Brussels report: Hungary’s struggles highlighted in latest EU economic outlook
Hungary’s economy is currently experiencing a volatile phase. The pandemic, geopolitical tensions, inflationary pressures, and the complex effects of domestic policy measures have all impacted the country’s economic performance. According to the latest European Commission report, published in spring 2025, while modest growth is expected this year, Hungary continues to lag behind its regional peers—particularly in terms of investment.
The European Commission’s latest forecast indicates that economic growth across the European Union will remain subdued in 2025. Real GDP growth is projected to be around 1.1% for the EU and 0.9% for the euro area. The outlook improves slightly for 2026, when EU growth is expected to reach 1.5%. Meanwhile, inflation is forecast to decline gradually, potentially falling below 2% by 2026. The economic environment remains shaped by global risks: geopolitical instability, trade uncertainty, and weak external demand continue to hinder recovery, posing significant challenges for Hungary.
Hungary’s economic “growth”
Hungary’s economy grew by just 0.5% in 2024—a weak result, even by European standards. This limited growth was mainly driven by rising real wages and household consumption, while investment declined due to an uncertain business climate and reduced public spending. The Commission forecasts GDP growth of 0.8% in 2025, rising to 2.5% in 2026. However, this remains below regional competitors such as Poland (3.3%) and Romania (1.4%) for the current year.
According to HVG, Hungary’s economic convergence will be slow and largely reliant on improving external conditions.
Household consumption and investment
According to VG, household consumption is currently the driving force of the EU economy. Higher real incomes, tax cuts, and rising wages are encouraging consumer spending, thereby sustaining economic activity. However, investment—particularly in the corporate sector—remains subdued, with a meaningful recovery unlikely before 2026. Such a rebound will depend on a reduction in global uncertainty and the resumption of government-led construction projects. Exports are also weak, primarily due to a downturn in machinery and vehicle exports. However, the Commission believes this sector could recover if external demand strengthens.
Hungary’s economy is highly dependent on exports and global supply chains—particularly in the automotive industry and other high value-added sectors. If European or global demand remains weak, the domestic industry will suffer directly. Meanwhile, domestic risks also persist: inflationary pressures remain significant, exacerbated by rapid wage growth and increased government spending. Economic uncertainty, political risk, and a non-transparent regulatory environment continue to deter investors.
Budget deficit, rising wages and inflation in Hungary
Hungary’s unemployment rate stood at 4.5% in 2024, which is not exceptional, but the number of vacancies has decreased. Wages, however, have risen significantly, and this trend is expected to continue, with a further 9% minimum wage increase taking effect in 2025. This will particularly impact the public sector, but it will also influence the broader labour market. While overall inflation was 3.7% last year, core inflation (excluding energy and food) was significantly higher at 5.9%. Inflation began rising again in the first quarter of this year, driven by excise duty hikes and increased service sector prices. Inflation is forecast to reach 4.1% for the full year, potentially falling to 3.3% by 2026—though this will depend largely on external market conditions and wage trends.
The budget deficit was 6.7% of GDP in 2023, but fell to 4.9% in 2024, partly due to reductions in energy subsidies and public investment. It is expected to reach 4.6% in 2025 and 4.7% in 2026. The slight increase reflects new fiscal burdens, such as personal income tax exemptions for mothers and extended family tax credits. While these costs will be partly offset by the expansion of sectoral taxes, rising public sector wages will continue to exert pressure on the budget.
Hungary’s public debt-to-GDP ratio rose from 73.5% to 74.5% in 2024, primarily due to the weakening of the forint and the government’s acquisition of Budapest Airport. High interest payments in 2025 will further increase the debt, though it is expected to decline slightly to 74.3% by 2026. While this level of debt is not extraordinary by EU standards, for a small, open economy like Hungary, maintaining fiscal stability is crucial—especially in the eyes of international investors.
Overall, Hungary’s economic outlook remains mixed. According to current data, the country is among the slowest-growing economies in the region, particularly in terms of GDP growth and investment. However, there may be potential for convergence in the coming years if the economic environment stabilises and both exports and investment are revitalised.
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