The volatility of the forint makes German investors in Hungary dream of adopting the euro

Nearly three-quarters of German investors in Hungary support Viktor Orban’s country adopting the euro amid high volatility in the forint, with the percentage reaching its highest level in 13 years, Reuters reports.

Viktor Orban’s government has not set a date for adopting the euro and has ruled out joining the EU currency zone before Hungarians’ living standards rise to near the average of the bloc it joined two decades ago.

Hungary’s National Bank, which cut its benchmark interest rate by 50 basis points to 7.75% on Tuesday, recently warned that Hungary avoided a currency crisis in late 2022 when the forint’s collapse forced it to intervene and raise interest rates.

An opinion poll published on Wednesday, which was conducted by the German-Hungarian Chamber of Commerce between February 19 and March 20, shows that 73% of the 241 German investors surveyed support the adoption of the euro in Hungary, the highest percentage since 2011 and a significant increase from 2016-2017, when it had reached lows of around 50%.

“This is a result of the exchange rate volatility we have seen recently. We witnessed a similar trend during the financial crisis of 2009″, explain the authors of the report in which the survey was presented.

They also stated that support for adopting the euro is highest among companies that need significant imports, and lowest among exporters.

German investors are more optimistic about the evolution of the Hungarian economy

The survey also found that respondents are more optimistic about the prospects of the Hungarian economy compared to a year ago, and that optimism has increased substantially in companies’ outlook for their own development.

But the survey also shows that nearly half of respondents are unhappy with legislative uncertainties and a general deterioration in the predictability of economic policies, marked by increasing government intervention in the market.

Viktor Orban’s government announced just last week that it is considering a new cap on fuel prices, a measure it justifies by the fact that the price at the pump has ended up being higher than in neighboring countries.

Hungary capped fuel prices between November 2021 and July 2022, when Orban’s government scrapped the measure amid business backlash and a warning from Mol, Hungary’s biggest company, that it was selling at a loss on every liter of fuel removed from the pump.