Hungary in ‘no rush’ to join the euro

After 10 years as a member of the European Union, Hungary is still in no hurry to adopt the euro as it is enjoying the "advantages" of being outside the 18-country group, government and stock exchange officials have told CNBC.

Investors and euro-watchers had expected Hungary to join the single currency not long after it joined the EU a decade ago – but has yet to reach the right economic and fiscal conditions to sign up. The country's high level of government debt -- which peaked at 83 percent to gross domestic product, in 2010, when Prime Minister Viktor Orban's government came to power – makes the move impossible.

Hungary still uses its currency, the forint but now a move to the single currency is no longer of "immediate interest," according to the Hungarian government's international spokesperson, Zoltan Kovacs.

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Hungarian and EU flags in Budapest
John Butterfield | Getty Images
Hungarian and EU flags in Budapest

"Not being members of the euro zone at the moment has advantages for the country. Taxation policies really help the economy, we are trying to utilise that for the best in policy making," he told CNBC.

The government's goal is to reduce its debt to GDP ratio to 76 percent in the next year and according to Organization for Economic Cooperation and Development estimates, 75 percent is realistic in the next two years. But this figure is still significantly higher than the 60 percent required by the EU to join to euro zone.

"It is not an immediate interest of the country, because the economy, the structures that we are running need to be up to a standard that would make it beneficial for the country to join," Kovacs said, adding that there is currently no fixed target date for the country to join the euro area.

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However, the Hungarian government's policies and tough taxation measures, along with the ongoing conflict between Russia and Ukraine are hitting Hungary's markets. Trading volumes in the Budapest stock exchange have fallen between 20 and 25 percent in the last year, according to the chief executive of the group Zsolt Katona.

"For investors in the U.S., they just look at the map, Hungary is bordering Ukraine – there is a war going on, the risk premium is increasing and Hungary has some exposure in Ukraine and Russia to the extent of 6 percent of GDP," Katona said.

But he said joining the euro area would have little effect on outside investment into Hungary, adding that the lack of the single currency is currently not seen as a "burden ".

"I can see only a very tiny amount of investors that do not invest in Hungary because we don't have euros as a trading currency. The Hungarian forint market is a very liquid fast-moving market. You can exchange your euros and dollars into forint very easily, even in big sizes. So I don't see it having a huge impact, if we were to change into euros," he said.