Hungarian Forint: one of the weakest currencies in the world
With all the ups and (especially) downs of recent times, the Hungarian forint has become one of the weakest currencies not only in the region – in Central and Eastern Europe – but in the whole world.
Second weakest currency in the world
In one year, only the Turkish lira and the Argentine peso have fallen further. On top of that, over the past three months, apart from the Chilean currency, the forint has been the weakest in the entire world, reports Portfolio.hu.
Since the beginning of the year, the forint has weakened by nearly 7.5% against the euro. This cannot be explained simply by the difficult global economic environment, a war in our neighborhood and high inflation. These are issues that affect our regional competitors in the same way, writes Portfolio.hu.
In early March, the forint’s record high could be blamed on the war, but since then something else has been the problem. In three months, the forint depreciated by 8.4% against the euro, while the Polish zloty only depreciated by 1.1% and the Czech crown by 1.2%.
Events that affect the Hungarian currency
Until early May, the forint broadly aligned with the Polish zloty, and that’s when the split began. If we take a look at the events of the past two months, we might find the reasons why the Hungarian currency plunged. Portfolio.hu has gathered these events:
– In April, the European Commission launched a rule of law case against Hungary, and no agreement was reached on the disbursement of EU funds.
– The market was not entirely satisfied with the government’s fiscal adjustment program, which is partly based on special taxes that send a negative message to the business environment.
– The deterioration of the fundamentals of the Hungarian economy is becoming more and more evident, in particular the external imbalance, the balance of payments and the external trade balances both becoming strongly negative.
– The dollar has strengthened: the American currency has gained 7% against the euro in three months. And the forint follows the movements of the dollar in the opposite direction, which means that when the US currency strengthens, the forint generally weakens.
The bad news is that these negative effects are not abating yet and there are no signs of improvement.
Source: Portfolio.hu, vg.hu