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EcoTV Week
21/10/2022 • By Cynthia Kalasopatan Antoine

The Hungarian forint is amongst the worst performing currencies in Central Europe since January 2022. The forint has respectively lost 11 and 23 % of its value against the Euro and the dollar. The Central Bank of Hungary even intervened last week to shore up its currency. Why is the forint more affected than other currencies in the region? A few explanations below.

Hungary has a population of 9.8 million people. The country belongs to the group of high-income countries. It became a member of the European Union in May 2004 but remains outside the Eurozone.

Macroeconomic fundamentals were relatively sound before the COVID-19 outbreak and have not been jeopardised by the fiscal and monetary stimulus implemented to cope with the shock. This support has driven strong GDP growth in 2021 (8%), mainly driven by exports and manufacturing sector performances. Inflation pressures have reappeared, triggering the first monetary policy tightening since 2011 as inflation should end 2021 at 4.6% on average, significantly above the 3% central bank target. Public debt has risen to 80% of GDP in 2020, but quantitative easing from the central bank is making it affordable. Relations with the EU must continue to be monitored. However, Hungary’s attractiveness for foreign direct investment (FDI) has remained strong based on cheap labour costs and economies of scale related to the size of its manufacturing sector