forint

Hungary introduces new commemorative coin honouring 800 years of Pannonhalma Archabbey

Pannonhalma Archabbey

On 28 August 2024, the National Bank of Hungary (MNB) issued a new commemorative coin in honour of the Pannonhalma Archabbey, a UNESCO World Heritage site.

Issuance of the coin marks an important date

The release of the new forint coin marks the 800th anniversary of the abbey church’s medieval reconstruction and consecration, as well as the 10th anniversary of its designation as a national heritage site, Pénzcentrum reports. The 3,000-forint coin is part of a larger series that showcases Hungary’s national heritage sites, which was initiated in 2014 by the National Heritage Institute. The Pannonhalma Archabbey coin was designed by artist Balázs Bitó.

The Pannonhalma Archabbey is one of Hungary’s most important spiritual and cultural centres and is regarded as the cradle of Hungarian Christianity. Its thousand-year-old school and one of the largest monastic libraries in the world are located here. Established in 996 by Prince Géza in honour of St. Martin of Tours, the monastery’s church was first consecrated around 1003.

Pannonhalma Abbey
Photo: Wikimedia Commons

Over the centuries, it was rebuilt multiple times due to fire and war. The current church, restored in 1224, stands as a rare example of medieval architecture, still in use today for monastic prayer. Pannonhalma was officially declared a national heritage site in 2014.

The commemorative Pannonhalma Archabbey coin

The coin commemorating the Pannonhalma Archabbey is the 11th in a series featuring Hungary’s national heritage sites. The series follows a consistent design principle: one side of each coin features an image representing the entire heritage site, while the other side highlights a characteristic detail of the site. The Pannonhalma coin exemplifies this design.

On the front of the coin, within a circular border, there is a depiction of part of the abbey’s founding charter. To the right, breaking the border, is a sculpture by Géza Stremeny of St. Maurus of Pannonhalma, emerging from one of the columns in St. Martin’s Basilica. The circular edge of the coin includes the inscriptions “MAGYARORSZÁG” (Hungary) at the top, “2024” and the mint mark “BP.” at the bottom, with the value “3000 FORINT” to the left.

The back of the coin shows the Pannonhalma Archabbey complex and its surrounding landscape, again enclosed within a circular border. At the bottom, slightly extending beyond the border, is the crest of the Hungarian Benedictines. The right side features the mark of designer Balázs Bitó. The circular edge on the reverse includes the inscriptions “PANNONHALMI BENCÉS FŐAPÁTSÁG” (Pannonhalma Benedictine Archabbey) and “NEMZETI EMLÉKHELY” (National Heritage Site), separated by the emblem of national heritage sites.

The coin is made of an alloy of 90% copper and 10% zinc, weighing 18.4 grams and measuring 37 mm in diameter, with a reeded edge. Only 10,000 pieces will be minted in this bronze-patinated finish. To ensure broad access to this commemorative coin, it will be available at face value for one year following its release, as long as supplies last. Interested buyers can purchase it starting 28 August 2024, from the Hungarian Mint’s coin shop in Budapest or through their online store.

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Are Hungarians wealthier than expected? Many moving their money abroad

Are Hungarians wealthier than expected? forint money

Global wealth began to rise again last year, with Hungary witnessing an increase of over 200% in average wealth per adult since the financial crisis. However, premium banking clients are now seeking to move their assets abroad in search of more favourable transaction fees. This trend could threaten cash flows and the broader Hungarian economy. Meanwhile, foreign currency loans are reaching record levels.

International trends and Hungary

As Portfolio writes, global wealth resumed its growth last year, with lower-income adults in Hungary experiencing faster growth in wealth than those in higher brackets, according to a recent UBS study. Despite this, Hungary saw an 8% decline in average wealth per adult in 2023 when measured in Hungarian forints. Yet, since the 2008 financial crisis, average wealth per adult in Hungary has more than tripled, ranking it eighth globally in terms of growth. The study also highlighted a significant disparity between average and median wealth, a pattern evident in Hungary.

Hungarians seek to move their fortunes abroad

According to Szeretlek Magyarország, the recent introduction of financial transaction levies and additional charges for currency conversion in Hungary is unlikely to drive the wealthy to move all their assets abroad. However, 10-30% of their actively managed savings may be relocated to foreign providers, as reported by hvg.hu based on Blochamps Capital’s analysis.

The National Bank of Hungary (MNB) has observed a significant shift, with financial institution deposits falling by nearly HUF 1,200 billion (EUR 3 million) in July, while foreign currency deposits rose by HUF 492 billion (EUR 1.25 million). This shift is directly linked to the new measures, particularly affecting premium banking and affluent clients, who may find the extra 0.9% transaction fee a more significant burden. Consequently, there is growing interest among these clients in opening foreign accounts, particularly with banks offering international networks.

Are Hungarians wealthier than expected? forint money
Photo: deposiphotos.com

Why is this a problem?

István Karagich, the managing director of Blochamps Capital, warns that while it is unlikely that a significant portion of Hungary’s wealthy will move their entire wealth abroad, the relocation of 10-30% of their regularly invested assets to foreign providers could pose serious risks. Such a shift could reduce cash flows within Hungary, negatively impacting financial markets and the broader economy. To maintain the profitability of financial service providers and bolster investor confidence, it is essential to keep as much wealth as possible in Hungary, actively participating in local financial markets. A decrease in circulating funds could also lower public revenues, making long-term economic financing more challenging.

Surprisingly high rate of foreign currency loans

Telex reports that foreign currency loans now account for nearly half of all corporate loans in Hungary, a level not seen since a decade ago. The total stock of corporate loans reached HUF 12,780 billion (EUR 32.5 million) by the end of June, with most of this year’s increase driven by exchange rate changes, as the EUR/HUF rate climbed from 382 to around 395.

In addition, the rise in foreign currency loans, now totalling HUF 6,297 billion (EUR 16 million), is attributed to the scarcity of state-subsidised loans and the rising cost of forint loans. Foreign currency loans are primarily utilised by companies with substantial foreign currency revenues, such as exporters and real estate operators. However, for firms with forint revenues, these loans remain risky due to exchange rate volatility, as experienced during the 2008–2009 financial crisis.

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Featured image: depositphotos.com

National Bank of Hungary releases new HUF 3,000 coin on 20 August – PHOTO

National Bank of Hungary releases new forint commemorative coin Főőrség

From time to time, the National Bank of Hungary releases new commemorative coins. The next coin, ‘Főőrség’ (Royal Guard), will be issued on 20 August 2024.

National Hauszmann Programme

The National Bank of Hungary (MNB) shared that a new forint coin will be released tomorrow showing the achievements of the National Hauszmann Programme. The programme is dedicated to restoring Hungary’s Buda Castle District, an area of significant cultural and intellectual heritage, to its historic appearance as envisioned by architect Alajos Hauszmann at the turn of the 20th century.

This restoration includes the rebuilding of the Royal Guard headquarters, originally designed by Hauszmann and demolished after damage in World War II, now reconstructed in 2020 to house a commemorative exhibition. Additionally, the National Bank of Hungary is releasing a collector coin series, including a HUF 3,000 coin named ‘Főőrség’, to celebrate the Programme’s achievements and educate the public about the Buda Castle District’s renewal.

The new coin

The National Bank of Hungary‘s unique collector coin series will continue, with each piece forming part of a honeycomb structure—symbolising the preservation of national values through its strong, stable design. The obverse of the ‘Royal Guard’ coin features decorative motifs inspired by the St Stephen’s Hall tapestry, with a depiction of Buda Castle’s facade as it appeared around the 19th and 20th centuries. The reverse showcases the Royal Guard building, along with the inscription ‘FŐŐRSÉG’ and the designer’s mark.

new forint commemorative coin Főőrség
Photo: mnb.hu

Where to get it?

The unique hexagonal ‘Főőrség’ collector coin, crafted from Nordic gold—a copper alloy—measures 37.18 mm across and weighs 20 grams, with a smooth edge. Limited to a production of 20,000 pieces using a special proof-like technology, the coin will be available for purchase at face value for one year from its release, while stocks last. It can be bought at the Hungarian Mint Ltd.’s coin shop in Budapest, its webshop, and gift shops in the Buda Castle District.

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Inflation accelerated in Hungary, so the forint began to strengthen

forint historic lows

Hungary’s annual consumer price index was 4.1 percent in July, the Central Statistical Office (KSH) said on Thursday. As a result, the Hungarian National Bank (MNB) is not expected to continue its base rate cut programme, so the forint strengthened.

According to portfolio.hu, experts do not expect a further base rate cut from the MNB, so the forint strengthened from almost 400/EUR to 396 today.

Month on month, consumer prices were up an average of 0.7 percent, with vehicle fuel prices rising by 3.8 percent. Food prices rose by 2.7 percent in July. Household energy prices fell by 4.5 percent. Gas prices were 9.3 percent lower and electricity prices declined by 2.1 percent. Consumer durable prices edged down 0.5 percent.

Commenting on the data, Márton Nagy, the national economy minister, said the government’s economic policy measures had proven effective in reining in inflation.

Nagy said in a statement that the online price-monitoring platform introduced last summer was generating vigorous competition among retailers and helping to keep inflation low in the long run. Not only was the platform helping to keep prices transparent, he said, but it was also allowing consumers to make informed decisions, thereby boosting long-term retail market stability and sustaining economic growth.

The minister said falling inflation, rising real wages and “the gradual lifting of cautionary measures” were helping restore domestic consumption.

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Forint in trouble – EUR/HUF is close to 400 again

Hungarian forint currency change

The forint has been on a steady decline against the euro and might continue its trajectory due to foreign trade flow setbacks in the coming months. The last time the forint fell so spectacularly against the common EU currency was in the spring of this year. Meanwhile, international markets are cautious, worsening the dollar exchange rate.

The forint continues to depreciate against the euro

Telex reports that the euro reached HUF 398.4 at dawn on Monday, and the situation had not improved significantly by the early hours of the day. Throughout the morning, the euro was trading steadily around HUF 398-399, and after 9 a.m., it crossed the HUF 399 mark. The Hungarian currency started the week badly, but its current deterioration did not come out of nowhere.

As Telex pointed out in a previous article, there has been a continuous deprecation in the EUR/HUF exchange rate in recent days. On 30 July, the forint reached a multi-week low against the euro, with the price of one euro hovering between HUF 392 and 395. The last time the forint performed this poorly against the euro was in March of this year.

An interesting point of comparison is that the USD/HUF exchange rate has not seen a similar fall, with Monday’s level of HUF 364 even an improvement on the price four days ago. This is due to the fact that, as Portfolio writes, international markets remain highly pessimistic, with recession fears in the US increasing significantly in recent days. This has caused a sharp weakening of the US dollar.

Macroeconomic data brings bad news for the forint

Meanwhile, Portfolio also reports that the latest Hungarian macroeconomic data do not paint an encouraging picture for the forint. Citing the analysis of Gábor Regős, Chief Economist at Granit Fund Management, the site writes that although the Hungarian trade surplus is significant, it has seen significant setbacks, and the decline in the value of foreign trade could have a negative impact on the forint.

As Portfolio points out, both export and import volumes fell by roughly 10 and 7 percent respectively, in June. According to Gábor Regős, the fall in exports can be explained by low external demand, “which is dragging down the performance of vehicle and battery production in particular – although this also means that the transition to electric cars is progressing more slowly than expected, but German industry is suffering from the opposite, low demand for conventional cars, which means the problem of vehicle production in general.” The decline in imports is mainly explained by low investment volumes.

Overall, Regő puts Hungary’s trade balance at roughly EUR 1.1 billion, which he says is “not low, but significantly below a year ago.” Presumably, a drop in export volumes could also be behind the Hungarian GDP decline in the second quarter of the year.

Besides the trade balance, these figures could have implications for the future of the forint, as well. As Gábor Regős writes: “This is a mixed situation for the forint: while the current account surplus is likely to remain, which supports the exchange rate, unfavourable exports and thus expected weak industrial data also spell bad news for the forint.”

At a point where the EUR/HUF exchange rate is already close to crossing the 400 threshold, and the forint has experienced multiple setbacks in the span of a few weeks, slowing exports and a stumbling industry may be, as Regős puts it, “particularly dangerous” for the future of the Hungarian currency.

Read also:

  • The EU reveals when Hungary could join the eurozone – Read HERE
  • Hungarian workers earn less than 1/3rd of Austrian counterparts – HERE

Hungarian workers earn less than 1/3rd of Austrian counterparts

office workers long weekends

Hungarian wages are among the lowest in the European Union, with workers earning less than a third of the average Austrian salary in 2023.

Hungary’s average net wage 4th lowest in EU

According to Eurostat data cited by Bankmonitor, last year, Hungary’s average net wage was the 4th lowest in the EU. While the EU average net salary stood at EUR 28,217 per year, Hungary’s was less than half of that, at EUR 12,456. Only Bulgaria, Romania, and Croatia had lower average wages.

When converted to Hungarian forints, the disparity becomes even clearer. The average EU wage in 2023 was nearly HUF 900,000 per month. The highest-paid workers were in Luxembourg, where the average monthly net salary was HUF 1.56 million. In the Netherlands, it was HUF 1.44 million, and in Ireland, HUF 1.37 million.

Austrian workers earn 3 times as much as Hungarians

Austria, a country Hungary has aspired to match for over three decades, remains significantly ahead. In 2023, the average net salary in Hungary was HUF 396,000—approximately 44% of the EU average—while Austrian workers earned over three times that amount, at HUF 1.22 million.

The standard of living also lags behind. Hungarians live at 65.2% of the EU’s average living standards. When considering purchasing power, the wage differences between EU member states are less pronounced than nominal figures suggest. The gap between the top-ranked Luxembourg and the lowest-ranked Bulgaria is more than fivefold.

In the Netherlands, the average wage’s purchasing power is less than three times that of Slovakia, which is at the bottom of the list. Hungary improved two places in the ranking compared to the previous year, now standing at 22nd. This means the average wage in Hungary is only enough to cover about two-thirds of the consumption level that an average EU citizen can afford, according to the report.

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Featured image: depositphotos.com

Hungarian forint plummets, 400 EUR/HUF dangerously close

forint euro exchange rate money huf eur eurozone

The Hungarian forint has faced multiple setbacks recently, resulting in a significant downturn. The currency’s future remains uncertain, with its decline showing no clear end.

forint euro exchange rate money huf eur eurozone
Photo: depositphotos.com

On Wednesday, the forint’s value dropped sharply. It began the day trading around 390 to the euro and 359.5 to the dollar, but these levels quickly became outdated, Világgazdaság reports. By the end of the trading day, the forint had depreciated by 0.84%, reaching 393.45 against the euro, and by 0.72%, falling to 362.12 against the dollar.

Reasons behind the weakening of the forint

Several factors have contributed to this steep decline:

  • The Hungarian National Bank (MNB) recently announced an interest rate cut.
  • Following this, MNB Deputy Governor Barnabás Virág indicated that one or possibly two more rate cuts could occur this year.
  • Additionally, new data from the Purchasing Managers Index (PMI) suggests continued economic contraction in Europe’s largest economy.

The weak German PMI figures indicate low inflationary pressures, which typically lead to expectations of further interest rate cuts. This, combined with the MNB’s potential future rate reductions, suggests that the forint might lose further support both domestically and across Europe, forecasting a continued weakening trend.

Investors, likely alarmed by the narrowing interest rate differential in Hungary and ongoing political issues, seem to be withdrawing from the Hungarian market. The full extent of the forint’s potential decline is difficult to predict, but some analysts have suggested that an exchange rate of 425 to the euro could be possible by summer.

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Hungarian central bank makes base rate cut decision

forint money collector coin central bank

Hungarian central bank (NBH) rate-setters cut the base rate by 25 basis points to 6.75 percent, while lowering both ends of the interest rate corridor to the same extent, at a regular policy meeting on Tuesday.

Hungarian central bank’s decision

In a statement released after the meeting the Council said inflation data was consistent with the projection in the June Inflation Report.

It said the growth of the Hungarian economy, high foreign exchange reserves, the persistent current account surplus, the government’s deficit reduction measures and a cautious approach to monetary policy all improved the country’s risk perception, adding, at the same time, that geopolitical tensions and the risks to the outlook for inflation “continue to warrant a careful and patient approach”.

Among the favourable domestic trends, the Council highlighted the improvement in consumer confidence, the increase in real wages and growing household consumption. “With the pick-up in the production of new industrial capacities built recently, balanced economic growth is expected from 2025, and Hungary’s export market share is likely to increase,” the statement said.

The Council put GDP growth at 2.0-3.0 percent for this year and inflation between 3.0 percent and 4.5 percent.

It said it was “constantly assessing incoming macroeconomic data, the outlook for inflation and developments in the risk environment, based on which it will take decisions on the level of the base rate in a cautious and data-driven manner”.

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Featured image: depositphotos.com

Unbelievable: Hungary experienced the highest inflation in history

pengő hyperinflation

On 1 August 1946, Hungary introduced the forint as its official currency. The change was necessitated by one of the most severe economic crises in history: the hyperinflation of the pengő.

During the final years of World War II and the immediate aftermath, Hungary experienced an extraordinary economic collapse. The national currency at the time, the pengő, underwent the most severe devaluation ever recorded.

The hyperinflation of the pengő…

pengő hyperinflation
The hyperinflation of the pengő made the introduction of the forint necessary. Photo: depositphotos.com

This period of hyperinflation was so extreme that there was a point when prices doubled approximately every 15 hours, Index writes. The currency’s value plummeted so quickly that the government and printing presses struggled to keep up with the demand for increasingly larger denominations.

In June 1946, just before the introduction of the forint, the price of a kilogram of bread had skyrocketed to 5.85 billion pengő.

This rapid and relentless inflation rendered the pengő almost worthless, making everyday transactions extremely difficult and confusing for the population. People were forced to carry enormous amounts of money for basic purchases, and the introduction of new currency denominations like “millpengő” (one million pengő) and “billpengő” (one trillion pengő) added to the chaos.

…and the introduction of the forint

Hungarian forint
Photo: FB/MNB

To address this crisis, the Hungarian government implemented a stabilisation plan by the summer of 1946. This plan aimed to restore the national income to about half of its pre-war level, ensuring it could adequately meet the basic needs of the population. With a more stable economic foundation in place, the government decided it was time to introduce a new currency to replace the pengő and stabilise the economy.

On 1 August 1946, the forint was introduced as Hungary’s official currency. Initially pegged to the value of gold, the forint was designed to provide a stable and reliable medium of exchange. The first coins issued included denominations of 1, 2, and 5 forints, as well as 2, 10, and 20 fillér coins. Later, various denominations of banknotes were introduced.

Since then, the forint has remained Hungary’s currency, enduring various economic changes. In 2021, it became fully convertible, with its value now compared to major international currencies like the US dollar and the euro. While there have been discussions about phasing out the forint, particularly around Hungary’s accession to the European Union, it remains the country’s official currency. Despite the digital age, where many people store money virtually on bank cards, the forint continues to be a physical part of daily life in Hungary.

Fun facts about the forint: did you know?

  • The medieval gold forint derives its name from the city of Florence, where gold coins were minted as early as 1252 under the name “florentinus”, which became the forint, or florint in the old days.
  • 400,000 septillion pengő had to be exchanged for 1 forint in August 1946.
  • Introduced in 1970, the brass two-forint coin, which at one time was also used in street telephone boxes, was called bélás.
  • The paper 200-forint note was withdrawn almost 15 years ago, on 16 November 2009, and can no longer be officially exchanged.
  • The model of the female figure on the first 100-forint banknote, issued in 1946, was Gizella Tőkés Jánosné Várszegi, an employee of the banknote printing house.
  • The front of the first 1000-forint banknote, introduced in 1983, featured Béla Bartók.
  • When the currency was introduced in 1946, a kilo of bread cost 0.96 forints.
  • The discarded forint banknotes are used to produce energy: the shredded banknotes are pressed into brick-shaped briquettes, which have a high calorific value and have been offered free of charge by the National Bank of Hungary for years for charitable purposes.

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Featured image: depositphotos.com

Hungarian National Bank will decide the forint’s fate on Tuesday: collapse or strengthening?

Hungarian forint state budget historic lows

The Hungarian National Bank may decide about a base interest rate cut again this Tuesday. A cut would probably not result in an exchange rate collapse, but it would break the Hungarian currency’s strengthening. Experts believe that Tuesday may mark a considerable change in both directions.

Forint strengthened a bit last week

According to index.hu, the forint strengthened a bit this week. It started at 392/EUR and finished at 391/EUR. That is because of the positive international atmosphere, and the EUR-USD currency exchange rate, which is on a 4.5-month peak.

Because of the weaker dollar, the forint tried to break the 390/EUR level on Thursday, Dániel Molnár, a senior analyst of the Makronóm Institute, said. The dollar began to decrease because the markets started to expect three consecutive base rate reductions (September, November, and December).

Meanwhile, the euro ran out of strength because the markets believed the European Central Bank (ECB) was planning a base rate cut. As a result, the euro weakened, and the forint could strengthen.

forint money collector coin
The Hungarian forint we are all proud of. But bad news always hit it hard. Photo: depositphotos.com

Forint strengthening was trend-like

Zoltán Varga, a senior analyst of Equilor Befektetési Ltd, said the forint may occupy the 387-397/EUR level against the euro and the 355-365 level against the dollar.

The forint’s strengthening follows a trend, Zoltán Árokszállási, the director of the MBH Analyst Centre, highlighted. The reasons are both international and domestic. First, the euro strengthened against the dollar. The only opposite change was due to the IT glitch collapsing international air traffic for days. That worsened investor sentiment and resulted in the strengthening of the dollar.

Árokszállási said there was a connection between the slightly stronger forint and the Hungarian government’s budget adjustment decisions moving towards restoring balance.

How will the Hungarian National Bank decide?

The forint’s fate is in the hands of the Hungarian National Bank this week. The markets calculate with a 25 base points reduction. The last time they did so was on 18 June, and since then, the financial and economic environment has become more favourable. For example, headline inflation was reduced to 3.7%. The government announced budget balance restoration, FED’s cut will be higher, and the ECB is also expected to cut base rates.

Hungarian forint national bank
György Matolcsy, the governor of the Hungarian National Bank. Photo: FB/MNB

That is why the Hungarian National Bank is expected to cut 25 base points in July, keep the interest rate level in August and may continue the rate cuts in September.

Mr Árokszállási said a base rate cut may not result in the collapse of the forint. But it will probably derail it from its strengthening course. He added that the bank’s and the Monetary Council’s statements will also play a key role on Tuesday because international investors’ concerns about inflation are still present.

forint hungarian central bank
Will it be worth more or less? Photo: depositphotos.com

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Among the region’s currencies, the Hungarian forint lost the most value in 20 years

forint hungarian central bank minimum wage loans

Since 2004, the Hungarian forint has lost half of its value against the euro, while the Polish zloty, for example, has remained stable and the Czech koruna has even strengthened.

Over the past two decades, the exchange rate between the Hungarian forint and the euro has typically moved according to inflation differentials between Hungary and the eurozone, according to GKI Economic Research Co.

The year 2023 broke the pattern, with inflation in Hungary significantly higher than in the euro area, but the forint still managed to strengthen. The main reason for this, according to the GKI, is that the central bank set a high benchmark interest rate to counter inflation, and the favourable yields attracted investors, strengthening the currency, Telex reports. This trend is a loss for domestic exporters, which could also weaken export-oriented industrial production.

Changes in the euro-forint exchange rate over the last 20 years

forint money collector coin
Photo: depositphotos.com

GKI published an analysis looking at the euro-forint exchange rate from a historical perspective, reviewing the 20 years since EU accession. They wrote that the exchange rate remained relatively stable in the first four years after Hungary’s accession to the EU until 2008 when the financial crisis changed the situation and brought a sharp depreciation of the currency. The forint weakened by 12 percent against the euro in a year, and the central bank started to devalue the currency.

The aim was to attract capital investment, but at the same time, it also increased the attractiveness of working abroad for Hungarians and spending holidays in Hungary for tourists. On the flip side, it became more expensive for Hungarians to go on vacation abroad, and it became more expensive for the general public and the corporate sector to buy imported goods.

The end of the Covid-cycle meant an 8 percent fall in 2020, when public debt also soared due to government spending. The exchange rate was stable in 2021, then another drop came in 2022, after which the euro cost 9 percent more when it almost reached HUF 430. The main reason for the decrease was the Russian-Ukrainian war and the resulting energy crisis, but the government’s spending during the elections did not help the public deficit either.

In 2023, the forint finally started to strengthen, with the value of the domestic currency averaging 2.4% higher than in the year of the energy crisis. In 2024, the forint has weakened again, losing 3.7 percent in the first half of the year.

The deterioration is most striking when compared with regional currencies. Romania’s depreciation was similar to Hungary’s, with the forint losing 52 percent and the Romanian leu 23 percent since 2004. The Polish zloty is at roughly the same level as 20 years ago, while the Czech koruna has gained 24 percentage points. According to the GKI, a higher proportion of Poles and Romanians work abroad, so their remittances are strengthening the currency. They also say that the “conversion of EU subsidies into forints is done through the central bank”, which is counteracting the strengthening of the forint.

Read also:

  • The EU reveals when Hungary could join the eurozone – Read here
  • Vacation: Here is how much an “Austrian euro” is worth in Hungary – Read here

PHOTOS: Hungary issues special collector coins

forint money collector coin central bank

The National Bank of Hungary (NBH) will issue a collector coin marking the start of the Hungarian presidency of the Council of the European Union on 1 July, the bank said on Friday.

Special collector coins in Hungary

The NBH will issue the coin in silver and non-ferrous metal versions with face values of HUF 7,500 and HUF 3,000, respectively.

The obverse of the coin features representations of Hungary’s parliament building, the Tihany Abbey and the Millennium Monument above an abstract, dotted representation of an assembly hall.

The reverse of the coin shows the national coat of arms surrounded by a stylised network of interlocking semi-circles, emblemising diplomatic relations, and twelve stars symbolising the EU.

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The EU reveals when Hungary could join the eurozone

forint euro exchange rate money huf eur eurozone

The European Commission and the European Central Bank have published their latest Convergence Report, evaluating the progress of EU countries outside the eurozone. The report assesses each nation’s readiness to adopt the euro, highlighting their advancements and challenges in meeting the criteria for eurozone membership. According to the latest convergence report, the conditions for euro adoption are not currently met in Hungary.

The Convergence Report

The Convergence Report evaluates the progress of EU Member States outside the euro area, with the exception of Denmark, which has an opt-out. This report, published at least every two years or upon request from a Member State aiming to join the euro area, examines how these countries are meeting the necessary criteria for adopting the euro.

As HVG reports, six EU countries, including Hungary, have been judged in the Convergence Report made by the European Central Bank and the European Commission. The report targeted Bulgaria, the Czech Republic, Hungary, Poland, Romania and Sweden. The results are mixed, but may not be too surprising for most people.

Eurozone enlargement

According to the newest report, out of the six countries mentioned above, Bulgaria is meeting the most criteria. However, the Czech Republic and Sweden are not doing badly either. The same could not be said about Hungary.

To be more exact, there is not a single criterion met by Hungary.

In addition, the willingness to adopt the new currency raises further questions, as the Czech Republic and Sweden are seemingly content with their current currencies.

Hungary does not meet the criteria

According to the Convergence Report, Hungarian inflation remains a significant barrier to joining the eurozone, with an expected benchmark of 3.3 percent contrasted with an annual average of 8.4 percent in May 2024. Additionally, Hungary’s deficit stands at 6.7 percent, well above the expected 3 percent, marking the highest deficit among the assessed countries. Romania closely follows with a deficit just 0.1 percentage point lower, remaining under an excessive deficit procedure since 2020.

The euro adoption criteria also include the long-term interest rate, expected to be 5.5 percent, which only three out of six countries meet. Hungary notably falls short, with a rate of 6.8 percent. Another critical criterion is the quality of governance, a challenging aspect to put into numbers. Only Sweden meets this expectation, while Bulgaria and Hungary face issues due to perceptions of high corruption, causing reluctance among other countries to support their accession.

Strict requirements

ING’s analyst, Péter Virovácz, has told Index that the introduction of the euro has fairly strict requirements. He said, “(…) there is growing debate about the extent to which these requirements actually help to create and put into practice the concept of an optimal currency area.” Since Hungary joined the EU, there have been periods when the country has met all the criteria for joining the eurozone. However, it is all in the past now.

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Gloomy outlook: Weakening forint, rising fuel prices in Hungary

petrol station fuel money

This morning, fuel prices changed again, with petrol becoming HUF 2 more expensive, while diesel increased by a more significant HUF 8. Unusually, there will also be an increase on Tuesday, with petrol rising by HUF 3 and diesel by HUF 7. The increase in fuel prices is not surprising: in addition to the weakening of the forint, domestic prices are now reflecting the earlier European price rises.

Increase in fuel prices

We have seen a steady upward trend in fuel prices over the last period. At the beginning of the week, on Monday and Tuesday, according to holtankoljak.hu, the price of petrol and diesel will continue to rise.

Earlier, according to information obtained by Index, the MOL Group sent a letter to petrol stations saying that in the future, the price of fuel may change several times a week instead of twice a week.

Tamás Pletser, oil and gas analyst at Erste Bank, told Index that the market saw a significant drop in diesel prices around April, as many in the European market feared an economic downturn. However, in the last two weeks, diesel margins in Europe have recovered and are now close to USD 22 in the European market, while the gasoline margin is around USD 17.

Weaker forint, more expensive diesel

Ottó Grád, Secretary General of the Hungarian Petroleum Association, stressed that there has been a significant turnaround in the European market in the past two weeks, as diesel prices have increased by 7%. This is also clearly visible in domestic diesel prices, in addition to the impact of the weak forint.

The Hungarian currency weakened significantly last week, from 390 to close to 399 against the euro and from 362 to 374 against the dollar.

According to Grád, the summer season traditionally sees an increase in petrol sales and he believes that repricing has come to an end. Thus, beyond one or two corrections, no more drastic increases can be expected in the near future.

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Hungarian forint falls sharply as Eurozone political crisis unfolds

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Last Sunday’s European Parliament election led to varying degrees of political turmoil in Western Europe, with markets reacting swiftly to perceived threats. The euro plunged, but the Hungarian forint fell even more significantly, painting a bleak picture for both currencies.

The latest election results have already dealt a severe blow to the euro and European stock markets. The deep dive might not be short-lived, as neither markets nor analysts were prepared for the surge of the far-right, despite prior indications.

Analysts’ notes released since the election paint an increasingly grim outlook for the euro. The consensus is that the growing political extremism could fundamentally shake confidence in European markets, leading to asset devaluation, as reported by Bloomberg.

European Parliamentary elections shake the market

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This process has already started. In response to the poor election results, French President Macron dissolved the parliament and called for early elections. The Belgian Prime Minister resigned, and the German governing coalition achieved its worst-ever results. Consequently, the euro dropped by 0.5% to a one-month low against the dollar, and Western European stock markets opened the first post-election working day with significant losses.

Analysts highlight that alongside uncertainty, volatility is likely to return, putting pressure on the euro’s market. The euro hasn’t been without stress lately either. Stronger-than-expected U.S. labour market data on Friday altered expectations for the Federal Reserve’s interest rate path, leading markets to price in only one rate cut instead of two.

This could result in a persistently high base rate and a robust dollar, which would be painful for the euro. The far-right’s advance in the European Parliament raises questions about Macron’s ability to implement his economic policies in a divided parliament and the feasibility of further fiscal policy convergence among member states.

Moreover, the German governing coalition’s setback, which oversees Europe’s largest and currently struggling economy, adds to the euro’s woes.

Hungarian forint falls more sharply

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The Hungarian forint has fallen even more sharply than the euro in recent hours/days, despite no significant far-right surge domestically, Világgazdaság reports. However, the Tisza Party’s seven seats were a surprise on the international stage.

The forint’s decline appears to be more influenced by the dollar’s broad and prospective strengthening and Monday morning’s inflation data. May’s inflation came in at 4%, below the expected 4.2%, suggesting that the Hungarian National Bank has room to cut interest rates further, potentially weakening the forint. By 11:30 AM, the forint had dropped 0.5% to 393.4 against the euro.

There will be more excitement for the forint market this week beyond the election results. The Federal Reserve’s decision on Wednesday regarding the U.S. base rate is crucial. While markets are confident there won’t be a cut for some time, the Fed’s communication will significantly impact the forint’s near-term trajectory.

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Bleak forecast: EUR/HUF exchange rate to remain around 400

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The EUR/HUF exchange rate is expected to hover around 400 in the near future, according to financial experts. They believe a major depreciation of the forint is unlikely unless unforeseen external factors arise. Conversely, this also means that the Hungarian currency is not expected to strengthen significantly: the price of one euro will likely remain between HUF 380-400.

As reported by DNH at the end of this May, the forint has performed particularly well in recent weeks, trading at 383.95 against the euro and 353.72 against the dollar. Now, despite the promising figures, the forint has started to weaken in recent days.

Pénzcentrum spoke to several financial experts about the future of the forint ahead of the vacation season. They anticipate no major fluctuations in the EUR/HUF exchange rate, suggesting it will likely stay within the 380-400 range.

After weeks of strengthening, the forint has lost momentum

Following a period of remarkable gains, on Wednesday morning, the forint traded at 390 against the euro, and 403 against the Swiss franc once again. A relative weakening was also seen against the dollar, albeit to a lesser degree, with the USD/HUF exchange rate currently hovering around 360.

According to Pénzcentrum, in the case of the Swiss franc, it is not the fluctuations of the forint itself, but the sustained strength of the Swiss currency that explains the sudden rise in its price.

János Nagy, an analyst at Erste, describes the forint’s recent fluctuations as a natural and typical process for the Hungarian currency.

We do not think the movements we have seen in the forint in recent days are out of the ordinary; they are completely in line with the usual pattern. There was no specific factor behind last week’s weakening, just as there was no particular factor behind the earlier strengthening. The forint continues to react intensely to movements in the EUR and USD, where there has also been no clear trend for months,” the expert told Pénzcentrum.

Expectations regarding the Hungarian National Bank’s interest rate policy, as well as those of other major central banks such as the Fed and ECB, also impact the forint, he emphasised.

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It is time to get used to the 380-400 EUR/HUF exchange rate

According to András Bukovszki, an analyst at CIB Bank,

“Our expectations for the forint remain unchanged. The EUR/HUF exchange rate will likely continue to fluctuate in the 380-400 range.”

János Nagy shares a similar view, stressing that he does not expect a rapid weakening of the Hungarian currency. He adds that even if the forint does weaken quickly, the Hungarian central bank may adopt a more cautious interest rate policy, which will support the currency.

“Of course, this does not exclude the possibility of periods of high volatility when we see larger swings for either external or internal reasons. It also follows from the above that exactly when the forint is strongest in a given period, i.e., when it is most advantageous to exchange, will always become clear only in hindsight.”

Similarly, Bukovszki emphasised that unforeseen (positive or negative) events can cause significant fluctuations in the EUR/HUF exchange rate, as “the forint remains the most sensitive in the region to changes in international investor sentiment.”

In any case, analysts generally do not expect the forint to experience any sudden ups or downs, which also means that it will not make any outstanding gains shortly—unless some significant external change occurs.

As for exchanging money ahead of holidays, János Nagy added that those who pay by card instead of cash can offset several forints of weakening, as credit cards usually offer a cheaper currency conversion rate than cash exchangers. Therefore, those travelling abroad may be better off paying by debit card instead of exchanging money before travelling.

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No stopping: Hungarian forint at a several-month high

The Hungarian forint continues its impressive ascent, hitting multi-month highs against both the euro and the dollar. This surge is particularly noteworthy against the American currency.

On 24 May, the forint held onto its remarkable gains, showing no signs of losing steam. The day began with the forint trading at 386.3 to the euro and 357.32 to the dollar. By just after 8 PM, it had strengthened to 383.95 against the euro and 353.72 against the dollar, marking gains of 0.63% and 0.99% respectively, Világgazdaság reports.

What’s the reason behind the strengthening?

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The exact catalyst for the forint’s dramatic rise is unclear, given the absence of significant macroeconomic data from either Hungary or the US on Friday. However, it appears that even minor economic indicators were enough to fuel substantial market movements.

Notably, the forint wasn’t the only currency making waves. The euro also posted a 0.4% gain against the dollar. One possible factor behind the forint’s strength is Friday’s report from Hungary’s Central Statistical Office (KSH), revealing a lower-than-expected unemployment rate of 4.4% in April. According to our article published on Friday, in absolute terms, there were 217,300 unemployed in April (which was still 100 more than in March and 27,200 more than twelve months earlier).

This lower rate suggests underlying strength in the economy, which could temper expectations for the Hungarian National Bank’s (MNB) planned rate cuts this summer. An overheating economy risks inflation, something the central bank will likely strive to prevent, according to Világgazdaság.

Forint at several-month high

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Interestingly, Friday’s labour market data may primarily influence the MNB’s interest rate decisions after June. Deputy Governor Barnabás Virág mentioned at a Tuesday press conference that a rate cut might still happen in June, but thereafter, the central bank’s room for manoeuvre would narrow. Analysts point out that currency markets often price in changes well in advance, sometimes looking as far as a year ahead.

The last time the Hungarian currency was this strong against the euro was on 5th February, marking a notable milestone in its recent performance.

However, as we wrote in THIS article, despite the central bank’s cautious stance, analysts predict that the euro could exceed the HUF 400 mark by the end of the year. The consensus forecast suggests that the euro exchange rate will fluctuate between 383 and 409 HUF, with many predictions leaning towards breaching the 400 mark.

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Possible 400 EUR/HUF exchange rate amid Hungarian central bank decisions

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Will we see a 400 EUR/HUF exchange rate again this year? The Hungarian National Bank (Magyar Nemzeti Bank, MNB) is anticipated to continue its trend of monetary easing with a 50 basis point interest rate cut at its meeting tomorrow. This would lower the benchmark rate to 7.25%. However, according to economists consulted by Portfolio, this aggressive easing phase is approaching its conclusion. Despite the central bank’s cautious stance, analysts predict that the euro could exceed the HUF 400 mark by the end of the year.

Barnabás Virág, the MNB Vice President, told Portfolio last week that the base rate could settle around 6.75-7% by mid-year. This view is shared by market participants, who expect an imminent 50 basis point cut followed by a similar reduction in June. This would align the base rate with the mid-year target of 6.75%.

The consensus is clear: an immediate 50 basis point cut is anticipated, with most expecting a similar decision in June, although a minority predicts a smaller, 25 basis point reduction. This pattern indicates a shift towards a more conservative approach as the year progresses.

Monetary Council might opt for a larger cut

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Photo: FB/MNB

András Pintér from Apelso Capital notes that the central bank has been signaling a cautious approach, preparing the market for smaller steps. The market’s expectations, particularly towards the year-end, have outpaced the central bank’s plans. Therefore, in May, the Monetary Council might opt for the larger 50 basis point cut, but June could see a continuation of this trend if necessary.

The inflation trends in the services sector might concern the central bank, yet recent international developments provide some leeway for this decision. Global risk appetite has stabilised following a brief “risk-off” period in April, which is also reflected in the HUF’s exchange rate. According to Pintér, the upcoming communications will likely emphasise the nearing end of the rate-cutting cycle.

Unicredit’s lead analyst, Zsolt Becsey, highlights that the easing of public friction between monetary and fiscal policies broadens the central bank’s manoeuvring space. This flexibility is further supported by recent weak US macroeconomic data, which have bolstered expectations for three Federal Reserve rate cuts this year, benefiting emerging markets like Hungary.

The past year has seen a dramatic reduction in the base rate, from 13% to 10.75% by the end of 2023, with a mid-year target of 6.75%. This rapid series of cuts might suggest a deeper reduction by year-end, but current forecasts do not support this. In fact, the consensus points to a significant slowdown, with a year-end forecast of 6.5%.

Erste Bank’s chief economist, Orsolya Nyeste, points out that several factors, including rising inflation and the need to maintain positive real interest rates, limit further cuts in the latter half of 2024. The policies of major and regional central banks, combined with domestic inflation and fiscal conditions, will heavily influence the MNB’s remaining scope for action, which appears to be minimal.

Surge in inflation, 400 EUR/HUF exchange rate expected this year

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ING expert Péter Virovácz anticipates a significant inflation surge in the second half of the year, peaking at 5.5-6%. Consequently, the June rate cut might be the last in this cycle. The expected inflation rise, fiscal adjustments boosting inflation, and the monetary policies of regional central banks all suggest that the MNB will adopt a cautious and wait-and-see approach. Should internal and external conditions turn favourable, there might be room for an additional 50 basis points cut in total.

Péter Koncz from Századvég Gazdaságkutató emphasises the growing importance of imported inflation. This highlights the crucial role of exchange rate stability in maintaining price stability. However, despite these efforts, analysts seem sceptical about the HUF’s stability over the next year. The consensus forecast suggests that

the euro exchange rate will fluctuate between 383 and 409 HUF, with many predictions leaning towards breaching the 400 mark.

This indicates that the market believes that, despite the central bank’s cautious rate cuts, the regional yield convergence will not prevent the HUF’s weakening trajectory.

Therefore, even with the Hungarian National Bank’s measured approach to monetary easing, the euro is expected to surpass the 400 HUF threshold, reflecting broader market trends and economic conditions.

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