Is the Hungarian economy set to revive in 2025 after years of stagnation?
After two years of stagnation, the Hungarian economy looks poised for recovery in 2025, driven by wage growth, government initiatives, and increased investment. However, challenges like external demand and currency stability remain. Here’s what the experts say.
Tough years behind
As VG reports, the Hungarian economy has faced significant challenges over the past two years, with an energy crisis, soaring inflation, and weakened consumer confidence severely impacting growth. Companies scaled back production and investment as public caution persisted, while external demand offered little relief, exacerbated by Germany’s recession. Domestic growth faltered, with GDP growth in 2024 falling below 1 percent—far short of the government’s optimistic 4 percent projection. However, as inflation eases and economic conditions stabilise, there is growing optimism that the Hungarian economy may finally regain momentum in 2025, leaving behind a period of stagnation and underperformance.
Economists and PM Orbán are hopeful
The Hungarian economy enters 2025 with renewed optimism after two challenging years. Zoltán Árokszállási, Head of MBH Bank’s Analysis Centre, highlights factors such as wage increases, enhanced family tax credits, and government programmes stabilising investment as key drivers of consumption and growth. While external demand remains uncertain, with limited support expected from the German economy, a surge in automotive investments from major players like BMW and CATL could strengthen the Hungarian economy in the latter half of the year. Prime Minister Viktor Orbán emphasised fiscal improvements and strategic investments as “hidden resources” poised to bolster GDP growth, which experts predict could reach 3 percent in 2025. In an interview with Patrióta, he said:
The Hungarian economy will not perform well because European performance improves. It will be good even if it does not. Because we have two well thought-out, hidden and now unearthed resources.
Growing wages to fuel the economy
Dániel Molnár, a macroeconomic analyst, anticipates significant wage growth of up to 9% under a three-year wage agreement, with real wage increases exceeding 5% as inflation stabilises within the central bank’s tolerance band. This, coupled with government measures such as enhanced family tax credits and bond interest payments, is expected to bolster consumption and improve consumer confidence. Investment is also set to rebound, supported by the Sándor Demján programme for SMEs and new housing construction initiatives. Additionally, production launches at factories like BYD, CATL, and BMW are expected to strengthen exports and contribute to economic growth. While the Hungarian economy has favourable internal dynamics, sustaining growth above 3% will depend on improved external conditions and eased geopolitical tensions.
Will the forint finally stop weakening?
The Hungarian economy is expected to maintain relative stability in 2025. As experts say, the forint is unlikely to weaken significantly. However, the euro is not anticipated to drop below 400 forints consistently, according to Zoltán Árokszállási of MBH Bank. Interest rates may see modest reductions, but the pace of cuts will depend on global trends, particularly the US Federal Reserve’s monetary policy. The Hungarian National Bank (MNB) is expected to closely monitor the forint’s exchange rate to prevent inflation from exceeding its target range. Current projections suggest a base rate of 5.75% by year-end, though adjustments could be made based on market conditions. Exchange rate and interest policy stability will be crucial for the Hungarian economy’s continued recovery.
Read also:
- Shocking decline: How Hungary fell behind its neighbours after joining the EU
- Unprecedented growth and rising prices: records and averages for Hungary’s housing market in 2024
Featured image: depositphotos.com
Another secret weapon of our Politicians when it comes to GDP growth:
https://www.euronews.com/business/2024/12/09/eu-budget-who-pays-the-most-into-the-eu-and-who-gains-the-most
TLDR: in 2023, Poland was the top net beneficiary, receiving EUR 7.1bn, followed by Romania (EUR 5.9bn), Belgium (EUR 4.8bn), Hungary (EUR 4.4bn) and Greece (EUR 3.9bn).
The 2023 net receipts from the EU budget per person in Hungary was EUR 459.
Draw your own conclusions.
The EU forecast for Hungarian GDP growth in 2025 is 1.8% which is significantly lower than the 3% quoted in this article. In my opinion considering economic problems Europe is currently mired in even 1.8% is overly optimistic.
I’m no economist but even I know the biggest drivers of inflation are government imposed wage increases, government initiatives to pump money into the economy and a weakening currency. These “experts” talk about lower inflation in the first sentence, then go on to list all the things that will occur in the economic sphere this year that will drive up inflation. This time last year the same experts said that GDP growth would be over 4% and the forint won’t go above 400 forints to the euro in the long term. Every year they spout the same fantasies that they themselves know cannot possibly be true based on their education. Yet, every year they expect everyone in Hungary to believe this nonsense. Hungarians are some of the most logical and evidence based thinking people on the planet, there’s no way they believe this.
Concur Matt.
No real “Rocket Science” in your competently worded commentary.
Hungary, in the “historic” after 16 years in Government, just on the subject matter alone of your commentary, the Orban led Fidesz Party, a political party of “toxic cultures” have just, through the process using it as propaganda, feed the people of Hungary, absolute FALSE and Mis-leading information under the banner of the Economy of Hungary.
Its Heinous.
Hungary – the CONSTELLATION of Economic & Financial that factually is the BIG picture in Hungary, point again I wish to make is, that the Orban led Government are just a worsening Government, in there ability to have any form of Economic stability in Hungary.
Orban, his Fidesz Government the GROWING gargantuan PRESSURIZATION on them, the DEBT as a Government, they factually have, the fine level, of a compounding daily interest structure in the money owned by the Orban led Fidesz Government of Hungary, to the European Union – just builds into ALL probability, in being a financial and economic cataclysmic DISASTER.
STAGNATION – in the OBVIOUS factual case of Hungary is that its DECLINE will continue, for the ONE simple reason – that the Orban led Government – have No Money – to INVEST into the FUTURE of Hungary.
Governments – that FAIL, fail, fail to INVEST – the application, the usage of tax payers MONEY – into projects of the FUTURE of there country, there FAILURE rightly leads to DOWNFALL.
Hungary – can’t BORROW grow Government DEBT any HIGHER, having immense PROBLEMS in the servicing of there Government at this immediate point in time.
Hungary – through the name, the actions and attitude muchly on the shoulders of Victor Orban – WILL not get ANY favours from Brussels.
The Hungarian Economy is NOT performing – not returning TAXES of near enough level, to even consider a Government Debt – reduction program, and at the same time – introduce a TRUTHFUL an ACHEIVABLE, a viable PLAN to start about as a Government SOLID plans of INVESTMENT – for the FUTURE of Hungary.
Hungarians – have been FAILED.
Appalling & Heinous and it will continue until such time – that the Orban – Fidesz Government of Hungary are OUST.
Matt you are on the bulls eye. My wife and I laugh at how Fidesz politicians are world experts at contradicting themselves in the same sentence but their supporters seem clueless to it. I wanted to say the same thing about last year’s projection. I have been watching a new BBC series on the psychology of the Third Reich and I am drawing parallels from this and other material all the time. The incredible thing about dictatorships is their inevitable direction to failure due to the inability of the leadership to accept the truth of expert analysis contracdictory to their desires. I would add in another item that would be their interference in free market competition which is a big problem in Hungary.
Larry & Matt.
Hitler, in what Larry writes, is the personification of this “practice” of FAILURE.
Orban – is MUCHLY in this “Mould” – that his CV builds to being a humiliation of him-self, and to Hungary.