Severe austerity measures may follow the Hungarian elections, expert warns

As the elections draw nearer, Hungary’s economic outlook remains stagnant in almost every respect. Although the government continues to project optimistic growth figures, experts suggest that reality is far less encouraging — and significant austerity measures may be introduced as early as spring.

Six months before the 2026 elections, Hungary’s economy is still stagnating. While inflation is easing, growth remains far from satisfactory, and no substantial shift in economic policy is expected before the elections. Dávid Németh, lead analyst at K&H Bank, outlined in detail what could be expected in the next six months and what kind of adjustments or austerity measures may become necessary, according to Telex.

Stagnant GDP and distant interest rate cuts

According to Németh, recent data show that GDP stagnated in the third quarter, which suggests that growth will reach only 0.5% in 2025 and, at best, 2.4% in 2026 — well below the government’s target of 3%.

Although the forint is currently stable, Németh believes that a stronger appreciation is needed. Owing to inflationary pressures, the National Bank of Hungary is unlikely to lower the base rate before spring 2026. Even then, such a move would only be possible if monthly inflation fell below 3% — a scenario with a relatively low probability of just 30%.

Meanwhile, the budgetary position could deteriorate rapidly. While revenues and expenditures were nearly balanced in 2024, a deficit of 1–1.5% of GDP may emerge in 2025. Without immediate post-election correction, this could rise to 2–2.5% in 2026. Combined with interest expenses of around 3.5%, the overall deficit could reach approximately 6%.

A bleak outlook for the housing market

Distortions are also evident in the housing market. Government schemes such as Otthon Start (Home Start) have driven demand to such an extent that supply is unable to keep pace. As a result, experts estimate that Hungarian real estate is currently overvalued by 20–25%.

According to Infostart, citing data from ingatlan.com, demand for newly built properties has surged by an average of 76% since the Otthon Start programme was announced. In Budapest, demand rose by 49%; in major regional cities by 86%; and in smaller rural settlements by an extraordinary 142% year-on-year over the past four months.

The number of building permits has also increased: nearly 20,000 new permits were issued by September this year — a 37% rise compared to 2024. However, this pace still falls far short of matching the rapid growth in demand.

Major austerity measures expected

According to the analyst, regardless of the election outcome, several measures will likely be introduced that could be classified as austerity, though no meaningful announcements — not even promises — are expected before early summer.

While market continuity provides a certain degree of stability, investors are also hopeful that a potential change of government — similar to Donald Tusk’s victory in Poland — could bring positive developments in areas such as EU funding and interest rate levels. One thing is clear, however: the withdrawal of market-distorting price caps and the reassessment of budgetary subsidies are urgently needed.

Schemes such as the income tax exemption for mothers, state-subsidised housing loans, and the proposed 14th-month pension place a heavy burden on public finances. Without rational restrictions and more targeted support, these programmes are unsustainable in the long term.

• Have you heard about the concept of the Hungarian euro?
• Hungary’s housing prices soar as market heats up again