Hungary: Recovery on the horizon, yet uncertainty remains

Following another stagnant year, we expect Hungary’s economy to grow by 2% in 2026, supported by improving external demand on the back of the EU–US trade agreement and Germany’s anticipated recovery. These factors may boost exports and investment; however, lingering uncertainties and weak carry-over effects temper the outlook. Household consumption is expected to remain a positive contributor, driven by rising real wages and pre-election fiscal easing. Inflation dynamics have improved somewhat, supported by declining producer prices and a stronger forint, while price cap measures have exerted a notable disinflationary impact. Nevertheless, underlying inflationary pressures remain elevated, as reflected in persistent market services inflation and high inflation expectations.

espite policy easing by major central banks, the MNB has maintained a stability-oriented stance, with rate cuts likely only in late 2026 to ensure sustainable disinflation through positive real rates and a stable, strong forint. Currency stability has become a key priority, given the strengthened pass-through of exchange rate movements to consumer prices. Positive carry dynamics continue to support the forint, which appreciated significantly in 2025 and is expected to remain firm throughout 2026. As parliamentary elections approach, short-term fiscal risks have increased, reflected in rising yields and widening spreads. Long-term yields are likely to remain elevated amid higher major bond yields and uncertainties surrounding fiscal consolidation.

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