Risks and opportunities in the Hungarian economy

The biggest risk is caused by continuous price growth, i.e. inflation. Inflation is a phenomenon as old as money, known since the Phoenicians. Our money is worth less and less, which means we have to pay more and more for the same product.

Inflation, illustrated by a natural-scientific example, may best be compared to a fever characteristic of the human body. The human body has a natural temperature, which simply arises from the fact that the body lives, breathes, works and functions. This function requires production of energy, as well as the flow of energy through the body, which involves the production of heat. Blood and the cardiovascular system can carry energy from one cell to another within the body. In the economy, money plays the role of blood, moreover, the flow of money, that's why the work of the economy here also includes the production of heat, i.e. inflation.

However, apart from being necessary for the functioning of the economy, inflation also has a destructive effect. Even a relatively low weakening of the banknote of around 5% means that every 100 HUF will lose purchasing power by 14 HUF within 3 years. In the case of a permanently higher rate, say above 10%, this loss amounts to HUF 25 for the same period of time.

Another such risk factor is the evolution of the forint exchange rate. If we look at the EUR/HUF chart over the last 10 years, you will see that despite the large fluctuations, but still trending, the HUF is weakening against the common European currency by around 2.5% per year. Although this trend is favorable for export companies, during this time all business entities pay the price.