Economy 3 November 2025, 1:15pm

Hungarian economy slams on the brakes, tough wage talks ahead

Portfolio

Employees and employer representatives were waiting for the third-quarter GDP figures. Until Thursday, they had hoped that the Hungarian economy would start to grow. However, the weak figures suggest that tough negotiations on wages are ahead, due to resume on Monday.

The third quarter of 2025 was not a successful one for the Hungarian economy either. There was stagnation on a quarterly basis, and economic growth was only tenths of a percent on an annual basis. Even an outstanding fourth quarter would only bring GDP growth to 0.5% this year.

The GDP data on stagnation was also bad news because both employee and employer representatives were expecting this figure.

Companies believe that the economy cannot sustain significant wage increases. If wages were to be raised significantly, it would lead to layoffs and bankruptcies. However, employee representatives are demanding a minimum increase of 10%. Thus, serious disagreements are expected at Monday's negotiations.

Melinda Mészáros, president of the LIGA Trade Unions, responded on behalf of employee organisations, saying that based on their current knowledge, this does not change their previous plans. "We expected this outcome, with GDP growth of 0.5–0.6% and inflation above 4%. We had already anticipated this in our economic models, which were established much earlier. Our proposal is to stick to the three-year wage agreement. This is the only way for both sides to achieve the desired wage increases," she said.

"It is not possible to withdraw from an agreement just because something does not happen as expected. With the multi-year agreement, both employers and employees took a risk. If there is no agreement now, for example, there is an automatic correction to the agreement, which means a smaller wage increase compared to the previous agreement due to poorer economic performance," added Melinda Mészáros.

In her view, this means that the minimum wage increase should be 12% rather than 13% next year. Regarding the guaranteed wage minimum, they are insisting on a 10% pay rise. Admittedly, this is not mentioned in the agreement.

Previously, one employers' organisation considered a 9% increase to the minimum wage and a 7% increase to the guaranteed wage minimum for skilled workers to be feasible,
while another wanted to raise the lowest mandatory wages by 7% and the guaranteed wage wage by 5%.

The government had previously made next year's reduction in social contribution tax by 1 percentage point conditional on a wage agreement between the parties. This would primarily enable a fair increase in the guaranteed minimum wage. "Beyond that, I do not expect any government measures," Melinda Mészáros told Portfolio ahead of the new negotiations.

According to Ferenc Rolek, Vice-President of the National Association of Employers and Industrialists (MGYOSZ), renegotiating wage agreements is the only viable option based on the current performance of the economy.

This is because the foundations of economic performance have been called into question.

"We knew that the third-quarter GDP figures would be poor. We still expect growth of only 0.5% this year, even though the multi-year agreement was based on hopes of three per cent economic growth, a figure we never really believed in, even when the agreement was signed. It would be foolish to stick to the original agreement, as the situation has changed significantly. We need to think sensibly about it and rewrite it. We want to conclude an agreement that is appropriate to the situation," said Ferenc Rolek.

He did not want to discuss what minimum wage and guaranteed wage minimum increases they consider feasible for next year. They will discuss this on Monday.

With growth around zero and inflation at 4 percent, where would the 11 percent minimum wage increase come from? There are no resources for it,

he said.

"As we have said before, the state of the global economy does not allow for this. Increasing the minimum wage to 50% of the average monthly wage over three years is not currently feasible. This would only be realistic if there were economic growth. While we consider wage convergence to be important in the long term, we will probably not be able to achieve this within three years," Ferenc Rolek summarised.

Given the differing positions of employees and employers, it is possible that no new agreement will be reached.

"If no agreement is reached, the government will decide on the increase to the minimum wage. The more delicate issue is the rate at which the guaranteed wage minimum will increase, because we have only agreed to this for one year. If no agreement is reached between employer and employee organisations, we trust in the wisdom and sense of responsibility of the government," concluded Ferenc Rolek.

However, employees believe that if no agreement is reached, the minimum wage will increase by well over 10% due to automatic adjustments (lower-than-expected GDP and higher inflation).