Hungarian markets surged after the April 12 general election, with research firm BCA recommending a long position in the forint against the U.S. dollar on expectations of renewed access to European Union funds and lower perceived country risk.
Market reaction and currency moves
The Hungarian forint jumped to its strongest level against the euro since April 2022, while the Budapest Stock Exchange’s main index (BUX) hit a record high the day after the vote.
Against the U.S. dollar, the forint strengthened beyond the 310 level, marking a sharp move from earlier in the year. Major banks, including UBS, now see room for further gains, projecting the currency could reach 355–360 versus the euro in the coming months.
BCA argued that these moves reflect improving sentiment toward Hungarian assets and provide a backdrop for taking long positions on the forint.
Political shift resets EU relations
The rally followed a decisive political shift. The opposition TISZA party, led by Peter Magyar, won a constitutional supermajority, ending the rule of Viktor Orbán.
Markets view the result as a reset in Hungary’s relationship with Brussels, raising expectations that long-delayed EU funds will be released as political tensions ease.
The new administration has made unlocking these funds a top priority. Peter Magyar has already held talks with European Commission President Ursula von der Leyen aimed at accelerating disbursements.
Scale of potential EU money
BCA estimates Hungary could receive up to €26 billion over the coming years from EU sources, including Cohesion Funds and the Recovery and Resilience Facility, via grants and loans.
The firm highlighted that total net capital and financial account inflows stood at €5 billion in 2025, underscoring the potential impact if EU funding resumes at scale.
The expected inflows would equal around 12% of Hungary’s 2025 GDP, a higher share than in most Central and Eastern European peers. On top of that, BCA sees scope for an additional €16.2 billion in support linked to the Security Action for Europe framework.
Other estimates cited by market participants put the total range of possible EU funding, including previously frozen amounts, between €18 billion and €35 billion.
Economic outlook and growth prospects
BCA noted that Hungary’s growth has underperformed its regional peers in recent years, constrained by stalled EU funding and political friction with EU institutions.
GDP expanded by just 0.4% in 2025, leaving the economy close to stagnation. Forecasts for 2026 point to a rebound, with growth seen between 1.4% and 2.0% as foreign capital returns and pressure on public finances eases.
The research argues that a more predictable policy backdrop and improved ties with Brussels could sustain the forint’s momentum and support asset prices.
Fiscal strains and rating concerns
Despite the market optimism, the new government faces a strained fiscal position. The general government deficit reached 4.7% of GDP in 2025, overshooting targets, and Fitch Ratings expects it to widen to 5.6% in 2026, citing pre-election spending and energy support measures.
Fitch has kept Hungary’s ‘BBB’ sovereign rating but maintains a ‘Negative’ outlook, reflecting uncertainty over the speed and credibility of fiscal consolidation.
Monetary policy and inflation risks
Monetary policy remains tight but cautious. At its March meeting, Hungary’s central bank held the base rate at 6.25%, signaling concern over external risks and raising its inflation forecast for 2026 to 3.8%.
The bank’s stance suggests it is wary of easing too quickly, even as the currency strengthens and growth is expected to recover.
Conditions attached to EU funds
While the election outcome has cleared a major political obstacle to EU financing, the European Commission has reiterated that actual disbursements will depend on concrete reforms, particularly in areas linked to the rule of law.
For traders, the key risk is whether the new government can deliver the legislative and institutional changes required to unlock the full volume of EU support. The pace of those reforms is likely to determine whether the recent rally in the forint and local assets can be sustained.
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