How to make the most of your money is never an easy question. Especially under the current, unprecedented circumstances, among a pandemic, war, and increasing energy costs, it is increasingly difficult to make the right investment decisions. Read on to get an overview of the most prominent economic trends in Hungary in October 2022.
Inflation and foreign exchange rates in Hungary
The high inflation started by conditions arising in the pandemic kept on increasing throughout 2022. This was mostly due to the war in Ukraine that began in February, and the sanctions that followed. Inflation in Hungary in September was around 20%, while currently the yearly inflation is expected around 13-14%. In line with this, foreign exchange rates are higher than ever before, with both USD and EUR costing more than HUF 400 since August.
The situation is not eased by the current disagreements between Hungary and the EU, which resulted in a delay for receiving substantial EU funding. However, the most dramatic impact on Hungarian economy is produced by the massive increase in energy prices. Previous government subsidies were revoked from many beneficiaries and remained available only to households consuming below average. As a result, businesses are affected even more than homes and natural persons. Especially the price of natural gas over the winter will influence the economic landscape during the months to come.
Countermeasures and investment options
To counter the above effects, various countermeasures have been applied. The base rate of the central bank (MNB) has been increased to 13%. The stabilize foreign exchange rates, the central bank introduced new, overnight deposit options for banks with favorable interest rates.
The Hungarian State Treasury has released several new government securities that offer favorable interests above 10%. Since securities held with the Treasury can be sold without paying the 15% savings tax, the new securities let investors easily switch to new assets to minimize their losses related to inflation.
According to analysts, while real estate investment is traditionally a safe investment, ROIs cannot keep up with the inflation. Rental income averages around a 5% interest, which is below both the inflation and the interests from the best government securities. While property prices keep climbing, the trend might not keep up with inflation. In line with this real estate remains a better option for long-term investment.
Stay on top of your finances
Under such uncertain circumstances, it is essential that you stay on top of your finances so that you can see how much room you have for financial maneuvering. Helpers Finance offers precise bookkeeping and accounting services primarily to foreign-owned small and middle-sized business in Hungary that lets you make informed decisions at all times.
Click here to learn about our services.
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DISCLAIMER: The information on this page is provided as general information only and it reflects the personal opinion of the authors. Nothing on this website constitutes investment advice or an investment offer as defined by Act CXXXVIII of 2007 (“Investment Service Act”), 4.§. (8) and (9). The content should not be used for financial or investment decisions, and it is not a personalized investment analysis. The information is provided without warranty of any kind. The authors, publishers and editors take no responsibility for any direct and indirect damage resulting from the use of the content of this site.
