The following is an adapted version of an article written by Gábor Kutasi, director of the Economy and Competitiveness Research Institute of the University of Public Service, originally published in Hungarian on the Ludecon blog of Ludovika.hu.
We tend to view a strong forint as simply good or bad. For some, vacations are cheaper; for others, profits from foreign customers and guests are lower. Changes in the exchange rate are not distributed evenly among economic actors: what is a gain for one is a loss for another. That is precisely why the question is not whether a strong forint is good, but rather who benefits from it and over what time frame.
The forint’s dramatic appreciation in 2026 and this new exchange-rate trend have brought about a fundamental shift for Hungarian economic actors. According to GKI’s assessment, one of the most important consequences of the strengthening was a decline in import costs and, consequently, a moderation in inflation, while the profitability of export-oriented companies deteriorated, as it reduced the profits of industrial and service exporters—though it did help moderate inflation in the process.
The Public Wins — But Not Everyone to the Same Extent
At first glance, a stronger forint is clearly beneficial for consumers. The prices of imported goods, fuel, travel abroad, and many products containing imported inputs, when calculated in forints, may decline.
However, the exchange rate’s disinflationary effect does not materialize immediately, depending on retailers’ inventory strategies; because importers purchased their stock earlier at a weaker exchange rate, the price reduction is incorporated into consumer prices with a time lag.
The public may feel like winners primarily because the stronger forint curbs inflation. Purchasing power may thus become more stable. However, the benefit is not distributed equally. Those who regularly shop abroad, pay in euros, or consume imported products feel the favourable impact of the exchange rate more directly. For consumers who use only domestic services, this effect is much less immediate and tends to be delayed.
‘The exchange rate’s disinflationary effect does not materialize immediately’
Stability as a Key Word for Sovereign Debt Markets
A strong forint is also an interesting issue from the perspective of government financing. If the appreciation of the exchange rate is accompanied by a moderation in inflation and a reduction in financial risks, it could create a more favourable financing environment in the government securities market. The mechanism is simple: with lower inflation, the nominal yield expected by investors may be lower, while a more stable exchange rate can also reduce the exchange rate risk associated with forint-denominated assets. This can help reduce the government’s interest expenses.
However, there is an important countervailing effect. While a strengthening forint may mean exchange rate gains for foreign investors in forint-denominated government securities, the risk of a subsequent correction following excessive appreciation may increase investors’ caution. For the government, therefore, it is not a strong exchange rate in and of itself that is truly favourable, but rather one that is predictable and supported by fundamentals.
Negative Consequences for Industry
Exporters may be the biggest losers from the strong forint. This is because one euro in export revenue is worth fewer forints, while a significant portion of a company’s costs—such as wages—continue to be incurred in forints.
According to the aforementioned GKI survey, the appreciation of the forint is having a negative impact on the profitability of industrial and service sector exporters. Moreover, larger companies may be more vulnerable, as their export revenue accounts for a larger share of total revenue due to their closer ties to foreign markets.
The hotel industry is a particularly striking example. Foreign guests pay in euros, while hotels pay wages, energy costs, and numerous other expenses in forints. According to an analysis by Portfolio, compared to an exchange rate of over 400 forints to the euro, a rate of around 350 forints can already significantly impact hotels’ profitability.
However, not every sector in Hungary’s export-oriented economy is suffering. For import-intensive companies, the strong forint is, on the contrary, a cost-reducing factor. Imported machinery, parts, and raw materials may become cheaper. This could particularly benefit domestic companies that primarily produce for the domestic market.
A good example of this is the construction industry. The strong forint may have contributed to the sector’s improved performance through lower costs for imported building materials and equipment, which to some extent offsets the sector’s short-term slowdown. According to an analysis by mfor.hu, in addition to exchange rate effects, investment demand linked to the election campaign also played a role in the construction sector reaching its peak in the first half of the year.
‘The “overvalued forint” is…not an absolute economic category’
According to Portfolio’s summary based on GKI data, it is therefore particularly important to consider the proportion of sales each sector makes abroad and the number of imports it uses in production. The ‘overvalued forint’ is thus not an absolute economic category: the same exchange rate represents a competitive advantage for one company and a decline in profits for another.
The strong forint redistributes income among economic actors. What the consumer gains from lower import prices, the exporter may partially lose through lower forint revenues. The question, therefore, is not who benefits from a strong forint, but which effect is stronger for the Hungarian economy as a whole: the inflationary gain or the loss of export profitability.
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