Hungary: Despite global headwinds, cautious optimism remained warranted

Erste Bank Research Team Erste Bank

Economic growth regained momentum in 2026, with GDP expanding by 1.7% y/y in both the first and second quarters. The prolonged conflict in the Middle East, the re-emergence of trade tensions, the expected significant drought-related losses, and the summer energy crisis pose risks to the outlook for the second half of the year. However, improving business and consumer confidence indicators suggest that the growth turnaround is likely to be sustained. Following the projected 1.7% GDP growth in 2026, the economy could expand by a further 2.2% in 2027.

Inflation moderated significantly this year. In addition to administrative price controls, the stronger forint played a significant role in the disinflation process, supporting continued price moderation, particularly in tradable goods and food products. Over the coming months, inflation is to gradually rise, and the twelve-month inflation rate is projected to rise slightly above 2% by December. Wage pressures, higher energy prices, and a possible reversal in the food price cycle represent the key risks to medium-term price developments.

Between June and August, the MNB delivered a total of 75 basis points of rate cuts, bringing the policy rate down from 6.25% to 5.50%. We maintain our year-end policy rate forecast of 5%, although upside risks to the interest rate trajectory have increased.

As geopolitical tensions have intensified again, developments in energy prices, particularly natural gas prices, remain the key determinant of the forint's performance. Beyond geopolitics, the evolution of Hungary's euro adoption strategy will remain a key driver, and markets are likely to welcome signs of stronger commitment on this front.

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Erste Bank Research Team

Erste Bank

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