Hungary’s forint is expected to strengthen to 355–360 per euro in the coming months after the Tisza party secured a constitutional majority in national elections, according to a research note from UBS.
The forecast implies an appreciation from current levels around 365 per euro and reflects expectations of policy continuity, EU fund access, and structural reforms under the new government. The forint has already climbed to a four‑year high against the euro, while the Budapest stock index (BUX) hit a record in the days following the vote, as markets marked down Hungary’s policy risk premium.
Election outcome and political backdrop
Preliminary results show Tisza winning more than two‑thirds of the 199-seat parliament, with estimates placing its tally at 138 seats. This gives the party a constitutional majority and is expected to allow the new government to implement its economic and legal agenda without major obstruction.
Market attention now centers on:
- how quickly a cabinet is formed,
- which figures are appointed to key economic posts, and
- how the new administration approaches fiscal consolidation and EU conditionality.
The cabinet must be in place by 13 May, making the coming weeks critical for signaling the government’s policy direction.
EU funds seen as key currency driver
UBS highlights the potential release of €18–€19 billion in previously frozen European Union funds as the core driver behind its positive view on the forint.
Access to these funds depends on the new government meeting 27 conditions set by Brussels, including:
- judicial reforms, and
- lifting Hungary’s veto on a €90 billion EU aid package for Kyiv.
The incoming prime minister, Magyar, has called unfreezing EU resources a “top priority” and has already initiated talks with the European Commission President to accelerate disbursements.
UBS’s February modelling assumed a scenario in which EU funds were restored, projecting EU transfers of about 2.5% of GDP in both 2026 and 2027. The bank argues these inflows could more than offset a 1–1.5% of GDP drag on the current account from higher energy import costs.
Currency projections and balance of payments dynamics
Using historical exchange rate behavior and balance of payments data, UBS estimates the forint’s real effective exchange rate could improve by about 10% under its base case.
The bank sees a path for the forint to reach 340 per euro by the end of 2026, but only under more favorable external and policy conditions. That stronger level would require an additional €10–€14 billion in unsterilized balance of payments inflows, coming from at least one of the following:
- faster progress toward euro adoption,
- a rise in foreign direct investment to roughly 3–4% of GDP (from an average of about 1.2% over the past five years), or
- a marked acceleration in productivity growth.
Hungary vs Poland: UBS prefers forint over zloty
UBS maintains a preference for the Hungarian forint over the Polish zloty, taking a comparative view of the region’s fundamentals.
The bank notes that:
- Poland’s economy is projected to grow by a solid 3.2–3.8% in 2026,
- but it faces a fiscal gap near 7% of GDP and inflation of about 4.0–4.5%,
- while it remains exposed to elevated energy costs and low real interest rates.
Hungary also carries fiscal challenges, with the 2026 budget deficit projected at 5.6% of GDP. However, UBS sees the potential scale of EU inflows to Hungary as a “unique and powerful” support factor for the currency that Poland does not share to the same extent.
Policy milestones to watch
For those exposed to Central European currency moves, UBS points to several near‑term markers:
- Cabinet formation by mid‑May
The composition of the new cabinet, especially the finance, economy, and justice portfolios, will give the first concrete signals on fiscal consolidation, reform momentum, and the approach to EU conditions. - EU negotiations and reform timetable
Communications between Budapest and Brussels on unlocking frozen EU funds will be closely monitored. Any concrete agreement or progress on meeting the 27 conditions could precede further forint gains. The new government also faces a tight structural deadline: some reform “super‑milestones” must be met by 31 August 2026 to avoid forfeiting €10.4 billion from the Recovery and Resilience Facility. - Fiscal strategy under pressure
The new administration inherits a budget strained by pre‑election spending, while GDP growth is only expected to recover to 1.6–2.3% in 2026. Markets will look for a credible plan that balances campaign pledges on tax cuts and social support with the need to narrow the deficit and stabilize debt dynamics.
Role of the Hungarian National Bank
Monetary policy will be another decisive factor for the currency outlook. The Hungarian National Bank is operating in a context of:
- very low recent inflation (1.4% in February),
- expectations of renewed price pressures from global energy markets, and
- a changing political backdrop following the election.
UBS notes that the central bank’s interest rate path and its coordination with the new government’s fiscal stance will be critical for attracting or deterring capital flows over the coming quarters.
In UBS’s base case, a combination of political clarity, progress on EU conditions, and disciplined macroeconomic policies supports a gradual appreciation of the forint toward 355–360 per euro, with stronger levels only achievable if financing inflows and structural reforms exceed current expectations.
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