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Economy and Finance

Economic forecast for Hungary

The latest macroeconomic forecast for Hungary. 

Indicators 2023 2024 2025
GDP growth (%. yoy) -0.8 2.4 3.6
Inflation (%. yoy) 17.0 4.5 4.1

Hungary’s economy is projected to have contracted by 0.8% in 2023, broadly as expected in the Autumn Forecast. It expanded by 0.9% q-o-q in the third quarter of 2023 due to the recovery of agricultural output from the severe droughts in 2022. However, monthly indicators point to continuing weakness in industry and construction in 2023-Q4. The contraction in annual GDP was due to falling investment and household consumption. While exports are also estimated to have shrunk in 2023, the larger contraction of import demand resulted in a positive contribution of net exports to GDP growth.

The economy is set to recover gradually in 2024-25, with GDP growth picking up to 2.4% in 2024 and 3.6% in 2025, same as expected in autumn, supported by decreasing inflation and interest rates over the forecast horizon. Household income has received a substantial boost from the 15% minimum wage hike in December 2023, and employment has also held up, with the unemployment rate at 4.2% in December. Real income growth and improving consumer confidence are projected to spur household consumption. The central bank has already begun to reduce interest rates in response to falling inflation. This is expected to contribute to the gradual recovery of investment. New FDI projects are set to boost exports over the forecast horizon. Hungary’s economic outlook remains sensitive to global investor sentiment. The country is also particularly exposed to energy price changes and potential supply disruptions due to its large dependence on energy imports and its limited scope for import diversification in the short term.

HICP inflation decreased to 5.5% in December 2023 due to base effects, decreasing energy prices, and the domestic recession. Disinflation is expected to proceed at a slower pace over the forecast horizon, due to the recovery of consumption demand and high labour cost growth. The increase of excise duties has also elevated fuel prices in January 2024. Annual HICP is projected to decrease from 17.0% in 2023 to 4.5% in 2024 and 4.1% in 2025. Compared to autumn, the forecast has been revised down for 2024, but remains unchanged for 2025.