Hungarian Forint Hits Yearly Low; National Bank Decisions Could Cause Further Decline
The Hungarian forint has seen a significant decline this week, reaching its lowest point in 2024. This drop has been attributed to a number of factors, including the fall of regional currencies and the anticipation of a considerable base rate cut in the near future.
Starting the week at a level of 382/EUR, the forint fell to 388/EUR by Wednesday and Friday, marking a three-month low. The government’s modification of excess profit tax rules for Hungarian pharmaceutical companies also contributed to the currency’s struggles, despite attempts by the finance minister and Richter to clarify the new regulations.
The coming week will be crucial for the forint’s future, with the Hungarian National Bank expected to announce a 100-point base rate cut on Tuesday. Additionally, the US Federal Reserve’s decision on the base rate on Wednesday is also expected to impact the Hungarian currency.
Finance Minister Mihály Varga has indicated that it is time for yields and the base rate to decline, a move that could further contribute to the forint’s depreciation.
In the realm of fiscal policy, Varga emphasized the need for continued strict measures to push average annual inflation below 5 percent. He also noted the government’s aim to reduce the deficit from 6 percent to 3 percent, with expectations of a deficit in the 4-4.5 percent range for this year.
On a positive note, EU funds worth 520 billion forints have been disbursed to Hungary since December, with another 2,500 billion forints expected in 2024.
Overall, the forint’s outlook seems uncertain, with potential for further decline in the face of policy changes and economic developments.
