After two consecutive quarters of decline, Hungary’s economy bounced back from recession in Q4, posting 0.5% quarter-on-quarter growth, beating analyst consensus by 0.3pp. Economic performance in 2025 is expected to be driven by a recovery in consumption and investments, while external demand and net exports remain uncertain.

Data from the statistics office KSH, released on January 30, showed that GDP grew by 0.4% year on year (chart) and by 0.2% y/y when adjusted for calendar effects. Full-year growth reached just 0.6%, falling well short of the 4% target set in the budget law.

Hungary’s economic rebound from a 0.9% contraction in 2023 was rather modest, analysts said. The government revised its growth target multiple times throughout the year and repeatedly blamed weakness in the German economy for Hungary’s struggles. However, domestic economic drivers also faltered.

The KSH will release detailed data in early March, but monthly reports suggest the industrial sector remained sluggish, while construction output also weighed on Q4 growth, according to a compilation by independent news outlet 444.hu. The services sector was likely the main driver of growth, with retail and tourism performing strongly in the autumn months, supported by rising real wages and a surge in foreign visitor numbers.

Looking ahead, the government projects GDP growth of around 3% in 2025, positioning Hungary among the EU's fastest-growing economies. Growth is expected to be driven by rising real wages, high employment, increased housing market activity, and stronger demand for services such as tourism, the National Economy Ministry said in a statement.

It also highlighted the positive impact of the government’s economic stimulus plan, which is set to mobilize HUF4 trillion (€10bn), including HUF1.5 trillion from maturing government bonds.

However, analysts caution that meeting the ambitious growth target will require sustained domestic demand, a significant improvement in external markets, and stronger performance in key industries.

Economists forecast growth to accelerate to 2-2.5% this year, though they warn that the outlook remains fraught with risks. Unlocking EU funds, boosting the purchasing power, and improving competitiveness will be crucial for sustainable growth, they added.

Brokerage Equilor forecasts Hungary’s GDP growth to rise from 2.2% in 2025 to 3.4% in 2026, though both figures remain well below the government’s targets.

In its latest quarterly macroeconomic update, the MNB revised its 2025 outlook downward by 0.1 percentage points, now projecting growth in the range of 2.6-3.6%. The central bank expects broad-based growth, with Hungary potentially emerging as a regional leader next year.

The European Commission and OECD forecast the economy to expand by 1.8% and 2.1% respectively, in 2025, with consumption as the main growth driver. However, both institutions highlight downside risks, including weak automotive demand, declining trade, and inflationary pressures.

According to ING Bank, which maintained its 2% GDP growth forecast after the latest data release, Hungary would need quarterly growth of 1.3-1.4% to reach the government’s 3.4% target for 2025.

Over the past five years, the government has consistently missed all major economic targets, from budget deficits to GDP growth.