Experts: Forint Will Strengthen, but Hungarian Fuel Prices Will Be One of Europe’s Highest

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The Hungarian forint broke records this week, reaching even 367/EUR. However, experts believe this trend will not last long since the national bank started to cut interest rates protecting the exchange rate. Meanwhile, the Hungarian government plans to increase the excise tax on fuel products, which will cost much more.

According to totalcar.hu, the Hungarian government said they must increase fuel prices from 1 January 2024. Otherwise, the Orbán administration would risk an infringement procedure against Hungary. That is because the EU has a minimum level of tax on each fuel product, and, currently, Hungary does not reach that. Even though Budapest asked for derogation (temporary exemption of the rule), the European Commission rejected the plea.

The result is that fuel in Hungary will cost much more. Here is how the tax will increase:

  • Gasoline: below USD 50/barrel from HUF 125 to 157.55; above USD 50/barrel from HUF 120 to 152.55
  • Diesel: below USD 50/barrel from HUF 120.35 to 152.9; above USD 50/barrel from HUF 110. 35 to 142.9
  • LPG: HUF 95.8/kg remains for road vehicles, while for other purposes, it will rise from HUF 12.725/kg to HUF 14.685/kg
  • Electricity: from HUF 310.5 to HUF 358.5 per MWh

In the case of gasoline and diesel, the increase will reach HUF 41 per litre, which is significant. As a result, Hungary will be among the European countries where fuel is one of the most expensive. If that happens, Totalcar suggests refuelling in Croatia, Romania or Slovakia, where it is much cheaper. For example, gasoline is now one of the cheapest in Romania in the continent (HUF 476-495/l).

Hungary has the 17th highest price regarding gasoline and the 10th highest concerning diesel. Following the price rise, Hungary will be 11th in the former and 6th on the latter list. Furthermore, it will exceed the Romanian, Slovakian, Austrian, Czech, Polish, Croatian and Slovenian average prices.

How long will the forint remain strong?

The Hungarian forint broke records this week going below 367/EUR, but experts believe the trend will not last long. That is because the national bank started to decrease the effective interest rate. The next session on the issue will be on 20 June, on which the monetary council will probably decide about another 100 base point cut. As a result, the forint will not be as attractive as it is now, so investors will take their money out of the Hungarian currency, index.hu wrote based on the remarks of a senior analyst of Equilor.

On the other hand, there is a drastic gas price decrease, which stabilises the Hungarian economy. Gábor Regős, the analyst of the Makronóm Intézet highlighted that Hungary’s external balance and current account are better. Furthermore, inflation is decreasing, and the country’s export in the euro is rising.

Some experts talk about a 355/EUR exchange rate by summer, but Zoltán Varga does not believe that. The rate will be between 360 and 365, he said. The 350/EUR milestone can be reached only by, for example, a ceasefire in the Russian-Ukrinian war. But that is unlikely, considering the ongoing Ukrainian counterattack.

Source : DailyNewsHungary