Hungary's industrial output in February plunged to levels last seen during the 2020 Covid lockdowns, with official data showing an 8.0% year-on-year contraction after adjusting for calendar effects and an 8.7% (chart) decline, according to the raw data.

The month-on-month decrease was 1.3%, wiping out modest gains from January. The downturn of the industry could deepen if US tariffs are implemented, further hurting Hungary's export-driven manufacturers already grappling with weak external demand.

Output fell across all manufacturing subsectors, with particularly sharp drops in automotive production and electrical equipment. Even more resilient segments such as electronics and food processing, registered declines, according to preliminary data from the Central Statistical Office (KSH) on 4 April, with detailed data due out on Friday, April 11.

The figures came in worse than expected, even undershooting ING Bank's downbeat forecast. Peter Virovacz, senior economist at ING, noted that industrial output is now 7.1% below the average monthly level of 2021, adding that the prolonged slump could soon prompt manufacturers to abandon labour hoarding strategies due to cost pressures.

"A third consecutive year of industrial malaise seems increasingly likely," he said, warning that Hungary's export outlook is deteriorating amid rising global trade tensions. January's tentative rebound proved short-lived, and February's sharp fall has darkened prospects for first-quarter GDP.

 

 

Battery production, a strategic focus of recent industrial policy, collapsed by 46% in February, further highlighting the sector's fragility.

Erste Bank chief economist Janos Nagy said the data suggest "a discouraging start to the year" and warned that massive new US tariffs could weigh further on output and investment, especially if they trigger a broader trade war.

Although Germany's recent cyclical improvement could lend some support to Hungarian manufacturers in the medium term, Nagy cautioned that the benefits of any planned capacity expansions in Hungary are unlikely to materialise before 2026.

Analysts said Hungary could face more pain due to the tariffs. In a fresh report, the Vienna Institute for International Economic Studies (wiiw) warned that Budapest stands to be one of the biggest losers among EU countries.

In the meantime, Bence Pinter, the independent mayor of Gyor, warned that the new tariffs could drastically cut US-bound sales of Audi models produced in the city, home to the world's largest engine plant and 12,000 automotive jobs. In an open letter, he urged Foreign Minister Péter Szijjártó, a former Gyor city councillor, to leverage Hungary's ties with Washington and secure either tariff relief or economic compensation.

Hungary's Economic Development Ministry (NGM) blamed the slump on external factors, citing the EU's competitiveness challenges and Germany's protracted recession. In addition to the recovery of external markets, big investments by CATL, BYD, BMW, SEMCORP and EcoPro in the pipeline could give new impetus to Hungary's industrial sector, the ministry said.