Hungary: Wage surge masks softening labour outlook – ING

ING economists Peter Virovacz and Zoltán Homolya note that Hungary’s January wage data are heavily distorted by a one-off bonus to military and law enforcement staff, leaving underlying wage growth much lower than the headline figure. They highlight strong real wage gains and retail sales, but warn that higher labour costs and weaker growth could trigger job cuts and weigh on Hungary’s growth outlook.

One-off bonus inflates Hungary wage data

"At first glance, this may seem surprising. However, the headline year‑on‑year increase of 26.3% in January 2026 is heavily distorted by a one‑off, six‑month salary bonus (“firearms money”) paid to military and law enforcement staff. Stripping out this effect, underlying wage growth is closer to 8.3%."

"The bonus is expected to lift average annual wage growth by around 1.5ppt in 2026. On a monthly basis, net wages rose faster than gross wages, mainly reflecting changes to family allowances and tax benefits for mothers introduced at the start of January."

"As the average wage was more distorted than usual in January this year, changes in the median wage are particularly important. As expected, the increase in the median wage corresponded to the 11% increase in the minimum wage. This clearly indicates that the minimum wage increase caused wage compression in the lower income brackets, a situation that companies sought to address."

"All of these figures are consistent with the data we have already seen for this year. Retail sales began the year with unexpectedly strong growth, fuelled by a combination of one-off benefits, tax changes, and increased real purchasing power. Recent statistics clearly indicate mounting wage pressure on the corporate side."

"The biggest question is how companies will respond to cost shocks caused by the war in the Middle East, rising labour costs, and weaker expected economic growth. Given the significant deterioration in the outlook, passing on wage costs may become more difficult. Consequently, we increasingly expect companies to respond with significant workforce reductions, which would pose a further negative risk to Hungary's already gloomy growth outlook."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)