Hungarians do not believe that the economic situation in the country will improve and that consumer prices will go down. Due to inflation, which is now the highest in the European Union, they are withdrawing their savings from banks en masse. They buy government bonds for them because they assume that the state will not go bankrupt. Referring to data from the Hungarian Central Bank, Bloomberg and other media outlets write about it.
Banks in Hungary currently offer an interest rate of 12.5 percent. The country’s inflation rate was 17.5 percent in July, although it has been easing for the past six months from a peak of 25.7 percent in January, which was the highest in nearly 15 years.
Savers increased their holdings of domestic government bonds by almost HUF 1.4 trillion (CZK 800 billion) in the second quarter, which is 13.5 percent more than in the same period last year. At the same time, people in Hungary had 1.9 trillion forints less in cash and bank deposits, a year-on-year drop of 10.7 percent, the central bank said last week.
The data, according to Bloomberg, show that savings transfers have already taken place since Prime Minister Viktor Orbán’s government announced a special 13 percent tax on interest earned on bank deposits in June. At the time, the government said it wanted to increase demand for Hungarian government bonds.
According to him, Orbán was advocating patriotic bond purchases at a time when the European Union is withholding about 28.7 billion euros (almost 690 billion CZK) from funds earmarked for Hungary. Brussels justifies the move by concerns about bribes and the state of the rule of law in Hungary. The government in Budapest does not agree with this and claims that Brussels is punishing it for having a different opinion on some issues in the EU.
The government in Budapest has also restricted the ability of investment fund managers to invest in assets other than bonds. It thus tried to reduce credit costs.
Hungarians mostly bought inflation-linked bonds. The volume of retail bonds of this type, i.e. those held by small investors, increased by 37 percent to HUF 5.9 trillion in the first half of this year.
The growth of consumer prices may fall below ten percent in the fourth quarter, Orbán said. The rapid movement of bank deposits is closely monitored by the central bank, which told banks last week to intensify liquidity management in order to avoid further controls.
2023-08-21 11:07:31
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