Surprising Wealth: Hungarians Sending Money Abroad
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 favorable transaction fees. This trend could threaten cash flows and the broader Hungarian economy. Meanwhile, foreign currency loans are reaching record levels.
According to a recent UBS study, global wealth resumed its growth last year, with lower-income adults in Hungary experiencing faster growth in wealth than those in higher brackets. 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.
Recent introductions of financial transaction levies and additional charges for currency conversion in Hungary are prompting wealthy individuals to consider moving some of their assets abroad. According to analysis by Blochamps Capital, 10-30% of actively managed savings for premium banking and affluent clients in Hungary may be relocated to foreign providers. The National Bank of Hungary (MNB) has observed a significant shift, with deposits in financial institutions falling while foreign currency deposits rise, mainly due to new measures affecting premium banking and affluent clients.
István Karagich, the managing director of Blochamps Capital, warns that the relocation of 10-30% of regularly invested assets to foreign providers could pose serious risks to Hungary’s economy. This shift could reduce cash flows within the country, negatively impacting financial markets and the broader economy. The rise in foreign currency loans, now accounting for nearly half of all corporate loans in Hungary, is another cause for concern. These loans pose risks for firms with forint revenues due to exchange rate volatility.
To maintain financial stability and bolster investor confidence, it is essential to keep as much wealth as possible in Hungary and actively participate in local financial markets. The outflow of assets to foreign providers could have long-term negative effects on the Hungarian economy, making it crucial for policymakers and financial institutions to address these challenges effectively.
