The Hungarian Forint (HUF) is the official and national currency of Hungary and is issued by the Hungarian National Bank (commonly known as Magyar Nemzeti Bank). Although the forint was in circulation between 1868 and 1892, the modern forint as we currently know it, was introduced in 1946, after the second world war to help stabilise the economy.
The forint’s currency code in international markets is HUF and is represented by the symbol Ft. Banknotes range from Ft500 and Ft20,000 while coins are minted between values of Ft5 to Ft200. While Hungary is an EU member, it hasn’t adopted the euro yet due to the hesitation by the federal government and the central bank to adopt the common currency. The currency’s top currency exchange is the euro and the US dollar.
The Hungarian National Bank (MNB)
The Hungarian National Bank, which is the country’s central bank, was established in 1924. It is part of the European System of Central Banks (ESCB) and a successor of the Austro-Hungarian Bank. As the central bank of Hungary, MNB is responsible for maintaining the forint’s value and overseeing its circulation. Its main objectives are to maintain price stability through monetary policy and to provide support to the federal government’s economic policies.
European Union and the euro
Hungary became a member of the European Union (EU) in 2004 after applying to join the union 10 years earlier. Hungary hasn’t adopted the euro as the government and the central bank feel that the move will be a “strategic error” and the euro is a “trap” according to Hungary’s central bank governor Gyorgy Matolcsy. Hungary is not unlike other European countries such as Bulgaria, Croatia, the Czech Republic, Poland, and Romania which have yet to adopt the common currency.
Many of these countries are reluctant to join the Eurozone following the 2007-08 financial crisis and the European sovereign debt crisis. However, while Hungary doesn’t use the euro, some merchants in the country accept it.
History of the HUF
The name forint comes from Florence’s gold coins called fiorino d’oro which were struck at the start of 1252 and circulated throughout the Austro-Hungarian empire.
While the currency exchange rate has been relatively stable, uncertainty about the economy has weighed on the forint. Following World War I, the Hungarian economy struggled and after war reparations and the loss of much of their tax base, the HUF lost almost all its value. Later, during the transition from communism to democracy (1988 and 1990), Hungary suffered by hyperinflation which reached up to 35% during the 1990s when it became a market economy.
Throughout the 2000s, the economy recovered but inflation remained extremely high that the currency could not be converted.
Forint outlook
Economists at Commerzbank have forecast that the forint will regain some ground by the end of the year as inflation moderates faster than the pace at which MNB will cut rates, and the real interest rate will become less negative. They expect a weaker forint subsequently in 2024 because EU relations and monetary policy will continue to act as negative factors for the HUF.
Discussing the HUF’s outlook, ING economists have noted that if negotiations with the EU move in a positive direction, then the HUF will strengthen. On Thursday (19 October 2023), Hungary’s Minister for EU Funds will meet with European Commission representatives in Brussels to discuss locked EU funds, with the Hungarian side saying that all problems should be resolved by the end of November. The European Union had frozen the funds over rule-of-law concerns and is now considering unlocking billions of euros for Hungary. The EU’s attempt to win Budapest’s approval relates to a decision in December to open accession talks with Kyiv, which would require unanimous backing of the union’s 27 members. Hungary is seen as having closer ties with Russia than other EU states and could potentially oppose the decision in December. Additionally, another decision that requires unanimity which will take place later this year is a bid by the EU’s executive Commission to have member states contribute more to the bloc’s joint resources to fund more aid to Ukraine.
According to the Financial Times and comments by EU officials, some 13 billion euros ($13.6 bln) are under discussion in the negotiations. If the progress in the talks is confirmed, the EUR/HUF may fall further.