Hungarian Forint (HUF): What It Means, How It Works

What Is the Hungarian Forint (HUF)?

The term Hungarian forint (HUF) refers to the official and national currency of Hungary. The forint is issued and managed by Magyar Nemzeti Bank, the country's central bank. The forint is represented in the international market by the currency code HUF and the symbol Ft. The currency was introduced in Hungary in 1946. Banknotes are issued in denominations between Ft500 and Ft20,000 while the bank mints coins ranging in value from Ft5 to Ft200.

Understanding the Hungarian Forint (HUF)

The forint is Hungary's official, national currency. It is issued by the country's central bank, the Hungarian National Bank, which is commonly known as Magyar Nemzeti Bank. Established in 1924, the bank is responsible for maintaining the currency's value and controlling its circulation. Its main objectives are to "achieve and maintain price stability" while using monetary policy to support the federal government's economic policies.

The forint is denoted in the foreign exchange market as Ft and is commonly referred to by its abbreviation HUF. It is not pegged to any currency and no currencies are pegged to it either. Along with the euro, the currency's top currency exchange is the U.S. dollar.

Forint banknotes are issued in denominations of 500, 1,000, 2,000, 5,000, 10,000, and 20,000 forints. Coins are issued in denominations of 5, 10, 20, 50, 100, and 200 forints. Bills are printed by the Hungarian Banknote Printing Company while coins are minted by the Hungarian Mint. One forint is divided into 100 fillér. These coins were removed from circulation in 1999 due to high inflation.

Special Considerations

Hungary joined the European Union (EU) in 2004. There was significant support to join the union at the time when the country applied 10 years earlier. However, Hungary still doesn't use the euro and hasn't set a target date to make the switch because the federal government and the central bank are reluctant to adopt the common currency. The nation's central bank governor Gyorgy Matolcsy described the euro as a "trap" and a "strategic error."

Other European countries that don't use the euro include Bulgaria, the Czech Republic, Poland, and Romania, though the European community is seeking more participants through economic integration.

The 2007-08 financial crisis and the European sovereign debt crisis magnified the dangers of joining the eurozone, in which 19 of the 27 EU member countries adopted the single currency. By giving up control of their own monetary policy, countries such as Greece and Spain are unable to devalue their currencies to stimulate economic growth.

History of the Hungarian Forint (HUF)

The Hungarian forint was first used between 1868 and 1892. But it wasn't until 1946 that the modern forint was introduced. It was meant to stabilize the national economy following World War II. The name comes from the gold coins of Florence called fiorino d'oro, which were struck beginning in 1252 and used throughout the Austro-Hungarian empire.

The currency's exchange rate has been stable to some extent. But uncertainty in the nation's economy has plagued the value of the forint in the foreign exchange market. For instance:

• The acceptance of the 1920 Treaty of Trianon following World War I had a series of devastating effects on the economy, not to mention 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 World War I, five were incorporated by neighboring countries. Saddled by war reparations and the loss of much of their tax base, the HUF 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. Hyperinflation reached 35% during the 1990s when it adopted a market economy. The economy did make some improvements in the 2000s even though inflation was so high that the currency lost its ability to be converted.

Hungary relies on a skilled labor force to drive its export-oriented economy. Major trading partners include Germany, Slovakia, Italy, Romania, and Austria. Top industries include car and car parts manufacturing and producing components for radios and televisions.

According to World Bank data, Hungary reported gross domestic product (GDP) growth of 4.6% in and 14.6% inflation in 2022. This was primarily due to the economic fallout that resulted from the global COVID-19 pandemic.

The Bottom Line

Although Hungary is part of the European Union, it is one of a handful of countries that continues to use its own currency rather than the euro. The forint, which is represented by the abbreviation HUF in the international currency market. Maintaining the forint and controlling the supply in circulation is the responsibility of the country's central bank, Magyar Nemzeti Bank.