“The forint at an all-time low. Every day, or for almost months, it’s more or less the same title that appears on the front page of Hungarian news sites, at least those not under the influence of nationalist Prime Minister Viktor Orban, who have to silence the bad news. On Tuesday October 11, the Hungarian currency broke a new all-time low of 429 forints for one euro, against 359 forints a year ago and 265 forints when Mr Orban came to power over 12 years ago in 2010.
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Under his leadership, Hungary has consistently refused to adopt the euro, long relying on a weak forint to keep its industry competitive. But the controlled decline has now turned into a worrying decline amid the war in Ukraine and runaway inflation. Having fallen 16.6% against the euro since the start of the year, the forint is currently the most fragile currency in the European Union (EU) and is significantly underperforming its neighbors. The Czech koruna remains stable and the Polish zloty fell just 6.2% over the same period as the two currencies face the same environment.
“Very heavy dependence on Russian gas”
For the moment, however, there is no panic movement among the 10 million Hungarians, even if certain real estate websites assure that more and more sellers are displaying the amounts of their goods in euros. However, some analysts, such as Allianz, warned at the end of September of the risk of a balance of payments crisis in the coming months. “If the authorities do not react, the situation in Argentina could be repeated in Hungary,” even the economist and former Finance Minister Laszlo Csaba estimated on October 11, citing a possible intervention by the International Monetary Fund, as during the 2008 crisis.
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Despite multiple interventions, the Hungarian National Bank is unable to stop its currency from declining. At the end of September, it again raised its main interest rate, which is now at 13%, the highest in the entire EU, with the aim of “achieving and maintaining price stability”, while “the risk of recession in the global economy has increased”. According to the latest figures, inflation rose to 20.1% yoy in September. But the central bank simultaneously announced that this would be the last hike in its current cycle, which doesn’t seem to have satisfied the markets.
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