The Hungarian forint maintained its momentum on Monday, 3 November, continuing the gains seen last week. By mid-morning, the exchange rate hovered around 386.4 forints per euro, marking a two-and-a-half-year high. According to Dávid Németh, chief analyst at K&H Bank, this trend is being driven not only by macroeconomic factors but also by political expectations.

Markets back the Tisza Party, forint strengthens

Németh explained that the market is currently betting on Péter Magyar and the Tisza Party. A potential victory in the spring 2026 elections could trigger a short-term market boost similar to what followed Donald Tusk’s party’s success in Poland. He noted that the forint’s current strength already partly reflects expectations around this possible government change. If the trend continues, the euro could fall below 385 forints by the end of the year, 444.hu reports.

A Tisza Party win could generate positive economic effects through several channels. Firstly, it could reopen access to currently frozen EU funds. Secondly, it might pave the way for a fiscal policy aiming at introducing the euro in Hungary. This would significantly reduce the country’s debt-financing costs, given that the current Hungarian yield spread is over three percentage points higher than Greece’s solely because Greece is a member of the eurozone.

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The Hungarian forint maintained its momentum on Monday, 3 November, continuing the gains seen last week. Photo: depositphotos.com

Four possible election scenarios

According to Németh, there are four realistic election scenarios, depending on whether a two-thirds majority is achieved and by whom. A narrow government majority could be perceived as unstable by the markets, especially since any government in the second half of 2026 would face serious budgetary adjustment pressures. Without adjustments, the budget deficit could rise to 6–7% of GDP, signalling an unsustainable economic trajectory.

Németh suggested that state spending should be more restrained or better targeted in several areas. He cited over-expenditure on economic sector support, as well as religious and recreational spending, as areas for potential cuts. Furthermore, he argued that introducing a 14th monthly pension is unrealistic, and that the 13th should be capped at HUF 600,000. He also recommended reviewing full personal income tax exemptions for mothers and 3% subsidised housing loans, as these could pose long-term fiscal burdens.

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Significant adjustments needed

The analyst believes that adjustments equivalent to roughly 3% of GDP will be necessary. Half could come from restructuring current measures, with the remainder saved by not implementing promised expenditures. He also expects that margin caps on prices will likely be removed following the elections, around May–June 2026.

Németh does not anticipate significant growth this year, but next year could see some recovery due to a weak base this year and election-related government spending. Investments in Hungary by BMW, CATL, and BYD could have a noticeable positive impact next year. Military spending and public-sector wage increases may boost household consumption, though inflation could accelerate again, from below 3% at the start of the year to potentially above 4% in the latter half.

The Hungarian National Bank is therefore expected to reduce the base rate cautiously, in one or two steps. Investors currently appear to see the short-term prospects of the Hungarian economy as being shaped less by the current government and more by a possible Tisza victory and the accompanying market optimism.