Hungarians in Budapest Successfully Build Wealth, Overcoming Inflation

Published: November 20 2023

The Hungarian National Bank has released data showing that households in Budapest have successfully built wealth and overcome inflation. The financial assets of households increased by 12.2% compared to the previous year, with the majority of the increase coming from investment returns.

By the end of the third quarter, the financial assets of households reached 92,821.7 billion Hungarian Forints, a 12.2% increase from the previous year. This increase can be attributed to a combination of saving and investment returns, with investments in securities and bonds showing significant growth.

Despite the challenges posed by inflation, households in Budapest have maintained their confidence in investment funds and have been actively saving and investing their money. The data shows that households have been able to accumulate significant savings over the past year and have seen positive returns on their investments.

While the volume of cash and bank deposits held by households decreased over the past three quarters, there was a small increase in the third quarter. However, this increase was due to the appreciation of foreign currencies, particularly the Euro, rather than an increase in physical cash holdings.

There has been a notable increase in contributions to pension funds and insurance policies in Budapest. The strong returns achieved by these funds in the second and third quarters have helped restore confidence in these institutions. As a result, there has been a significant increase in new contributions to both pension funds and insurance policies compared to the same period last year. These investments have also yielded positive returns for the contributors.

What is the current state of wealth in Hungary? According to the recent data from the Hungarian National Bank (MNB), the financial wealth of households in Hungary has increased by 12.2% compared to the previous year, reaching 92,821.7 billion forints.

How did the value of assets in households increase despite inflation? The increase in financial wealth can be attributed to both saving and investment returns. Over the course of 12 months, households saved more than 5,000 billion forints, and investment returns contributed nearly 2,460 billion forints, which is a record high for a single quarter.

Was summer a challenging time for most families in Hungary in terms of saving money? Yes, historical data shows that families tend to save less during the summer months, particularly during the holiday season and the start of the school year. This trend continued in the third quarter of this year, with households saving less compared to the first and second quarters.

How much cash do households hold in Hungary? As of September, households in Hungary held approximately 6,000 billion forints in cash and nearly 450 billion forints in foreign currency. Additionally, they had less than 9,400 billion forints in forint deposits and over 2,400 billion forints in foreign currency deposits.

What investments have Hungarian households been making to counter the effects of inflation? Hungarian households have been investing in securities, particularly government bonds and bank bonds, to offset the effects of inflation. In the third quarter alone, more than 450 billion forints flowed into government bonds, bringing the total stock to over 12,000 billion forints. Approximately 60 billion forints of household savings were also invested in bank bonds, reaching a stock of over 540 billion forints.

Have investment funds been affected by new taxes in Hungary? Most investment funds in Hungary, except for real estate funds, have been subject to new taxes, including the social contribution tax (szocho). Despite this, the demand for investment funds has remained strong. In the third quarter, nearly 480 billion forints of fresh money flowed into domestic investment funds, surpassing the amount invested in tax-exempt government bonds. Additionally, 23.3 billion forints were invested in foreign funds. As a result, households held a total of 8,919 billion forints in domestic and foreign investment funds by the end of September.

What is the state of individual stock investments in Hungary? By the end of September, the value of individual stock investments held by households surpassed 2,000 billion forints for the first time. Although individual investors were net sellers in the stock market during the third quarter, the favorable performance of stock prices resulted in a profit of over 160 billion forints for households.

Have pension funds and life insurance policies seen growth in Hungary? Yes, pension funds and life insurance policies have shown growth in Hungary. In the second and third quarters, pension funds achieved excellent returns, which likely restored confidence in these institutions. This has led to a significant increase in fresh savings to both pension funds and life insurance policies compared to the third quarter of 2021. Life insurance policies received 30 billion forints of new deposits, a 70% increase compared to the previous year, and voluntary pension funds gained over 46 billion forints through investment activities.