What Is the Hungarian Forint (HUF)?
The Hungarian forint (HUF) is the national currency of Hungary. The forint gets its name from gold coins called fiorino d'oro, which the city of Florence minted in the middle ages and which were used throughout the Austro-Hungarian empire at the time.
The forint subdivides into 100 filler, but these particular coins no longer circulate as legal tender due to high inflation eroding their value.
- The Hungarian Forint (HUF) is the national currency of Hungary.
- After World War I, Hungary experienced one of the largest hyperinflations in modern history.
- The introduction of the forint in 1946 was part of an economic stabilization measure following World War II.
- While it is an EU member, the country has not yet adopted the euro.
History of the Hungarian Forint
The introduction of the Hungarian forint in 1946 was part of a stabilization effort for the economy in post-World War II Hungary. The exchange rate of the currency was relatively stable until the country adopted a market economy in the early 1990s. During this time, hyperinflation reached 35%. However, the economy made some improvements in the 2000s. Although at one point, Hungarian inflation was so high, the currency lost its ability to be converted (which is an essential aspect of international commerce).
The Treaty of Trianon, formed at the end of World War I, set Hungary's current borders. Hungary joined the Axis powers during World War II, and at the end of the war, it became a satellite state of the Soviet Union. Between 1949 and 1989, Hungary was the Hungarian People's Republic.
Hungary has experienced some of the worst bouts of hyperinflation of any country in the world. Following World War I, in which Hungary sided with Germany and the other defeated Central Powers, the country was forced to accept the 1920 Treaty of Trianon. This peace treaty had a series of devastating effects, including the loss of more than 70% of its pre-war territory and over 60% of its pre-war population. Of Hungary’s 10 largest cities prior to the War, five were incorporated by neighboring countries. Saddled by war reparations and the loss of much of their tax base, the Hungarian currency lost almost all its value. At its peak in 1923, annualized inflation reached nearly 1,200%.
From 1988 and into the early 1990s, many central and eastern European countries—including Hungary—broke with the communist rule. The transition, prompted by inflation and stagnation, was peaceful. The first free elections in Hungary were in 1990, and the country sought to become integrated into the rest of Europe during the early 2000s.
In 2004, the European Union (EU) invited Hungary to join. They had applied ten years earlier, and there was significant support for joining at that time.
The Hungarian National Bank is the country's central bank. They manage the issuance and circulation of the forint. Paper banknotes of forint have denominations of 500, 1000, 2000, 5000, 10,000, and 20,000 forints. Coins have denominations of 5, 10, 20, 50, 100, and 200 forints.
Hungary and the Euro
Hungary first planned to adopt the euro as its official currency in 2008, but it has consistently decided to hold off. According to the European Commission, Hungary is currently preparing the adopt the euro. However, the country does not have a target date for adopting the euro.
Both the 2008 financial crisis and the 2012 European debt crisis put into sharp relief the dangers of joining the eurozone, the monetary union of 19 member states of the European Union that have adopted the euro as their primary currency and sole legal tender. For example, countries like Greece and Spain have been unable to devalue their currencies to stimulate economic growth.
Other eastern European countries, such as Poland, the Czech Republic, and Romania, have also declined to join the currency union. It is interesting that this is happening at the same time that the European community is seeking more thorough economic integration.
The Economy of Hungary
Hungary has a skilled labor force, and it is an export-oriented economy. Its primary trading partners include Germany, Austria, Italy, and France, among others. Industries are varied and include parts for automobiles, radio, and television. The country is the largest Central and Eastern-Europe electronics producer.
According to the 2019 World Bank data, Hungary experiences an annual 4.9% gross domestic product (GDP) growth with yearly inflation of 4.5%.