Hungary has managed to stave off a potential financial crisis by halting the creeping shift of savings from forint to euros, according to a senior central bank official.
(Bloomberg) — Hungary has managed to stave off a potential financial crisis by halting the creeping shift of savings from forint to euros, according to a senior central bank official.
Alarmed by the plunge in the value of the forint last year, households and companies had shifted diminishing savings to euros “spontaneously” and at such a pace that it “threatened the pillars of financial market stability,” Deputy Governor Barnabas Virag said in an interview published Wednesday in the Vilaggazdasag daily.
As part of the “creeping euroization,” almost half of new household savings were made in euros rather than forint last year, Virag said. The share of foreign-exchange denominated household cash and deposits climbed to 22.3% in the fourth quarter of 2022 from 16.7% a year ago, according to central bank data.
The central bank’s intervention in October, where it introduced an emergency facility that raised the key interest rate to 18%, sparked a forint rally that helped reverse the trend, Virag said. New household savings this year were primarily forint-based, he said.
The forint strengthened close to 15% against the euro since October to a one-year high earlier this week.
It dropped as much as 2.1% on Wednesday after Virag flagged that the central bank will move toward cutting the key interest rate in the months ahead due to improvements in global market sentiment and an expected strengthening of disinflation trends.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.