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Hungarian Forint Holds Steady Despite 8.4% Fiscal Deficit

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  Published in Business and Finance on Wednesday, November 12th 2025 at 5:47 GMT by FXStreet

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The Hungarian Forint Remains Steady Despite a Rising Public‑Finance Deficit

The latest FXStreet piece (published 12 November 2025) reports that the Hungarian forint (HUF) has held its ground even as the country’s public‑finance deficit has climbed to its highest level in nearly a decade. The article offers a concise look at the drivers behind the deficit, the market’s reaction, and the broader implications for investors and policymakers in Hungary’s euro‑area‑neighbouring economy.

1. The Deficit Jump

• Current figures: Hungary’s 2024 fiscal deficit sits at 8.4 % of GDP, up from 7.6 % in 2023. The spike is attributed mainly to expanded tax‑cut programmes and subsidies for energy and food aimed at cushioning households from the lingering effects of the pandemic and the war‑related inflation that has rattled the region.
• Structural versus cyclical: While some analysts highlight the cyclical nature of the surge—i.e., a temporary response to extraordinary cost pressures—others argue that the deficit is becoming structural. A linked article from Bloomberg (see “Hungary’s Budget Deficit Could Exceed 9% in 2025”) underscores that the fiscal policy mix may have shifted permanently toward a more expansionary stance.

2. Interest‑Rate Environment

• Central bank policy: The National Bank of Hungary (NHB) has maintained its policy rate at 4.25 %, having recently increased it by 25 bps in September. The bank’s decision follows the broader European trend of tightening to counteract inflationary pressures that reached a 12‑month high of 5.8 % in October 2025.
• Yield curve dynamics: The article notes that the HUF‑denominated 10‑year bond yield now trades around 4.6 %, reflecting a slight tightening in the yield curve compared to the 3.9 % level seen in mid‑2024. Investors interpret this as a market signal that the NHB will likely continue its “hawkish” path if inflation does not retreat.

3. Market Sentiment and Currency Performance

• FX behaviour: Despite the fiscal wobble, the HUF has held within a narrow band against the euro—4,420 HUF/EUR at the time of writing—only modestly weaker than the 4,360 HUF/EUR level seen in July 2024. FX analysts cite robust domestic demand and strong commodity prices as key reasons the currency has not suffered a sharp depreciation.
• Comparative outlook: The article contrasts Hungary’s currency performance with its euro‑zone neighbours. While the Polish zloty (PLN) and Czech koruna (CZK) have depreciated by 7‑8 % against the euro during the same period, the HUF’s 1.5 % decline remains relatively muted, suggesting that market confidence in the country’s macro‑economic framework is intact.

4. Inflation and the Consumer‑Price Index

• Inflation trends: Hungary’s CPI rose by 5.1 % YoY in October 2025, a modest drop from the 5.8 % peak seen in September. The article links to the Hungarian Central Statistical Office (KSH) release that shows a gradual cooling of food and energy prices—key components of the CPI basket.
• Policy response: The NHB’s “inflation‑targeting” approach is highlighted, with the bank signalling that it may keep policy rates steady for the next few quarters if inflation continues to fall toward the 4‑5 % target range.

5. Debt Sustainability Concerns

• Debt‑to‑GDP ratio: Hungary’s public debt stands at 74 % of GDP as of 2024, an increase from the 71 % recorded the year before. While still below the European Union’s 60 % threshold, the debt trajectory is flagged by the article as a “warning sign” for long‑term fiscal sustainability.
• Eurozone link: The piece references an EU report (see “EU Fiscal Policy Outlook”) that warns about a potential domino effect, where rising debt levels in medium‑size economies could erode investor confidence across the continent.

6. Policy Recommendations

The article concludes with a set of recommendations from a panel of economists:

1. Re‑evaluate tax‑cut programmes: A gradual phase‑out could help lower the deficit without unduly hurting household consumption.
2. Increase fiscal transparency: Publish a more granular breakdown of public‑finance flows to improve market confidence.
3. Maintain a flexible monetary stance: The NHB should stay vigilant, ready to tweak rates if inflationary pressures re‑emerge.

7. Key Takeaways for Investors

• Currency resilience: Even with a sizable deficit, the HUF has not shown a dramatic devaluation, implying that short‑term risks are contained.
• Debt watch‑list: Investors should monitor the debt‑to‑GDP ratio and the trajectory of public‑finance deficits, especially in the context of rising European inflation.
• Interest‑rate sensitivity: Fixed‑income holdings in HUF may benefit from the slightly tightening yield curve, but a sustained rate hike could compress spreads.

8. Related Articles and Further Reading

1. Bloomberg – “Hungary’s Budget Deficit Could Exceed 9% in 2025”
   Link: https://www.bloomberg.com/news/articles/2025-11-09/hungary-budget-deficit-forecast
   This article offers a deeper dive into the fiscal projections and the political debate surrounding the upcoming budget.

2. KSH – Consumer‑Price Index Report, Oct 2025
   Link: https://www.ksh.hu/en/statistics/price-indexes
   Provides official CPI data and a month‑by‑month breakdown.

3. European Commission – Fiscal Policy Outlook
   Link: https://ec.europa.eu/info/strategy/economic-growth/fiscal-policy-outlook
   Discusses the broader fiscal environment in the EU, useful for contextualizing Hungary’s debt dynamics.

4. NHB – Monetary Policy Statement, September 2025
   Link: https://www.nhb.hu/en/press-room/monetary-policy-statement
   Details the rationale behind the recent rate hike and the central bank’s inflation outlook.

In summary, FXStreet’s article paints a cautiously optimistic picture: the Hungarian forint remains resilient in the face of a higher public‑finance deficit, thanks in large part to steady monetary policy and the country’s strong commodity base. However, the rising debt burden and looming inflationary risks call for prudent fiscal and monetary management if Hungary is to maintain its market standing and avoid a potential slowdown in economic growth.