Economy 24 July 2025, 11:08am

The outlook for the Hungarian economy looks bleak

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According to a survey conducted by GKI Economic Research Co., with support from the EU, consumer sentiment remained unchanged in July compared to June, while business confidence showed a slight decline. Consequently, the GKI's economic sentiment index fell by almost two points to its lowest level in two-and-a-half years. Compared to the previous month, firms' willingness to hire declined slightly. In July, the long-term decline in aggregate expectations regarding the development of sales prices halted.

Following a one-point increase in June, the GKI business confidence index fell by two points in July compared to the previous survey, essentially returning to the low level seen at the start of the year.

There was no good news from the services sector, especially industry, where the confidence index fell by three points compared to the previous survey and by one point compared to the previous one. However, the index for trade and construction remained unchanged. These shifts did not alter the overall picture, with construction remaining the least optimistic sector and business services the most optimistic.

The employment indicator, which measures businesses' aggregate expectations regarding their workforce management, continued to fall slightly in July. This change is not dramatic compared with June, but it brings the indicator to a nearly five-year low. Over the next three months, 7% of businesses plan to expand their workforce, while 13% intend to reduce it.

In July, the perception of the predictability of the business environment worsened slightly, with industry providing the most negative assessment.

In July, the price indicator ended its steady decline of several months. The indicator summarising the business sector's pricing plans rose very slightly compared to the previous month.

The good news for consumers is that price increase intentions in the trade sector have fallen further. In contrast, there has been a slight increase in price hike plans in the other three sectors. 18% of firms intend to raise prices within the next three months, while 8% intend to cut them.

The GKI consumer confidence index remained unchanged in July compared to June. Compared with the previous survey, the population assessed their financial situation over the past 12 months as unchanged, while their financial outlook for the next 12 months was slightly better. However, the perception of having enough money to spend on high-value consumer goods deteriorated slightly.

Compared with June, consumers expected the country's economic situation to worsen slightly over the next 12 months. The last time this expectation was lower was in September 2023. While the public's expectation of inflation has declined, the outlook for unemployment has deteriorated slightly.

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