GDP is projected to grow at 0.8% in 2025 and to pick up to 2.5% in 2026, supported by consumption and a gradual recovery of investment and exports. Although inflation has decreased from very high levels, underlying inflationary pressures remain strong. After a significant correction in 2024, the general government deficit is projected to remain elevated at 4.6% this year. The debt-to-GDP ratio is expected to increase to reach 74.1% this year.
| Indicators | 2024 | 2025 | 2026 |
|---|---|---|---|
| GDP growth (%, yoy) | 0,5 | 0,8 | 2,5 |
| Inflation (%, yoy) | 3,7 | 4,1 | 3,3 |
| Unemployment (%) | 4,5 | 4,4 | 4,3 |
| General government balance (% of GDP) | -4,9 | -4,6 | -4,7 |
| Gross public debt (% of GDP) | 73,5 | 74,5 | 74,3 |
| Current account balance (% of GDP) | 2,4 | 2,0 | 1,5 |
The economic recovery is facing headwinds
Real GDP grew by 0.5% in 2024, benefitting from steady consumption bolstered by substantial wage increases and a decline in households’ savings. By contrast, investment declined, due to an uncertain business environment and cuts in public investment. Exports remained sluggish due do the weak performance of machinery and vehicle exports. Economic activity declined in 2025 Q1 by an estimated 0.2% q-o-q, partly owing to a decline in industrial production.
GDP growth is forecast to reach 0.8% in 2025 and 2.5% in 2026. Private consumption is expected to remain the key growth driver, supported by real income growth, as well as higher personal income tax exemptions and allowances. Investment, particularly by corporations, is expected to be limited in 2025 but is set to rebound in 2026 as the headwinds from global trade uncertainties ease and government-supported construction picks up. Exports are projected to recover, driven by improving demand and new production capacity in FDI-funded facilities. Higher domestic demand is also set to boost imports and reduce the current account balance while income outflows to the rest of the world are assumed to remain low.
Risks to the outlook include subdued external demand, which is particularly important given Hungary’s trade exposure and deep integration into global supply chain in key sectors, as well as inflationary pressures, which have been exacerbated by high wage increases and other government-funded policy measures.
The labour market is expected to remain tight overall
The unemployment rate increased to 4.5% in 2024, while the number of job vacancies fell. A gradual economic recovery is expected to take place and lower the unemployment rate to around 4.3% by 2026. Nominal wage growth is set to remain elevated in 2025 and 2026, driven by a further 9% minimum wage increase in 2025, the tight labour market, wage hikes in the public sector.
Inflationary pressures persist
HICP inflation averaged 3.7% in 2024, with HICP inflation excluding energy and food reaching 5.9%. Inflation increased in 2025 Q1 due to excise duty hikes, a rebound in food inflation and persistent momentum in services inflation. Domestic demand and rising food prices are expected to keep inflation elevated in 2025. Although price regulations and negotiations between the government and major service providers are set to moderate inflation temporarily, prices are likely to adjust once those measures end in 2025 and 2026. Inflation is forecast to increase to 4.1% in 2025, before decreasing to 3.3% in 2026, driven by lower commodity and energy prices along with somewhat easing wage pressures.
The budget deficit is set to remain elevated
The budget deficit decreased from 6.7% of GDP in 2023 to 4.9% of GDP in 2024, driven mostly by lower spending on energy subsidies and postponements in public investments. In 2025, the deficit is projected to narrow further to 4.6%. Primary expenditure growth is set to remain high as a result of public wage increases and growing operating expenditure. Interest expenditure is forecast to decrease due to lower coupons on inflation-linked bonds, while energy subsidies are set to decline further. Public investment is expected to stabilise after a large drop in 2024.
In 2026, the deficit is projected to increase slightly to 4.7% of GDP, driven by recent new policy measures. Income taxes are set to decrease significantly due to the planned introduction of a personal income tax exemption for mothers and an increase in the family tax allowance, totalling an estimated 0.6% of GDP. These will be partially offset by the extension of sectoral taxes which were due to expire in 2025. Public wage growth is set to remain high on account of bonuses for military and law enforcement staff, estimated at 0.5% of GDP.
The fiscal outlook is surrounded by downside risks stemming from growth and domestic policy uncertainties.
The debt-to-GDP ratio increased in 2024, in part due to a weakening of the forint and the acquisition of the Budapest airport. It is projected to increase further to 74.5% of GDP in 2025 as large cash interest payments accrued in previous year are due. It is projected to decline slightly in 2026.