After experiencing a collapse last year, the Hungarian forint has entered a new phase of strengthening. This time, however, the currency’s rise is supported by a solid economic footing, giving rise to expectations of further appreciation.
Recent figures published for March external trade statistics provide evidence of this trend, revealing a return to stability after 2021’s sharp rise in gas prices and a pandemic-related decrease in exports. By February, the balance sheet had already seen a surplus and in March, it increased to almost EUR 1 billion.
In March, exports amounted to EUR 14.1 billion while imports totalled EUR 13.2 billion, resulting in a surplus of EUR 900 million and an improvement of EUR 1.7 billion compared to the same period in the previous year. While the balance of payments experienced a loss of surplus, the external balance of trade remained in surplus until mid-2021.
Although the forint exchange rate had weakened since 2018, it may have been a conscious economic policy decision rather than the result of market developments. At that time, there was no balance of payments issue leading to greater demand for the euro than supply.
Recently, the Hungarian central bank has taken extraordinary measures to protect the forint, while gas prices have begun to fall, thereby halting the forint’s decline. As the trend continues to reverse, the exchange rate currently stands at the 370 level, with questions surrounding its ability to strengthen further in the coming weeks.