Foreign exchange market prospects for 2024: What can Hungarian SMEs expect?

Hungary is facing an increasingly challenging economic situation: by the end of 2023, recession is more and more certain, with a GDP decline of -0.4% in annual terms. The decline in domestic demand can be felt in all segments of the economy, especially in retail trade and the manufacturing industry. The reason for this is still high inflation. Despite the ongoing disinflation, core inflation is expected to reach 10% by the end of the year, and consumer spending does not show any recovery due to the still negative real wage growth. The good news is that the end of price controls for certain products is a positive turn toward faster disinflation, and concerns about EU-related political risks seem to be subsiding.

On the foreign exchange front, the Hungarian forint (HUF) attracted the attention of foreign investors at the beginning of the year. Still, given the changing economic background, a shift towards the euro is expected due to its stability. Since the Hungarian monetary policy will probably not greatly affect the EUR/HUF exchange rate in the near future, iBanFirst expects a possible reduction of the required reserve ratio in order to increase liquidity. Analysts predict that by the end of the second quarter of 2024, the exchange rate of the euro may reach HUF 400. iBanFirst also expects that EUR/HUF will gradually move from HUF 400 to HUF 415 by the end of 2024.