As a top investment manager and financial market journalist, it’s important to note the current challenges facing Hungary’s forint. With disappointing growth in the second quarter and a pause in interest rate cuts, the forint is likely to remain under pressure.
Analysts are concerned about inflation, which unexpectedly rose to over 4% in July. Core inflation is also a worry, with a performance that is lagging behind other Central and Eastern European currencies. Antje Praefcke, FX analyst at Commerzbank, highlights these concerns.
Looking ahead, the central bank faces a tough road ahead. Reports suggest a potential shift towards expansionary fiscal policy, as the government prepares for the 2026 elections. Plans for budget consolidation may be put on hold in favor of large spending packages.
The Ministry of Finance had aimed to reduce the budget deficit from 7.6% of GDP to 2.9% by 2026. However, the upcoming budget draft in November could change these projections. The market is wary of such uncertainty, as it could impact Hungary’s already low credit rating.
Investors should keep a close eye on economic data and news updates, as a gloomy outlook could push the EUR/HUF exchange rate towards 400. Stay informed and monitor developments closely to make informed investment decisions.