Although the latest data show that several economic indicators — such as industrial production and orders, exports and confidence indicators — have recorded a slight improvement, their momentum remains markedly weaker than that of private consumption, which continues to be the only real engine of growth. Investment is the weakest component of the economy: despite the large projects under way, no significant recovery is observed and the multi-year decline appears to have halted only at the end of 2025. The indicators suggest that the low point has been reached and that a gradual recovery may begin in 2026, supported by the “Otthon Start” loan programme, the expected interest-rate cuts and a favourable base effect. Risks nevertheless remain linked to pre-electoral fiscal spending, since any subsequent adjustments could compress public investment.
Output in the construction sector grew in 2025, driven above all by infrastructure projects (roads and railways), even though sentiment in the sector remains weak. Newly completed dwellings are at their lowest level in the past nine years, while building permits have been rising for about a year. The “Otthon Start” programme and a significantly higher non-residential order backlog should support the sector, despite persistent labour shortages and low profitability.
During 2026 private consumption is expected to remain the main growth factor, supported by rising real wages and fiscal transfers. Corporate profitability, on the other hand, remains under pressure owing to wage growth outpacing efficiency gains, low utilisation of production capacity and strong competition from Chinese imports. A more decisive recovery in investment is expected only in the second half of 2026, favoured by the improving European environment and the progress of major industrial projects (BYD, CATL, BMW). Owing to the strong import demand generated by consumption and investment, net exports are unlikely to make a significant contribution to growth in 2026.
Given the extensive list of downside risks — geopolitical tensions, Chinese dumping, growing protectionism, new criticalities in supply chains, debt-related risks and the reduction of shifts at Mercedes until the third quarter of 2026 — a downward revision of the current 2.1% growth forecast appears likely after the publication of the March GDP figure.
The public budget recorded a surplus of 37 billion forints in January, temporarily supported by low utility costs; in the following months, however, additional expenditure will emerge linked to the monthly freezing of energy subsidies. Tax revenues sensitive to economic performance confirm the solidity of consumption, but also the persistent weakness of the corporate sector. The measures announced after the latest increase in the deficit target already imply a deviation of 0.6% from the 5.5% target for 2026, potentially larger without a mid-year correction.
Inflation fell sharply to 2.1% in January, driven by the decline in food prices and by administrative measures to contain margins, while core inflation also eased. Industrial goods show less favourable dynamics, partly because of the limited pass-through of the forint's appreciation and because of possible global increases in chip prices; housing-related durable goods recorded significant increases, partly connected to the “Otthon Start” programme. Average inflation in 2026 is expected to be around 2.5%.
The January data allowed the Hungarian central bank (MNB) to cut rates by 25 basis points to 6.25%, with further cuts likely in the following months. However, political uncertainty ahead of the April elections and a possible strengthening of the dollar could slow the easing cycle. The weakness of aggregate demand suggests that GDP growth could turn out lower than the current 2.1% forecast.
Focus Economia in collaboration with UniCredit Bank.
