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Economic and political overview

Economic Overview

Resuming the trends observed in recent years, Hungary's GDP rebounded sharply after the softening of the COVID-19 pandemic. Nevertheless, the country’s economy contracted for four consecutive quarters from mid-2022 to mid-2023 due to high inflation, tighter fiscal and monetary policies and sluggish external demand. Hungary entered a technical recession once again in Q3 2024. Consumption grew steadily due to a resilient labour market, high wage increases, and monetary policy accommodation. However, investment remained weak amid postponed public projects and declining business sentiment. Exports were hampered by subdued demand from trading partners, particularly for machinery and transport equipment. For the year as a whole, growth was estimated at 0.6% by the EU Commission, with a projection of 1.8% in 2025 and 3.1% in 2026, driven by strong consumption supported by real income growth and a declining household saving rate. Investment growth may face challenges due to uncertainties in the automotive sector. Exports are expected to rise gradually, boosted by foreign investment in manufacturing, while recovering domestic demand is likely to increase imports and narrow the current account surplus.

Hungary's budget deficit fell from 6.7% of GDP in 2023 to 5.4% in 2024, driven by reduced utility subsidies, postponed public investments, and a moderate tax revenue rebound. The net cost of energy price mitigation dropped from 1.6% to 0.9% of GDP. The deficit is expected to narrow further to 4.6% in 2025 and 4.1% in 2026. Fiscal policy is projected to be expansionary, with subdued primary expenditure growth and declining interest costs. Capital spending is set to rise gradually, while the phasing out of windfall taxes may reduce revenue by 0.6 pps. of GDP in 2025. Hungary's debt-to-GDP ratio reached 74.5% in 2024, driven by a high budget deficit and the Budapest airport purchase. It is expected to stay at 74.5% in 2025 before declining to 73.8% in 2026, supported by strong nominal GDP growth. HICP inflation fell from 17.0% in 2023 to 3.0% in September 2024, as the effects of previous energy and food price hikes and supply chain issues eased. However, inflation excluding energy and food remained high at 5.6%, driven by past inflation impacts on services, strong wage growth, rising consumer demand, and currency depreciation. Underlying inflation is expected to gradually slow as commodity prices and wage growth decrease. HICP inflation is forecast to decline from 3.8% in 2024 to 3.6% in 2025 and 3.2% in 2026 (data EU Commission).

The unemployment rate rose to 4.4% in 2024, up from 4.1% the previous year (IMF). As the economy recovers, labour demand is expected to rise, leading to a gradual decline in the unemployment rate. While the labour market will tighten, nominal wage growth is projected to ease in 2025 and 2026 as the impact of past minimum wage increases fades. Overall, GDP per capita in Hungary was estimated at USD 49,150 in 2024, still below the EU average (USD 62,660 – IMF), while 20% of the population was at risk of poverty or social exclusion as of 2023 (HCSO, latest data available).

 
Main Indicators 2023 (E)2024 (E)2025 (E)2026 (E)2027 (E)
GDP (billions USD) 212.46228.81245.62260.72275.76
GDP (Constant Prices, Annual % Change) -0.91.52.93.03.0
GDP per Capita (USD) 22,13223,88125,70327,35129,000
General Government Balance (in % of GDP) -6.4-4.3-4.2-3.3-2.9
General Government Gross Debt (in % of GDP) 73.573.573.673.071.9
Inflation Rate (%) 17.13.83.53.13.0
Unemployment Rate (% of the Labour Force) 4.14.44.24.14.0
Current Account (billions USD) 0.413.551.521.252.02
Current Account (in % of GDP) 0.21.60.60.50.7

Source: IMF – World Economic Outlook Database , October 2021

Country Risk

See the country risk analysis provided by La Coface.

 

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Main Sectors of Industry

The agricultural sector, which used to be the dominant force in the Hungarian economy for many years, now represents 2.5% of the GDP and employs 6% of the working population (World Bank, latest data available). The country has an agricultural area of 5,278k ha, around 56.7% of its territory (FAO). Cereals, fruits, maize, vegetables and wine are the main crops. More specifically, major crops include wheat (1 million ha), corn (1 million ha), and oilseeds (1 million ha) - mostly sunflower and rapeseed (0.9 million ha). According to the first 2024 estimates from the Hungarian Statistical Office, the total output of agriculture exceeded BGN 4 thousand billion, 8% lower than the previous year. This decline was due to a 4.4% decrease in production volume and a 3.8% drop in price levels. Crop production was 11% lower and livestock production 4.9% higher than in 2023.

Industry accounts for 22.7% of the country's GDP and employs 30% of the working population. Hungarian industry is very open to foreign investment, with manufacturing almost consistently ranking top receiver of foreign direct investment. The automotive and electronics sectors are the two main industrial sectors, and the manufacturing sector alone accounts for around 17% of the country’s GDP. The electronics industry is one of the largest industrial sectors in Hungary, accounting for one-fifth of total manufacturing production. According to the latest figures by the Hungarian Central Statistical Office, in 2024 the volume of industrial production was 4.0% below the 2023 level.

The services sector contributes 62.5% of GDP and employs almost 65% of the labour force. Trade, tourism and finance account for the largest share of activity and employment within the tertiary sector. In recent years the added value produced by the ICT sector increased by more than one-fifth, to USD 20 billion, with the digital economy currently making up more than 20% of Hungary's overall gross value added. In 2024, compared to the previous year and adjusted for calendar effects, the volume of retail trade increased by 2.6%. Sales grew by 3.7% in specialized and non-specialized food shops, 2.4% in non-food retail trade, while automotive fuel retail trade saw a slight decline of 0.1% (data HSO). Concerning the tourism sector, in 2024, there were 5.8% more tourism nights at tourist accommodation establishments than in the previous year (44.2 million tourism nights). The banking sector consists of 39 institutions: 17 commercial banks, 11 specialised credit institutions (mortgage banks, building societies, development and trade finance banks), 9 foreign bank branches and 2 guarantee institutions (European Banking Federation).

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 4.4 31.2 64.4
Value Added (in % of GDP) 4.7 24.3 57.6
Value Added (Annual % Change) 68.7 -5.2 -0.5

Source: World Bank - Latest available data.

 
Monetary Indicators 20162017201820192020
Hungarian Forint (HUF) - Average Annual Exchange Rate For 1 USD 281.52274.43270.21290.70308.00

Source: World Bank - Latest available data.

 

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Foreign Trade

Hungary's economy is very open, with trade accounting for about 157% of GDP (World Bank, latest data available). Cars and the spare parts industry account for the highest share of exports and imports. In the period Jan-Nov 2024, the main exported products were road vehicles (16.7%), electrical machinery, apparatus and appliances (16%), power generating machinery and equipment (6.7%), medical and pharmaceutical products (6.6%), telecommunications and sound recording and reproducing apparatus and equipment (6.5%), and office machines and automatic data processing machines (4.6%); while imports were led by electrical machinery, apparatus and appliances (14.4%), road vehicles (9.9%), medical and pharmaceutical products (5.3%), general industrial machinery and equipment (5.2% - data Hungarian Central Statistical Office).

According to data from the Hungarian Central Statistical Office, Germany was the main export destination in Jan-Nov 2024 (25.2% of the total), followed by Romania (5.4%), Poland (5.3%), Italy (5.2%), and Slovakia (5%);  whereas imports came chiefly from Germany (23%), China (6.7%), Poland (6.2%), Austria (6%), Slovakia (5.9%), and Czech Republic (5.4%). Overall, Europe accounted for 88.3% of total exports and 80.5% of imports.

Hungary's trade balance, which was traditionally in deficit, started posting surpluses in the last decade owing in particular to the good performance of the German economy. In 2023, however, the country’s trade balance was estimated to be negative by 5.1% of GDP by the World Bank. In the same year, exports of goods stood at USD 160.9 billion against USD 155.9 billion in imports (+6.1% and -5.5% year-on-year, respectively). As per services, exports reached USD 34.7 billion (+12.9%) vis-à-vis USD 24.1 billion in imports (+8%). The latest data published by the Central Statistical Office (KSH) shows that from January to November 2024, Hungary's trade surplus amounted to EUR 11.1 billion. Exports during this period declined by 3.8% to EUR 133.9 billion, while imports fell by 5.6% to EUR 122.8 billion. Hungary’s terms of trade improved by 0.8%, with the forint weakening by 3.2% against the euro and 2.8% against the U.S. dollar.   

 
Foreign Trade Values 20192020202120222023
Imports of Goods (million USD) 120,590116,020142,917165,136155,966
Exports of Goods (million USD) 123,796120,654141,830151,672160,955
Imports of Services (million USD) 22,21918,11721,28722,32224,119
Exports of Services (million USD) 30,15522,68926,90630,74434,707

Source: World Trade Organisation (WTO) ; Latest available data

Foreign Trade Indicators 20192020202120222023
Foreign Trade (in % of GDP) 160.8155.4159.7185.3157.3
Trade Balance (million USD) -4,259-1,565-5,287-15,96578
Trade Balance (Including Service) (million USD) 3,6883,029332-8,28210,642
Imports of Goods and Services (Annual % Change) 8.2-3.97.310.8-4.3
Exports of Goods and Services (Annual % Change) 5.4-6.18.311.40.9
Imports of Goods and Services (in % of GDP) 79.276.779.794.976.1
Exports of Goods and Services (in % of GDP) 81.578.779.990.481.2

Source: World Bank ; Latest available data

Foreign Trade Forecasts 20242025 (e)2026 (e)2027 (e)2028 (e)
Volume of exports of goods and services (Annual % change) 0.04.65.65.85.9
Volume of imports of goods and services (Annual % change) -1.96.75.95.75.9

Source: IMF, World Economic Outlook ; Latest available data

Note: (e) Estimated Data

 
International Economic Cooperation
Hungary is a member of the following international economic organisations: IMF, European Union, OECD, G-9, North Atlantic Treaty Organization (NATO), ICC, Central European Initiative (CEI), WTO, among others. For the full list of economic and other international organisations in which participates Hungary click here. International organisation membership of Hungary is also outlined here.
Free Trade Agreements
The up-to-date list of Free Trade Agreements signed by Hungary can be consulted here.
 

Main Partner Countries

Main Customers
(% of Exports)		 2023
Germany 26.1%
Italy 5.8%
Romania 5.3%
Slovakia 5.0%
Poland 4.6%
See More Countries 53.2%
Main Suppliers
(% of Imports)		 2023
Germany 22.6%
China 6.6%
Austria 6.1%
Poland 5.8%
Slovakia 5.4%
See More Countries 53.5%

Source: Comtrade, Latest Available Data

 

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Political Outline

Current Political Leaders
President: Tamas SULYOK (since 5 March 2024) - Fidesz
Prime Minister: Viktor Orban (since 29 May 2010) - Fidesz
Next Election Dates
Presidential: 2027
National Assembly: April 2026
Current Political Context
For the past fourteen years, Viktor Orban and the right-wing Fidesz party have dominated Hungarian politics. The Fidesz-KDNP party won a resounding victory in the April 2022 election, securing 135 of the 199 seats. Six seats were won by the nationalist party Our Homeland, while the coalition United for Hungary took home 57 seats overall. However, its supremacy is being increasingly challenged. The opposition, led by Péter Magyar's moderate centre-right Tisza party, gained traction in large cities in the October 2024 local elections, but not as much in rural areas. Tisza presents itself as a "third political force" seeking to reestablish democratic norms and bring Hungarians together from a variety of backgrounds. Furthermore, President Katalin Novák resigned in February 2024 due to a scandal surrounding her pardon of a vice principal who had covered up child molestation accusations. On February 26, 2024, her resignation was accepted by the National Assembly. With 134 votes or 67.67% of the assembly, Tamás Sulyok, an independent candidate backed by the Fidesz–KDNP alliance, was subsequently chosen as the new president.
Hungary's relationship with the European Union remained complicated throughout 2024. Because of worries about Hungary's administration and rule of law, the EU has kept withholding certain funds. There was also disagreement about Hungary's position on EU sanctions against Russia, particularly in light of the current situation in Ukraine. These tensions were not significantly reduced by Hungary's second-half 2024 EU Council chairmanship. Relationships with its European counterparts may continue to suffer as a result of the government's present strategy, which is centred on strategic partnerships with China and Russia.
Main Political Parties
Hungary is a multi-party democracy largely divided between the conservative right and opposition. The three main parties/coalitions at the latest election were:

- Fidesz-Hungarian Civic Alliance (Fidesz): centre-right, nationalist, socially conservative, the most popular party across all legislative districts. It currently holds a majority in the National Assembly with 135 seats and has maintained control of the presidency since 2010. Furthermore, it has supported the election of every president since 2000
- United for Hungary: a big tent coalition formed by the following parties: Hungarian Socialist Party, Democratic Coalition, Movement for a Better Hungary (Jobbik), LMP – Hungary's Green Party, Dialogue for Hungary and the Momentum Movement
- Our Homeland Movement (MHM): far-right, nationalist.

Other parties include:
- Christian Democratic People’s Party (KDNP): right-wing, propagates national conservatism; acts as a sister organisation of Fidesz
- Jobbik: initially far-right and anti-EU, the party has switched to the more mainstream right political line
- Politics Can Be Different (LMP): centre, green-liberal, champions protection of the environment, supports sustainable development and aims to work against corruption
- National Self-Government of Germans in Hungary (MNOÖ): German-Hungarian interests
- Momentum Movement: centrist, liberal.
Executive Power
The President is the Chief of State and the Prime Minister is the Head of Government. The President is elected by the National Assembly for a five-year term (eligible for a second term). His role is primarily ceremonial, with limited executive power. The Prime Minister is elected by the National Assembly on the recommendation of the President. The PM holds significant executive authority, including the selection and dismissal of cabinet ministers.
The Cabinet is a Council of Ministers elected by the National Assembly on the recommendation of the President; other ministers are proposed by the Prime Minister and appointed and relieved of their duties via the presidential elections.
Legislative Power
The Hungarian Parliament is unicameral. The National Assembly is composed of 199 members elected every four years and can either initiate new legislation or approve those introduced by the Government. Out of the total, 106 members are directly elected in single-member constituencies by simple majority vote and 93 members are directly elected in a single nationwide constituency by party-list proportional representation vote.
 

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