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15th January, 2019

Households amassing cash reserves

The amount of cash in circulation reached a new record high of Ft 6.1 trillion at the end of December, up from Ft 5.1 trillion at the end of 2017, according to MNB data.

The total value of cash in circulation amounted to 14.9% of GDP, one of the highest figures in the EU. In the Eastern Europe region, the same figure is higher only in Slovakia.

The 18.7% growth in cash last year exceeds the rise seen after the government introduced the transaction tax in 2013, when cash in circulation rose from Ft 2.7 trillion to Ft 3.2 trillion.

The government abolished the 0.3% tax on financial transfers below Ft 20,000 last year and recent comments by the Finance Minister suggest that the government is open to scrapping the tax altogether.

Portfolio also attributes the widespread use of cash to low interest rates, and the law allowing two free cash withdrawals a month of up to Ft 150,000.

More conventional factors include the black market economy, pensioners’ lack of bank cards and the high rate of debtors, who hoard their savings in cash for the fear that authorities may seize any money from a bank account.

Sources regularly consulted, with abbreviations used in text: Népszabadság (N); Magyar Hírlap (MH); Világgazdaság (VG); Napi Gazdaság (NG); Magyar Nemzet (MN); Népszava (Nsz); Kossuth Rádió news (KR); nightly TV news (TV).

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