Hungary’s economy to turn around shortly
The chief economist of ING Bank, Péter Virovácz, provided an appraisal on the outlook for the Hungarian forint and the national economy. Although the recession currently dominates Hungary, he predicted that it will soon end. In 2023, Hungary’s GDP might grow by 0.7 percent, which would be favorable for the forint’s exchange rate.
According to Mr. Virovácz, the Hungarian economy would likely start to collapse in the first quarter of 2023. It is a result of the rising inflation that is stifling several economic sectors, from consumption to investments. From February on, inflation is anticipated to decline, then pick up around the middle of 2023. The GDP will consequently start to grow as well. The export sector will be the portfolio’s main driver of economic development in the second half of 2023.
He anticipates a vigorous economic boom in Hungary in 2024. The easing of financial circumstances and the receipt of EU funding will serve as the sources. An average inflation rate of 19 percent is predicted by the top ING Bank analyst for 2023. He stated that the basic interest rate will not be lowered by the Hungarian National Bank (MNB) until May or June. The MNB will only begin progressively reducing it, he continued, in the latter few months of this year.
Nonetheless, it will take time. The Hungarian forint may continue to strengthen in the medium run, per Mr. Virovácz’s estimate. The trend will appear to cease temporarily as a result of the stalled discussions over EU money. At the end of this year, he predicts a level of 375/EUR, which will fall to 365/EUR by the middle of 2024.
Forint values reached record lows at the end of 2022. The energy crisis caused the Hungarian forint to rise beyond 410/EUR in July, which meant that Hungary needed to acquire a lot of euros to buy enough electricity for the winter.
The tendency, however, was unable to change. We had to spend more than HUF 430 for one euro in the middle of October, when the forint hit a new record low. Since then, the Hungarian national currency has significantly strengthened, with the exception of a rise in December. It is now trading below 380 euros.