Commission's updated forecast show Hungary's growth just above 2% in 2026-27

After two years of no or limited growth, GDP is projected to grow by 0.4% in 2025, the European Commission said in its updated economic forecast for Hungary on Mnday, In the spring, they still projected 0.8% growth for this year, i.e. the outlook has palpably worsened since then.

For 2026, the EU executive expects the Hungarian economy to grow by 2.3%, supported by fiscal stimulus, down from 2.5% projected in the spring. The EC sees Hungarian growth decelerating to 2.1% in 2027. Growth in the next two years is to be supported by consumption and the recovery of investment and exports.

The EC expects consumption to serve as the main driver of growth this year, but it warned that the expected 3.5% growth in consumption is anticipated to be offset by rising imports and a decline in investment. Exports are set to decrease, notably due to a decline in manufactured goods and business service exports. 

GDP growth is forecast to pick up to 2.3% in 2026, supported by fiscal stimulus, and then to ease to 2.1% in 2027. Consumption is projected to be supported by strong wage growth and fiscal measures. Investment is set to gradually recover and increase by 4.1% in 2027, driven by public investment, a pick-up in dwelling construction and improving business sentiment. Exports are projected to increase by 3.8%, aided by the launch of assembly facilities in the automotive industry, and to rise by a further 4.1% in 2027 as external demand picks up. At the same time, this economic recovery is set to lead to an increase in imports shifting the current account balance from a surplus of 0.1% of GDP in 2025 to a deficit of 0.4% by 2027. 

Risks to the outlook include continued weakness in investment and exports linked to developments in global supply chains. In addition, inflationary pressures could pose a challenge potentially exacerbated by high minimum wage increases and other government measures.

Inflation is set to moderate from 4.5% in 2025 to below 4% in 2026 and 2027,

but inflationary pressures remain strong.

Although government price regulations temporarily reduced inflation in 2025, prices are likely to adjust upward once those measures end,

the EC said.

The recent currency appreciation, along with the expected moderation of commodity prices and somewhat lower wage growth, is set to moderate inflation in 2026 and 2027. Inflation is forecast to decrease to 3.6% in 2026 and remain elevated at 3.5% in 2027, factoring in the introduction of the ETS2 scheme, which, if not delayed, is anticipated to lift energy inflation in 2027. 

After a significant decrease in 2024, the budget deficit is projected to decrease only slightly in 2025, to 4.6% of GDP. The cainet has recently raised the target to 5.0% of GDP, but the Commission sees the gap widen to 5.1% in 2026, driven by new measures targeting households.

"The cost of household energy subsidies continues to fall and interest expenditure declines due to lower coupons on inflation-linked bonds. However, public sector wage increases and other operating costs are expected to lead to strong growth in primary expenditure. Public investment is expected to grow moderately in 2025 as the decrease in spending on nationally-financed investment is outweighed by higher absorption of EU funds," the EC said.

Overall, the fiscal stance is expected to be expansionary in 2025, at -0.5% of GDP.

The Commission esimates that Hungary's income tax revenue is expected to be impacted by the introduction of a personal income tax exemption for mothers and an increase in the family tax allowance, totalling an estimated 0.6% of GDP next year.

New housing support measures for households and public workers are set to add a further 0.5% of GDP to the deficit. Further public sector wage increases, along with the already-announced bonuses for military and law enforcement employees, estimated at 0.5% of GDP, are projected to drive continued strong public wage growth.

These will be only partially offset by the extension of sectoral taxes on windfall profits into 2026.

In 2027, the deficit is forecast to remain elevated at 5.1%, in part due to the increasing cost of the income tax measures and the expiry of sectoral taxes. The fiscal stance is set to remain expansionary in 2026 and broadly neutral in 2027.

Further measures under consideration, such as the introduction of a 14th month pension, could result in a higher deficit.

In other words, it seems that the Commission has not yet considered the approximately HUF 170 billion that the first quarter of the 14-month pension payment will cost the budget, equating to around 0.2% of GDP.

Meanwhile, the projected path of public debt relative to GDP has shifted from a slight decline to a slight increase. The debt-to-GDP ratio is projected to increase over the forecast horizon from 73.5% in 2024 to 74.9% in 2027, driven by elevated deficits and decelerating nominal GDP growth. 

Hungary's unemployment rate has been hovering around 4.5% over the last year, and job vacancies continue to fall and employment is forecast to grow by 0.2% in 2025.

"The pick-up in economic growth expected in 2026 is projected to raise private sector employment and lower the unemployment rate to 4.3% by 2027. With the labour market remaining tight, nominal wage growth is set to remain elevated in 2025 and 2026, driven by public sector and minimum wage increases. Wage growth is projected to moderate in 2027 as these impacts ease," the EC said.

A címlapkép illusztráció. Címlapkép forrása: Getty Images