The novel coronavirus pandemic has hit Hungary like no other. The economic impact is dire with the tourism industry basically not existing anymore, the automotive industry, which is a strategically one of the most important drivers of the Hungarian economy, coming to a halt, the hospitality industry deprived of customers, and smaller stores that don’t sell food being out of business for months have left the country in tatters. The government is expecting the unemployment rate to go as far as a couple of hundreds of thousands, the real estimate, if the economy doesn’t open up, is much direr with some sources expecting jobless people in millions, non-essential services were forced to hike their prices in order to somehow survive the massive drop in sales. The clearest examples of this come in the form of financial industries that saw activity drop, but demand rise by those that remained.
This is why people have started searching for alternative ways to trade while looking out for off-shore firms to substitute the services. Even the most uncanny market participants such as Forex brokers in the USA have been under a lot of stress as well, however, they continue to provide one of the best services out there although for much more expensive price. Even though the expenses may be higher, the better-regulated market as well as a more stable economy of the US is granting peace of mind to a lot of Hungarian traders.
Even the top Forex brokers agree a market crash is imminent
The estimations vary from institution to institution, however, a lot of the thinktanks agree that the novel coronavirus pandemic may lead to much worse results than the 2008 global financial crisis. What sets this precedent apart from the 2008 event is that the restrictions, which governments have pushed out to stop the spread of the virus are affecting every industry at the same time meaning that the economies are slowly choking and going towards slow and painful death. Due to these fears, the Hungarian government has introduced very strict economic steps, which is going to have a serious impact on the banking system and whatever is left from the central budget of the country.
The Hungarian government has decided to suspend the capital and interest rate payments until the end of the year for both private individuals as well as businesses under the loan agreements. This news was announced on Facebook by the Prime Minister of Hungary, Viktor Orbán. Apart from this, the government has also decided to extend the short term business loan agreements until the end of June. Since most of the businesses had to shut down, a lot of Hungarian citizens started searching for ways to make money outside of the normal framework. Forex trading is becoming increasingly attractive to people interested in such affairs.
Unfortunately, Hungarian brokers are also going through loads of problems with even their offices being shut down for the due period. This is caused by the overall country’s economy and infrastructure not being strong enough to handle such economic strains.
The best FX brokers in the country and the bank agree
In face of constant financial struggle caused by the COVID-19 lockdown, Hungary’s forint fell to a record low against the euro on Tuesday, even though the central bank has been trying to balance the effect of the pandemic through stimulus packages on the currency it hasn’t been working out that well. The forint went down 0.2% (359.8 per euro) passing the previous low record reached in March. Although, it is worth noting that the forint was already quite weak even before the coronavirus lockdowns hit the economies. Overall the currency decline is about 6% already. The national bank has also been acting quite strangely with their initiatives.
The emerging-market policymakers are trying to contain the economic fallout, while the central bank is giving very mixed signals to currency traders. On one side they have eased liquidity significantly but on the other have curbed cash available at weekly tenders.
There has been an offering to push as much as 9.6 trillion forints ($30 billion) in liquidity into economics using weekly repo tenders that are at least 5 years old, which is partially an effort to prop up banks and firms. The volume of incoming cash into the economy through foreign-currency has fallen through.
In conclusion, the forint is struggling right now and the government needs to make some firm decisions and allow the economy some breathing space. However, it is understandable that the coronavirus pandemic has been hitting everyone hard and does not leave much for the countries that are not ready to adopt work from home strategies and not only that but do not have economic support to provide for the people whose jobs are literally dependant on going somewhere like bars, restaurants, tourism. Although a lot of social sciences and analytical organizations can work from home, the same cannot physically be said about factory workers who conspire a huge chunk of the Hungarian economy.
*Correction: We mistakenly quoted a Citi employee who did not make any statement on the subject.*