had risen to HUF 397.81.

The forint also weakened against other major currencies in international trade. The dollar went up from HUF 369.81 to HUF 371.54 and the Swiss franc from HUF 385.79 to HUF 386.34, according to 168.hu.

The forint opened the month of June 5.1 percent weaker against the euro, 3.6 percent weaker against the dollar and 4.9 percent weaker against the Swiss franc than at the start of the previous month,

MTI reports.

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Read alsoKSH: state cut back its investments, foreign companies brought their money to Hungary

Hungarian forint plunges ahead of Orbán’s announcements

forint euro bills

Viktor Orbán announced on his Facebook page early Wednesday afternoon that important decisions would be announced soon after the cabinet meeting. Ahead of the announcements, however, the Hungarian currency is not doing well, to say the least.

The forint rose above 385, then 386, 387 and 388 against the euro in the early afternoon on Wednesday, as portfolio.hu reports. According to the paper, the weakness of the forint can also be explained by international factors: the dollar is strengthening, which usually does not do good to emerging currencies.

Meanwhile, sentiment in foreign equity markets is favourable, which is making the forint’s underperformance look striking.

Viktor Orbán said that the government wants to protect the financial security of families, and said that he would provide information on the first government decisions taken in the new emergency situation on Wednesday.

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Read alsoOrbán’s announcement: govt to protect utility cuts, cut excess profits

New risk of corruption found in the Hungarian legal system by Brussels

VON DER LEYEN

Brussels has launched an infringement procedure against Hungary after identifying a new risk of corruption in the legal system of the country.

Getting further from EU funds?

Hungary is one step further away from EU funds, as hvg.hu put it. An infringement procedure has been opened for failure to apply EU anti-fraud rules. At the heart of the long-running dispute over EU funds is the fact that Hungary is denied access to them because the European Commission says there is a high risk of corruption, which could jeopardise the proper use of EU funds, Népszava reports.

These are communicated to the Hungarian authorities year after year in so-called country-specific recommendations,

but the Hungarian government fails to act on them.

Infringement procedures

Thus, the European Commission’s opinion has not changed, and now, it seems that the Hungarian position is deteriorating even further. The Commission has identified another risk in the Hungarian system, which has led to the opening of an infringement procedure. This position has recently come to the fore in discussions on EU recovery funds,

which has led to the European Commission refusing to approve EUR 1,500 billion in funds.

Hungary has received a formal notice

According to hvg.hu, the Commission has decided to send a letter of formal notice to Hungary for failing to correctly transpose EU rules in the fight against fraud affecting the EU’s financial interests by criminal law (Directive (EU) 2017/1371). The other three countries that received such notice are Estonia, Malta, and the Netherlands.

The aforementioned rules protect the EU budget by aligning definitions, penalties, jurisdiction rules, and limitation periods for fraud and other criminal offences against the EU’s financial interests. Hungary now has two months to respond.

If Brussels’s concerns are not dispelled, the procedure will move on to the next stage.

As we can read in the article of hvg.hu, in addition to this, four other cases have been opened or are ongoing.

Truck bringing supplies
Read alsoWill Hungary become the next major battery producer?

This is how Hungarian real estate market is affected by the historic low of HUF

budapest real estate

The Hungarian forint has reached a historic low in recent days. But how will this affect the Hungarian real estate market, and who will have a huge advantage in the current market conditions?

The depreciation of forint is still ongoing, having reached 400 historic lows on Monday. The sudden fall of the Hungarian currency is due to the economic sanctions imposed on Russia as a result of the Russian-Ukrainian war and the threat of gas cuts. Hopefully, the current economic situation will not take too long, however, there could still be some great winners in the Hungarian real estate market.

Since 2012, property prices have been rising steadily across the country, and in the last 2-3 years prices have started to rise sharply in the market. The Hungarian market is chiefly dominated by retail transactions and domestic players who receive their salaries and take out home loans in Hungarian forint. However, the current depreciation of the forint could give foreign investors a significant financial advantage.

This is particularly true for those coming from the eurozone as well as Switzerland, the UK, China and the US.

Numerically, Hungarian forint has weakened by 11-15% against the major currencies since the end of February. This means that from the perspective of foreign buyers, house prices have also fallen sharply by 11-15%.

As the Hungarian news portal Portfolio reports, this could lead to a significant increase in demand, especially from Austria, Slovakia and Romania. If investors do not consider the current situation too risky, they could push up prices in the agglomeration areas of the big cities close to the border, as well as in Budapest. The Hungarian capital is the main point of interest for Chinese investors, while Austrian and German buyers are mainly interested in the countryside.

According to an expert, real estate is the best investment at the moment, even if prices in the prime areas can rise by another 100-200,000 HUF per m2 in the upcoming months – reported by 24.hu.

Even more intensive changes can be expected in the commercial property market, concerning offices, logistics, retails and hotels where companies invoice their transactions mostly in euros. In this segment of the real estate market, developers borrow their project loans mainly in euros (due to lower interest rates), while owners and investors pay their rents in euros. Based on all this,

the cost of renting a 1,000 m2 premium office has jumped from HUF 7.1 million to HUF 8 million in the last two weeks.

For tenants, this is a sudden and significant increase in costs, who are also struggling with increasing energy prices (companies do not benefit from rent reductions).

Additionally, the increase in construction costs will affect both the residential and commercial property markets. After last year’s drastic increase, further growth can be expected this year as well, but this time for different reasons. Most of the building materials are imported, so prices have risen sharply as the forint exchange rate has deteriorated. This impacts all sub-markets, including new housing and rents.

Read alsoCentral bank may intervene: a record weak forint poses a serious threat to the Hungarian economy

Forint hits 400 historic lows against the euro, government blames Brussels

forint euro 400 hungary

With the Russian-Ukrainian war continuing unabated, investors have been extremely sensitive to the weekend’s developments, and the risk-averse mode is taking its toll on the forint.

The domestic currency is showing a sharp depreciation, hitting new historic lows and crossing the 400 mark. International sentiment then improved in the afternoon, with the euro coming all the way back below 395.

4:20 PM

The forint has been holding steady since reaching a low of 400, and is currently trading a little below 395. Compared to Friday, it still represents a significant weakening of over 2%.

Against the dollar, it has weakened even more, by 2.3% to 362.5.

Forint victim of Brussels sanctions

Finance minister

Hungary’s currency has become a victim of Brussels’s sanctions, which have caused substantial damage to the Hungarian economy, Finance Minister Mihály Varga said on Monday.

Mulling a decision to extend sanctions to the energy sector poses the gravest danger to the forint and to the Hungarian people, the minister said in a video posted on Facebook.

Those who advocate extending the sanctions want Hungarians to pay the price of war, he said.

“The Hungarian government will not support a move like this at any international forum,”

the minister said.

Those who call for the extension of sanctions want to make the Hungarian people pay the price of the war

Referring to the exchange rate of the forint, the foreign minister said that

the sanctions measures have created extreme uncertainties in the European economy, adding that one of the biggest threats to the Hungarian economy now would be the new sanctions affecting the energy sector.

The ministers did not say that if Hungary were a member of the eurozone it would not face such difficulties

The forint has not fallen this much since 2008

This morning, the złoty and koruna are relatively stable, while the forint has seen a huge depreciation of more than 10 forints. The only previous example of this was during the financial crisis, when the euro was 18.09 forints more overnight (on 15 October 2008),” Erste’s team of analysts said in a morning commentary.

According to them, the war in our neighbourhood

the markets are extremely nervous and risk averson is extreme.

As the MNB sees interest rate hikes as the strongest weapon against the weakening currency, further tightening measures could come this week.

Hungarian Forint reached its historic low against Euro today!

This week, Hungarian Forint has reached its lowest level ever. On Monday, 1 EUR was HUF 372.21.

After having reached two historic lows against Euro last November, we did not expect that soon the Hungarian Forint would reach its lowest level ever.

As a result of the Russian-Ukrainian war, the new historic low of the Hungarian currency has been reached today.

As the Hungarian news portal hvg reports, Hungarian Forint started to fall last Thursday, minutes after the Russian attack. On Thursday, the value of the forint depreciated by 10 points in one day, reaching the 370 level by the end of the day. On the weekend, a slight improvement could be observed. Investors calmed down a little and the Hungarian currency started at 367 on Monday morning.

During the day, however, it quickly started to fall, and as soon as European stock markets opened,

Hungarian Forint has reached its lowest level ever: 1 EUR was HUF 372.21.

According to Portfolio, the weakening is not due to Forint-specific factors.

The primary reason behind the weakening of the Hungarian currency is the Russian-Ukrainian war.

The conflict has triggered a general risk aversion in the market, as investors seek to get rid of any assets that are even slightly risky. This is affecting all emerging currencies, including the forint, while currencies that are considered safe, such as the dollar, the Japanese yen and the Swiss franc, are strengthening.

It is difficult to counter the weakening. Even if the Central Bank of Hungary cannot influence international sentiment, it does have the means to dampen these effects. One option is intervention in the foreign exchange market, but it is questionable how successful this can be in a situation like the current one.

Another practical option for the central bank is to raise interest rates. Last week, as in January, the base rate was raised by 50 basis points and the one-week policy rate by 30 basis points. Based on the communication so far, the next tightening is not expected until the end of March, but the MNB has always reserved the right to flexibly raise the one-week rate in response to market volatility. The question is whether they intend to react to the current market situation.

UPDATE

March 1, 2022: Hungarian forint sinks steadily, reaching a historic low against the euro. Read details HERE.

Budapest Parliament Hungary Danube
Read alsoHungary offers to hold peace negotiations in Budapest!

Hungarian forint reached two historic lows against Euro

forint euro kató alpár fotó

The Hungarian currency has been losing its value for months, but it reached historic depth yesterday. In Monday morning, you could buy 1 EUR for more than 370 HUF. The currency’s weakening accelerated last week partly because of the USD’s strengthening. Yesterday we had to pay 329 HUF for 1 dollar and 441 HUF for 1 GBP. Even though it seemed on Monday afternoon that the HUF will strengthen a bit, in the evening it surrendered, and reached a new historic low: 370.2 HUF/EUR.

Hungarian forint losing its value rapidly

According to portfolio.hu, despite the Hungarian National Bank’s reference interest rise, the forint continued to lose its value even on Monday. The trend is the same in the case of the regional currencies. For example, the Polish prime minister said yesterday that they did what they could to strengthen zloty.

The reason is, the Hungarian business media outlet says, that

Joe Biden announced yesterday that they would nominate Jerome Powell to continue to lead the Fed.

As a result, the USD strengthened against the Euro and the Hungarian forint, as well. Of course, there are several other reasons like the increasing number of COVID patients in Central-Europe, or the weakening of the Turkish lira. Portfolio.hu says that these factors increase the financial risks of the region, so investors take their money away. 24.hu says that the emerging fourth wave might cause a new economic crisis in Hungary.

Cornerstone laying of Belgrade-Budapest railway section held in Serbia

Government boosting inflation?

Even though it seemed on Monday afternoon that the HUF will strengthen a bit, in the evening it surrendered, and reached a new historic low: 370.2 HUF/EUR – 24.hu reported. Before, the forint’s historic low against the euro was at 369.19 – index.hu said.

As we reported before, the Hungarian government will distribute a lot of money before the 2022 general elections. The youth below 25 will not have to pay personal income tax from next January. The families raising children will get back part of or even all their personal income tax they paid in 2021. As a result, for example, family of three where both parents earn average salary

will get back almost 1.5 million HUF (4,000 EUR).

Furthermore, the pensioners got Historic high premium (80,000 HUF per capita) in November. Moreover, they will get a 13th month pension next February.

While the government would not like to introduce euro in Hungary, the united opposition would do so. In a recent interview the joint PM candiate of the opposition parties, Péter Márki-Zay, said that there is an agreement between the six parties and the Everyone’s Hungary Movement that they would start the process provided they win the 2022 parliamentary elections.

Hungary needs to replace the forint with the euro – reader’s letter

euros

Sometimes, we publish readers’ letters because we like well-developed arguments and nicely written texts.

If you want to share your thoughts on a given issue, send us your writing to in**@da**************.com.

The Euro for Hungary

The gate of freedom, Hungary of 1989 misled by the former freedom hero of 1989 Viktor Orbán now in the service of Vladimir Putin is rejecting the Eurozone, even openly mocking the Euro, claiming the Euro to be a failure. If József Antall knew what Viktor Orbán is doing, well… No comment.

69% of Hungarians want to join the Eurozone,

but Viktor Orbán prefers manipulating the Forint and running Hungary as his fief. The opposition sadly is not focused, and hoping to end the Orbán regime, they seem to lack the cohesion to win. The left-wing tax populist Klara Dobrev will certainly not defeat Viktor Orbán with a high tax populist platform and married to Ferenc Gyurcsány, the disgraced former Socialist Prime Minister whose confused economics mixed by confused politics led to the 2nd victory of Viktor Orbán in 2010. Gergely Karácsony, the mayor of Budapest, seems a much more reasonable candidate, with better chances to oust Orbán. Key is to focus on the Eurozone, on Orbán’s Russian pivot and close Putin ties and not roll out a Socialist wish list including massive tax hikes. Hungary’s tax system needs to be adjusted to reduce VAT on the EU level to 20% and

raise Corporate Tax to 15% from the current 9%, but keep the 15% flat tax and avoid the temptation of socialist tax populism driving the Hungarian middle classes back to Orbán.

Keeping taxes low and flat at 15% inside the Eurozone is the way for Hungary to catch up with the Czech Republic and Slovenia in this decade and reach Austrian prosperity levels by 2040 as Austria stays a high tax country after the failed tax reform of Sebastian Kurz and Werner Kogler from October 2021.

So the Eurozone membership should be a key election topic for 2022

Orbán will certainly try another anti-migration campaign, so the EU would be well advised to take the pressure off all such redistribution schemes to avoid giving Orban his topic. Better focus on Rule of Law and clearly the Euro for Hungary. Here it would help if Romania would join the Eurozone in 2024 together with Bulgaria, as this would make many Hungarians with links to or living in Romania reconsider their position, and Orban would have much to explain. It would help if Donald Tusk took the Eurozone for Poland as a flagship topic for his return to Poland. It would help to have this debate in the Czech Republic. And Croatia’s Eurozone membership will have an impact as well. Croatia overtaking Hungary into the Eurozone is certainly a message that won’t be lost on Hungarians. But given the misalliance between Orbán and Vucic,

the EU offers to Serbia to change the currency of Serbia from the Dinar to the Euro for the recognition of Kosovo would have an impact on the northern neighbour.

No matter if Serbia rejects or accepts it – such a debate and such an official offer will be reported in Hungarian media, and the debate about the Euro all around Hungary from Slovakia, Austria, Slovenia to Croatia and possibly Serbia and Romania and as discussed even in Ukraine would certainly send the debate in Budapest into a frenzy. And even Orbán’s strict massage control will not control this message, the Euro is soon a reality in Central and Eastern European countries and just Hungary is isolated, possibly left over with Serbia alone. Not so attractive for Hungarian voters, already 69% are for the Eurozone entry of Hungary.

7.2 billion Euro for Hungary as part of EU Recovery fund

The EU is supporting Hungary with 7.2 billion and add the 33 billion net transfer since 2004 and add the massive support from 1990 to 2004 by EU, USA and Germany and Western IFI following the end of Communism and the reconstruction and EU accession. Yes, and all this is justified, but we can ask some things, please some minimal standards of Rule of Law, Anti-Corruption and Good Governance and some alliance allegiance and yes to join our tools of convergence and cohesion and our economic system – the Euro. Yes, we can ask for the Euro from Hungary.

Time for better leadership

Once the opposition has won in 2022, how will the EU react when the new Hungarian Prime Minister declares that Hungary wants to join the Eurozone? Yes, wait, we need to check and yes all criteria and we better wait until Orbán is back in power! No, this time we have to act! Get Hungary in the Eurozone straight after the election of a pro-European, pro-Euro Prime Minister, and make that clear during the election campaign.

Author: Gunther Fehlinger/ https://www.linkedin.com/in/fehlinger/

Provided the opposition wins in 2022, they will introduce the EURO in Hungary

opposition coalition

The opposition Democratic Coalition (DK) has called for the introduction of the euro and the European minimum wage as “the only way out of Hungarians’ subsistence crisis”.

László Varjú, the party’s deputy leader, told a press conference on Monday that “the flawed economic policy of the Hungarian government, a record weak forint and skyrocketing prices have led to our money losing its value, and we can afford less and less from the same salary.”

Despite a 4 percent raise in February, the minimum wage is still worth less than last year, Varjú said. Varjú insisted that

the “current subsistence crisis” had been created by the government

and could only be resolved by a change of government in the general election next spring.

Varjú said that should DK’s candidate, MEP Klára Dobrev, become prime minister,

she would work to accelerate Hungary’s accession to the euro zone.

She would also introduce the European minimum wage to ensure that “rather than just surviving on their salary, Hungarians can make a living at almost European levels.” Besides western European countries, the minimum wage in Slovakia, the Czech Republic and “even Romania” is now worth more than that in Hungary, he said.

“Those fighting the introduction of the euro actually mean to say that Hungarians’ work is worth less than that of others,”

he said.

Would the introduction of EURO be “particularly dangerous” in Hungary?

forint euro kató alpár fotó

The European Commission cannot afford to involve itself in partisan politics, as this would eventually tear the European Union apart, Gergely Gulyás, the prime minister’s chief of staff, said in a discussion with András Schiffer, the opposition LMP party’s former leader, on Thursday.

In the discussion on the future of the EU at the Mathias Corvinus Collegium festival in Esztergom, in northern Hungary, Gulyás said there was no alternative to institutionalised cooperation among the nations in today’s globalised world. This, he added, required a shared set of rules. Gulyás insisted, at the same time, that the EC had lately been ignoring what it was allowed and not allowed to do according to the law. He said the commission was

“serving political needs”

even if this meant trampling over EU law.

Schiffer said the “real conflict” shaping the future of the bloc was between democratic decision-making and “corporations’ hunger for profit”.

“The question is whether we’ll have a world in which profits come before the interests of the people and nature, or if human communities will be strong enough to keep capital in check,” Schiffer said. This requires strong nation-states and strong cooperation among them, he added.

Schiffer criticised the structure of the EU for “tying together” countries with different levels of development. A different kind of Europe is needed that allows less developed member states to deviate from the rules on certain issues, he said. In these member states, land should not be subject to the principle of the free movement of capital, but the rules on matters like wages, labour protection and environmental protection should stay as they are, he added.

Meanwhile, Schiffer said

it would be “particularly dangerous” to introduce the euro in Hungary,

arguing that the “gap between the core and semi-peripheral countries” was wider in the euro zone.

As regards the EC’s launch of an infringement procedure against Hungary over its child protection law, Gulyás said the proceedings lacked a legal basis, arguing that education was a national competency. “So the question of whether or not the regulation is good is a legitimate one on the part of the opposition, but the EU has nothing to do with this,” he said.

Schiffer partly agreed, saying that

the government should have consulted with the EC on its amendment of the advertisement law.

He said that although the EC’s criticisms of the part of the law banning the “popularisation of homosexuality” were valid, the dispute over the law was primarily a domestic political conflict.

Asked if the government would consider amending the law, Gulyás said that if the referendum on child protection issues will be valid, the government will be bound by it.

On the topic of the Norway Grants funds, Gulyás said

it was “outrageous” that Norway was refusing to meet its commitments

and wanted to tell Hungary “which organisations linked to George Soros” it should distribute the funds to. The funds from the Norway Grants are not “handouts”, but rather money that Hungary is owed, he said, arguing that Norway was “enjoying the benefits of the European single market while not being a member of the EU”. The EC should stand up for Hungary on this issue, Gulyas added.

Schiffer said the monies from the Norway Grants and EU funds were a tool the EU could use to “make certain countries see reason”.

Hungarians want to replace forint with euro, but the government does not

forint euro kató alpár fotó

It has long been a question whether Hungary will ever use the euro instead of the forint. The question divides Hungarians. According to a recent survey, most Hungarians would adopt the euro, and most experts are also pro-euro. However, the Hungarian government regularly argues that the introduction of the euro would adversely affect Hungary and result in an economic downturn.

According to a Eurobarometer survey, 69 per cent of Hungarians would like to switch to the euro, 26 per cent would not like to adopt it, and the remaining 5 per cent were uncertain about the issue. The popularity of the euro has increased compared to previous years. This may be related to the coronavirus epidemic. Ákos Péter Bod, a professor at Corvinus University, believes that the euro has not become more popular, but the weakening of the forint is pushing people towards the euro. He added that the euro is popular in countries with high inflation, such as Romania and Hungary.

During the coronavirus epidemic, one euro became 30-50 forints more expensive.

In 2019, it was possible to buy one euro for 310-330 forints, while during the epidemic, one euro costs 360 forints, but for a short time, the exchange rate was above 370. “A weaker forint causes higher inflation and a relative loss of wealth for the majority of Hungarians,” Zoltán Török, chief economist at Raiffeisen Bank, tells portfolio.hu.

Central bank governor György Matolcsy believes that the changeover to the euro should not be done in the interest of Hungary’s economic development. Dr László Csaba, an economist and professor at CEU, believes that the benefits of adopting the euro can be seen in Slovakia. Slovakia used to be one of the poorest countries but is now a leader in the region. László Csaba, who had previously helped Viktor Orbán with advice, refuted Matolcsy’s claims step by step.

The euro area is a serious safety net in the event of a crisis.

It is not worth it for a small country to maintain its own currency. László Csaba told 24.hu that it is completely feasible that there will be euro in Bulgaria or Romania sooner than in Hungary. According to the current position of the Hungarian government, the introduction of the euro is not expected in this decade. The government believes that its own currency is a source of independence and economic advantage, even though most experts see the situation differently.

PM Orbán: Hungary bringing jobs back faster than euro-zone countries

orbán government info

Hungary is bringing back jobs lost during the pandemic faster than the euro-zone countries, Prime Minister Viktor Orbán told a press briefing on Thursday.

Whereas unemployment in the euro zone is at 8 percent, in Hungary it is 4.3 percent, Orbán said. More than 4.5 million have a job in Hungary today, he noted, only 50,000 fewer than in the same period of 2019.

Hungary’s government has vowed to create as many jobs as have been destroyed by the virus, Orbán noted, adding however that there would be an opportunity to create double that many before the end of the year.

Contributors to response efforts to get ten-day leave

Those who contributed to Hungary’s Covid-19 response efforts will get a paid leave of ten days

“This is the least they deserve,” Orbán told a press briefing.

The decree specifying the scope of recipients will be published later today, he said.

Gergely Gulyás, head of the Prime Minister’s Office, said workers would not have the option of accepting overtime pay instead of taking the time off, as the purpose of the measure was to give them a chance to rest.

Government to launch National Consultation survey on reopening economy

The government is launching a National Consultation public survey on reopening and strengthening the economy.

The aim of the survey is to find common ground on the most important matters concerning the creation of a stable economy, Orbán told a press briefing.

The public will be asked, for example, on whether they think the increase of the minimum wage to 200,000 forints (EUR 575) alongside considerable tax cuts for SMEs should happen in more phases or one go, he said.

The government is also looking for backing from the public on issues such as a personal income tax rebate for low-earning parents, the moratorium on loan payments, migration and a climate tax, he added.

nyugati renovation works
Read alsoHungary job growth largest in Europe?

The Hungarian forint is plummeting — when will it stop?

forint

The coronavirus pandemic has changed almost everything globally, and it is no different in the case of foreign currency exchange. Unfortunately, the pandemic, which has stayed well over its welcome, had a massive impact on how the Hungarian forint is standing up against other currencies.

Index reports that the exchange rate of HUF has decreased by over 2% in the last month. The overall lowest exchange rate of the Hungarian forint compared to the Euro was around HUF  370 per every one EUR. The HUF has reached that all-time low twice during 2020 and has been already getting close to that in 2021 with HUF 368 per every one EUR last Monday, which was only 0.5% away from the currency’s historical lowest.

The Hungarian forint is not faring good against other currencies either. Compared to the exchange rate of January 1st 2021,

the exchange rate of the forint has decreased by 1.4% compared to the EUR and a shocking 4.5% compared to USD. The 1.1% increase compared to the Swiss franc is among the very few positive changes since then.

Hungarians can be very resourceful. Check out how they have made money on the weak forint.

Index asked two analytics, Zoltán Török from Raiffeisen and Orsolya Nyeste from Erste, who both highlighted that this process is not necessarily only affecting Hungary, but most emerging markets in the EU. The exchange rate of

  • the Polish złoty decreased by 2.77%
  • the Czech koruna decreased by 2.64%
  • and the Hungarian forint decreased by 2.34%.

Orsolya Nyeste said that what is affecting the Hungarian currency are global processes.

“Dollar yields are rising, as are global inflation expectations, so interest rates in Central and Eastern Europe do not seem so attractive to investors,” – she said, adding that generally, the strengthening of the USD – which increased 1.77% compared to the EUR – has a negative effect on the currencies of the emerging markets.

TradingView Hungarian Forint Árfolyam Currency Exchange Rate
The changes in HUF compared to EUR Source: TradingView

“The announcement of new closures ruins the short-term economic outlook, making it more uncertain. This was also clearly visible in the forint’s exchange rate last year, which reacts strongly to [corona]virus news: if the situation worsens, the forint weakens. If it improves, the forint’s exchange rate will stabilise or even strengthen,” – Orsolya Nyeste said.

According to Zoltán Török, one of the reasons for the bad exchange rate of the HUF could be because financial markets have been trying to predict and adapt to the new, overall higher inflation rates coming worldwide, following a generally low inflation rate period of the past few years.

He also highlighted that generally, Central banks can mitigate the weakening of their own country’s currency by raising interest rates. In the case of Hungary, however, this cannot be done, as due to the past year of combating the coronavirus pandemic, the Hungarian budget is in deficit. This concludes that, unfortunately, the current weakening of the HUF cannot be halted yet.

Despite all bad news, the analysts predict that the HUF will stabilise or even slightly strengthen. Zoltán Török from Raiffeisen says that although the weakening will continue for a bit, after a few months, the HUF will start to strengthen again, even reaching under HUF 360 per EUR,

stabilising somewhere between HUF 350-360 against the EUR. Orsolya Nyeste is not that optimistic; she thinks that the Hungarian forint’s exchange rate will stabilise and keep at HUF 365 against the EUR.

eu brussels
Read alsoShocking! Hungary leads the list of the countries obligated to pay back the most EU money

Croatia to adopt euro on Jan. 1, 2023

wage money Euro

Croatian National Bank Governor Boris Vujcic announced on Thursday that Croatia would adopt the euro on Jan. 1, 2023.

“Although the outbreak of the COVID-19 pandemic hit the Croatian economy and public finances hard, we are working on a National Plan to replace the Croatian kuna with the euro,” Vujcic said at a televised conference in coastal city Opatija.

The governor noted that the Croatian National Bank is working closely with the government on the plan which will regulate the process of the euro adoption. It would deal with different issues such as the conversion of deposits and loans, adjustment of interest rates, and recalculation of prices. The plan, he said, should be presented soon and implemented in the autumn.

Although polls show that some people are afraid that the introduction of the euro will lead to an increase in prices and a lower living standard, the governor said it is not the truth.

He said experience in other countries that have replaced their currency with the euro is different and that the living standard there went up.

Croatia was admitted in July into the European Exchange Rate Mechanism (ERM II), a preliminary stage for entry into the eurozone. The central rate of the Croatian kuna is set at 1 euro to 7.53 kuna. A country has to spend at least two years in ERM II before joining the eurozone.

Vujcic said Croatia is committed to implementing additional measures to combat money laundering, further reduce administrative and financial burdens on the economy, and improve corporate governance in state-owned enterprises.

He stressed that Croatia has been fulfilling all the criteria for nominal convergence since 2016, but that the crisis caused by the pandemic will temporarily make it more difficult to meet the fiscal criteria.

The governor said also on Thursday that he expects a 10 percent drop in Croatia’s gross domestic product this year, and a strong six percent growth in 2021.

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Read alsoCroatia makes mask-wearing mandatory in parliamentary sessions

PM’s Office: No decision on Hungary joining the euro zone yet

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Asked about the renovation of Budapest’s iconic Chain Bridge, Gulyás said the government wants the municipal council to renovate the bridge, noting that it had offered the same amount of funding for the project as it had to the administration of former mayor István Tarlós.

But, Gulyás insisted, the city council had “done nothing but pay lip service” to the project in the recent period. Despite having six times the funding needed for the renovation in its bank account, the city council has yet to launch the public procurement tender, he added.

The city council is “happy” to enter into disputes with the government, Gulyás said, adding that it would be “preferable” if the city leadership chose a matter other than the Chain Bridge for this.

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Read alsoPedestrians to be banned from Chain Bridge, Budapest

Gulyás said the structural issues with the bridge along with the dangers of falling debris from it warranted starting the renovation as soon as possible, adding that all the funds necessary for the project were available.

On the topic of rising parking fees in the capital, Gulyas said the fee hikes “will not solve anything”, adding that the metropolitan council had implemented a number of measures in the recent period that had led to more traffic jams in the city.

Parking fees are barely affordable as is, he said, adding that the government did not support any further hikes.

On the subject of left-wing districts requesting that the state compensate them for their losses incurred during the epidemic, Gulyás said the losses sustained by local councils were “relatively modest” compared with those incurred by the state.

Asked about the Budapest city assembly’s decision to set up a committee to investigate suspected cases of corruption in recent years, Gulyás said: “Any one is free to investigate anything” and wished the committee “good luck”.

Asked when the council overseeing public developments in Budapest would meet next, Gulyás said Budapest Mayor Gergely Karácsony had earlier visited a meeting and asked for it to be postponed. The government is not opposed to engaging in dialogue with the city council, he said, adding that if the council was prepared to cooperate, the next meeting would be held in September.

Asked about the new operational structure of certain universities, Gulyás said that having the institutions be governed by foundations would boost their autonomy and limit government intervention. The prime minister’s presence on the board of trustees of some of these foundations could be of help to the universities, he added.

Asked if the forint’s weakening after the central bank’s base rate cut earlier this week presented a risk to the economy, Gulyás said the government did not interfere with the bank’s monetary policy.

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Read alsoHungarians support joining the EUROzone? – Survey

Asked about Hungary’s euro zone aspirations Gulyás said the government had not yet made a decision on whether or not the country should adopt the common currency.

Though Hungary meets the requirements to join the zone, the government has seen the problems caused by the currency’s introduction elsewhere.

On another subject, Gulyas said the number of active jobseekers was down last week. Though the goal is not for the government to provide employment for those looking for work, it is prepared to do so if necessary, the PM’s Office chief said, adding that the government had implemented the necessary measures for this in the recent period.

Asked about a tourism tender where the winning bids were all Fidesz-led local councils, Gulyás said the Hungarian Tourism Agency (MTU) had been expected to assess all bids on the basis of professional criteria. Now is the time and opportunity to support hotels, Gulyás said, pointing out the industry had lost out on 3-4 months’ worth of business.

Concerning the port and logistics base Hungary is establishing in Trieste, Gulyás said helping Hungarian businesses get their products out onto the markets would boost foreign trade.

The government has so far paid off 25 million euros of the 31 million euro sales price for the 32 hectare plot, he said.

Commenting on the situation surrounding news portal Index, whose CEO has recently stepped down, and the suggestion that the government was looking to limit the independence of the portal’s editorial team, Gulyás said the government’s only job was to ensure the freedom of the press, which he said was guaranteed by the constitution and the country’s media law.

The government cannot get involved in matters concerning the press, he said, arguing that doing so would be a violation of press freedom. Gulyás underlined the importance of a diverse media landscape, saying that he believed Hungary had greater media diversity than western European countries.

International role of euro stable at historically low level – ECB

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The international role of the euro remained stable in 2019 at a historically low level, according to an annual report published by the European Central Bank (ECB) on Tuesday.

The share of the euro across various indicators of international currency use averaged around 19 percent, close to its historical lows, but it remained unchallenged as the second most used currency globally after the U.S. dollar, the report said.

Specifically, at constant exchange rates, the share of the euro in globally disclosed holdings of foreign exchange reserves rose slightly to 20.5 percent at the end of 2019, 0.2 percentage points more than a year earlier.

The U.S. dollar remained the leading global reserve currency in the same period, although its share declined by almost a full percentage point to a two-decade low of 60.9 percent.

The share of the Chinese renminbi increased modestly, by less than 0.1 percentage point, the report added.

The share of the euro in outstanding international debt securities declined from 22.4 percent to 22.1 percent in 2019, while its share in outstanding international loans grew from 14.3 percent to 15.4 percent, showing that international debt issuance in euro continued to increase in volume.

The report also pointed out the significant role of the euro in global green bond markets, with the euro being the main currency of denomination for the issuance of green bonds in 2019.

The euro was launched in January 1999.

Its usage had declined after the global financial crisis and bottomed out in 2016, according to the ECB. The international role of the euro is primarily supported by a deeper and more complete Economic and Monetary Union, it noted.

“The recent COVID-19 pandemic underlines the urgency of these policies and reform efforts, which are paramount to raising the attractiveness of the euro globally,” ECB President Christine Lagarde said in a statement.

Hungarians support joining the EUROzone? – Survey

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According to a recently published study, 2/3 of Hungarians support the idea of introducing Euro in Hungary to replace Forint as soon as possible.

Napi.hu reported that the survey was intended to present the opinions of the Hungarian residents about the introduction of the EUR currency in the country. Pulzus Kutató did the survey, and 65% of the asked population answered yes, EUR should be introduced shortly while the additional 35% voted no. Introducing EUR has been a widely arguable and exciting topic in Hungary. While it is not the main question today because of the coronavirus epidemic, it is still astonishing that more than half of the nation seems to support the idea of replacing HUF.

Becoming the member state of the European Union comes with the obligation of changing the currency to EUR. However, there are some examples like Denmark and the United Kingdom, before Brexit.

Currently, Bulgaria, the Czech Republic, Croatia, Poland, Romania, Sweden (still does not intend to join the EUR zone) and Hungary kept their original currencies. To be able to introduce EUR in a member state, there are several criteria to follow. Read about them in the article below.

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Read alsoWhen will the Euro be introduced in Hungary?

EUR is currently the official currency in 25 states, and 19 of them are the members of the EU. 

Each state decides on their own whether they would like to join the EUR zone, and developing a financial strategy of the joining is their task. The Hungarian Government emphasised many times before that they have the intention to join the EUR son. However, the exact date and the strategy are uncertain. In 2011, the Orbán Government estimated to be a member of the EUR zone by 2020, but it is clear that it still has to wait. In 2015, the National Bank of Hungary announced measurements to join the EUR zone but there is no current debate or negotiation about the procedure in the Parliament and at the bank at all.

Among the answers, 71% of the positive ones were given by 40–59-year-old Hungarian residents which means that mostly the members of the X and Y generations support the idea. The answers given by 18–39-year-old people made up only 58% of all the answers. Most residents filled in the survey from Budapest.