Hungary: Economy rebounds in Q4 but remains lackluster
GDP reading: According to a preliminary estimate, economic activity rebounded, increasing 0.4% year on year in the fourth quarter, above the 0.8% contraction seen in the third quarter. On a seasonally adjusted quarter-on-quarter basis, economic activity also bounced back, growing 0.5% in Q4 (Q3: -0.6% qoq s.a.). In 2024 as a whole, GDP posted a shallow increase of 0.5% year on year (2023: -0.9% yoy).
Drivers: Preliminary data suggests that Q4’s rebound was thanks to the services sector. Less positively, the agriculture, industry and construction sectors deteriorated in the final quarter of 2024. Adverse weather and a high base weighed on agricultural production; weak external demand capped industrial momentum; and fiscal austerity likely hindered activity in the construction sector.
A detailed breakdown will be released on 4 March.
GDP outlook: Looking ahead, the economy is set to continue its gradual recovery through the end of 2025, backed by rebounds in public spending, fixed investment and exports. That said, full-year GDP growth will likely fall short of the government’s estimate as a persistently weak German economy and U.S. protectionism cap momentum in the EU. A protracted freeze on EU funds and higher-than-expected U.S. tariffs pose downside risks.
Panelist insight: ING’s Peter Virovacz and Kinga Havasi commented on the outlook:
“The Hungarian economy would have to grow at an average quarter-on-quarter rate of 1.3-1.4% over the course of 2025 to reach the government’s official GDP growth forecast of 3.4%. This is not at all unrealistic, nor does it seem impossible, as the Hungarian economy was able to do so in the years immediately preceding the Covid crisis and in the recovery phases following it. Saying that, fiscal and monetary policies were much more supportive in those years, and that is not the case today. External demand is also much weaker than it was back then, and consumer and business confidence is more fragile and has tended to weaken in recent months. In such an economic environment, we maintain our previous forecast of GDP growth of around 2.0% in 2025.”