After last year’s unusual stagnation, cash in circulation is once again rising dynamically. At the end of September, 7.7% more forint cash was in circulation than in the previous year.
Cash in circulation is back in demand. After the surprising stagnation in the previous year, the Hungarian National Bank (MNB) is already recording a dynamic increase again. However, foreign currency holdings have fallen recently, where the weakness of the forint could bring a turnaround. At the end of September, cash holdings totalled 8,665 billion forints (a good 21.6 billion euros), an increase of 7.7% on the previous year. This development marks the strongest increase since autumn 2022.
Reasons for the return
There are several possible explanations for the revival of cash in circulation. Firstly, the decline in inflation is reducing the pressure to ‘use up’ cash at retail. At the same time, the falling interest rate environment is improving the relative position of interest-free cash. Regulatory measures by the MNB to promote the installation of additional ATMs could also contribute to this development. Last but not least, tax optimisation could play a role: According to a Mastercard survey, the proportion of income paid out digitally has fallen from 74% to 71%.
Long-term trend towards cashless payments
Despite the current upturn, the long-term trend towards cashless payments remains. Overall, Hungarians now spend twice as much money with cards as they withdraw with them. Ten years ago, the ratio was the other way round. At that time, 2.5 times more cash was withdrawn with bank cards than paid by card.
In addition to forint cash, foreign currencies also play a role. At the end of June, there was 640 billion forints worth of foreign currency in circulation in the Hungarian economy, which corresponds to just under 7% of total cash in circulation. However, foreign currency holdings fell by 6.5% between mid-2023 and mid-2024. However, as in the past, the current phase of weakness of the forint could boost demand for foreign currencies.
