Donald Trump's victory in the U.S. presidential elections could represent a political gain for Hungary's Prime Minister Viktor Orban, but in an economic context, it poses risks for the country.
This is reported by Reuters.
If Trump returns to the White House, he may implement his plans to increase tariffs on imports from China and Europe, which could lead to rising inflation in Hungary due to the weakening of the forint and potential reductions in production, particularly in the automotive sector. As noted by Reuters, the forint has already faced a decline following the Hungarian central bank's rate cuts in September, and after the U.S. elections, the currency weakened further, reaching levels not seen since 2022 when the bank was compelled to raise rates.
Experts believe this may just be the beginning; thus, if Trump fulfills his promises regarding tariffs, it could result in even greater declines.
"Trump's victory creates additional risks for Hungary," says analyst Roger Mark.
Although the forint performed better than expected post-elections, concerns remain that Hungary, with strong economic ties to the European automotive sector, may face additional pressure.
The European Commission is already assessing the potential impact of such tariffs on EU countries, with Germany and Italy likely to be the most affected, as they are the second-largest exporters to the U.S. Central Europe heavily relies on trade with Germany, especially in the automotive sector, which could lead to significant economic losses.
In a weak economic environment, Orban's government has repeatedly urged the central bank to make sharp rate cuts to stimulate economic growth ahead of the crucial elections in 2026. Finance Minister Mihaly Varga noted that combating inflation should be the top priority, while also emphasizing the need for close collaboration with the government.
However, some investors are concerned that political pressure may lead to a substantial reduction in rates, negatively impacting the forint and further decreasing inflation, which already reached record levels in the EU—over 25% last year.
"The new head of Hungary's national bank will have to choose between strengthening trust in the central bank and ensuring price stability or yielding to political pressure to stimulate the economy," reports Viktor Szabo from the investment company Abrdn.
Analysts at UniCredit believe that the forint remains under pressure due to risks associated with American tariffs, geopolitical situations, and weak economic data.
“The forint is the most vulnerable currency in Central and Eastern Europe due to its dependence on the automotive sector and Chinese investments,” they emphasize.
Source: Reuters