In the first quarter of 2026 the Hungarian economy grew by 1.7% year on year and by 0.8% over the previous quarter, exceeding expectations. The impetus came above all from services and, to a lesser extent, from the recovery of industrial production, supported by a strong March concentrated in a few large producers. The fundamentals nonetheless remain fragile: the recovery is narrowly based and heavily influenced by temporary factors.
Household demand was stimulated by pre-electoral fiscal transfers and by the rapid growth of real wages, with positive effects on consumption and saving. The spending component, however, generated a significant increase in imports. Measures such as the cap on fuel prices and the Otthon Start home-loan programme also had an impact, the latter financing above all the purchase of existing properties rather than new construction. Despite an increase in building permits, actual completions still reflect past trends, and supply constraints have fuelled a marked rise in house prices, particularly in the secondary market.
The construction sector benefited from the fiscal stimulus, with a clear rebound in output in March. The earlier declines, however, suggest that the sector made a negative contribution to overall growth. A more solid recovery will depend on a faster disbursement of EU funds and on the unblocking of the previously frozen resources. Investment activity remains weak.
Industrial production grew moderately, supported by oil refining and by automotive components, probably linked to the start-up of new production capacity such as that of BMW. Although it may emerge from recession, the sector continues to face geopolitical risks, disruptions in supply chains, rising energy costs and a strong forint that reduces the competitiveness of exports.
First-quarter growth was largely driven by one-off factors, which suggests a more moderate pace in the following quarters. The new government measures could add around 0.5 percentage points to growth, although part of the demand could be dispersed into imports because of the strong currency. The GDP growth forecast for the year has been revised upwards to 1.3% from the 1.1% of the previous month.
The fiscal picture remains challenging. In the first four months the budget deficit reached HUF 3,850 billion, already equal to 71% of the annual target, mainly as a result of pre-electoral spending and accelerated public investment. Even taking into account the possible improvements linked to EU funds and the reduction of financing costs, the deficit is expected to exceed 6% of GDP.
Inflation rose slightly in April, with an increase also in the core component. Price pressures remain contained by public interventions, but upside risks persist from energy costs and on the demand side. Inflation is expected to approach 4% by the end of the year, with an average just below 3% in 2026. Monetary policy remains on hold: the central bank has kept the reference rate unchanged, with possible cuts only under stabilised conditions. The forint is estimated to fluctuate between 350 and 360 against the euro, with margins for appreciation.
In summary
GDP 2026: +1.3% (estimate) · Average inflation 2026: < 3% · Deficit/GDP: > 6% · HUF/EUR exchange rate: 350-360
Focus Economia in collaboration with UniCredit Bank.
