Hungary’s economic fortunes hang in the balance as growth and inflation forecasts collude. Analysts predict that household consumption will remain the key driver of economic growth in 2025. They lowered their growth projection for this year from 0.8% to 0.5%. While the country has faced all of the above-mentioned challenges, the forint has added 5% this year, supported by strong carry trade dynamics.
The strengthening of the forint indicates an appreciation of the currency that has played a role in making risks to inflation more balanced. In August, headline inflation was recorded at 4.3% y/y and core inflation subsided marginally to 3.9%. These numbers are a good sign of moderation in price pressures, allowing policymakers to look at less aggressive monetary policy tightening.
Looking ahead, the European Central Bank’s (ECB) decisions will play a crucial role in shaping Hungary’s economic trajectory. Plus, expected rate cuts in 2026 are now expected to be less severe than previously thought. This shows a return to a more cautious environment for monetary easing. A very cautious rate cut seems well-justified by year-end, though this could get pushed as late as Q1 2026.
Hungary’s investment activity is expected to hit rock bottom this year, which will likely carry over to the economy’s overall performance. Even with those encumbrances, GDP is projected to increase 2.3 percent in 2026. This increase is indicative of a continued recovery driven by rising household demand.
The Federal Reserve’s recent acceleration of rate cut expectations have exacerbated this trend filling Hungary’s coffers. As global interest rates inevitably continue to rise, the forint’s strength will only bolster further domestic inflationary pressures. Get the full picture The forecast sees the annual average inflation rate in 2025 at 4.7%. That means that inflation remains a worry that needs to be handled with caution.