Forint strengthens (also) due to the rise of Tisza Party, US news agency says

Bloomberg's article says that the forint's strength could also be helped by Tisza Party leader Péter Magyar's plan to put relations with investors and the European Union on a new footing after next year's elections. Although it is too early to say whether voters will ultimately support the Tisza Party, which is leading in the polls, the possibility of Prime Minister Viktor Orbán being removed from office could improve market sentiment.

The forint lost roughly a third of its value during Viktor Orbán's 15 years as Prime Minister, a period marked by battles with Brussels, corruption allegations, and criticism of democratic backsliding, according to Bloomberg's article.

Investors may speculate that a change of government could release up to €18 billion ($21 billion) in frozen EU funds — equivalent to about one-tenth of Hungary's GDP — which could boost the currently sluggish economic growth.

But what exactly is "Tisza-bet"?

"The forint currently has an extra tailwind, which can be attributed to the elections," said Tamás Cser, who manages approximately $4 billion at Hold Fund Management Ltd. in Budapest. "The market has started to price this in."

Supported by high domestic interest rates, the forint has already strengthened by 6% against the euro and 20% against the US dollar this year,

outperforming all emerging market currencies except the Russian ruble. The political outlook has given further impetus to the rally: Barclays Plc strategists are advising investors to take a closer look at the forint ahead of a possible political turnaround.

Why the forint may strengthen in the event of a Tisza victory

At his campaign stop this week at a busy intersection in Budapest, Péter Magyar promised more predictable economic policies, the restoration of EU funding, and action against corruption, which would restore investor confidence. He believes that economic growth could accelerate to as much as 4% — a rate not seen since 2022 — which would improve the budgetary position and allow for tax cuts and higher pensions.

We must bring home EU funds,

Magyar told Tisza party supporters in Budapest. "This will help restart the entire Hungarian economy."

The 44-year-old Magyar has repeatedly indicated that he would follow the example of Polish Prime Minister Donald Tusk, who quickly regained access to EU funds in 2023 after the nationalist government was ousted. Warsaw's political turnaround triggered a sharp rally in Polish assets. Now, some investors are jumping on the forint bandwagon in the hope that Magyar's victory will have a similar effect.

Fidesz should not be written off just yet

According to Bloomberg, Viktor Orbán—an ally of US President Donald Trump—cannot be written off though: he has a powerful media machinery, state-backed companies, and a supermajority in parliament at his disposal. In 2022, he easily defeated the opposition alliance that tried to oust him, although his party is now more than 10 percentage points behind Tisza, according to recent polls.

Adnan El-Araby, co-manager of Barings Eastern Europe Fund, said that although he has exposure in Hungary, he does not want to increase his risk for the time being.

I understand if nimble investors try to act opportunistically, but realistically we are still a long way from Orbán not dominating the political arena,

El-Araby said. "He may spend heavily to win the election, and there is no guarantee that he would accept defeat."

In 2022, pre-election cash handouts helped him get re-elected, while a wave of spending upset the budget and sent the forint into a tailspin. Now the government also acknowledges that fiscal room for maneuver is limited, although Orbán has extended income tax exemptions and launched a new housing subsidy program as a move to regain popularity.

How analysts see the situation

Barclays, which at the end of 2024 was still betting on a weakening forint, recommended in August the purchase of options that would profit from a strengthening currency in the event that Orbán lost the election. Analysts also upgraded Hungarian government bonds, citing that “in the event of an opposition victory, a positive market reaction is likely after the April 2026 elections.”

As the vote approaches, further buying transactions may be made on Hungarian assets, according to Juan Orts, analyst at Societe Generale SA. “The proportion of positions betting on a stronger forint and lower interest rates may increase as the market prices in a Tisza victory and thus the release of certain EU funds as the elections approach,” he said. “I don't think the elections are the main positioning factor in Hungary at the moment. This will increasingly be the case as we get closer to the voting day.”

Despite the uncertainties, the risks are leaning in one direction, says Sergei Voloboev, currency and interest rate strategist at Bloomberg Intelligence.

An Orbán victory would mean the continuation of the status quo, with limited negative consequences for investors, while a Tisza victory would create an opportunity for better EU relations, greater competition, and a more balanced business environment.

“The strength of the forint this year can be explained, at least in part, by the growing perception that the Tisza Party could actually win next year's election,” he said.

As we approach the elections, the debate will intensify over whether a victory for Tisza or Fidesz will be more favorable for the forint, government bonds, the debt situation, and the Hungarian economy. From the perspective of the forint, it is certain that the full availability of EU funds and an increase in foreign capital inflows would have a positive effect.

Cover photo (for illustration purposes only): Getty Images