Economic growth is expected to be modest this year, with consumer spending continuing to fuel expansion

Inflation

With regard to the external environment, the European Central Bank forecasts that inflation in the euro area will accelerate this year, followed by a correction next year, meaning that inflation could reach the 2% target in Q4 2027. They expect the consumer price index to be 2.6% this year and 2.0% next year. At its March 2026 interest rate meeting, the ECB left the refinancing rate unchanged, meaning it currently stands at 2.15%.

The price of Brent crude oil showed significant volatility following the outbreak of the conflict in Iran: futures prices rose sharply in the short term, and long-term contracts have now also begun to rise. In our forecast, we anticipate a Brent crude oil price exceeding USD 70 per barrel, a conservative estimate. If the conflict ends in the first half of the year and the Strait of Hormuz is reopened following the ceasefire, futures prices will likely move lower. At the same time, it is important to note that future trends in oil prices and supply will be significantly influenced by the extent to which oil production capacity is damaged during the conflict, as well as by the terms on which the parties manage to reach an agreement. The more severe the damage to the production and shipping infrastructure, and the later the armed conflict is resolved, the longer it will take to restore shipping routes. Loss of supply is driving up global oil and natural gas prices, which are quickly reflected in the prices of goods and services, putting pressure on the global economy and thereby increasing inflation worldwide. The resumption of traffic may also depend on whether the agreement ending the war includes provisions guaranteeing full freedom of navigation. In an unfavourable scenario, partial traffic restrictions could remain in place for a long time, or goods could become subject to customs duties, which would also affect energy prices. Following the announcement of the ceasefire on 8 April 2026, the price of Brent crude oil immediately dropped by nearly USD 15 to USD 94.4. For more optimistic scenarios and the emergence of more favorable oil prices, sustained positive geopolitical news regarding this conflict could fuel the momentum.

In Hungary, consumer prices rose by an average of 2.1% in January and 1.4% in February, bringing inflation to an 8-year low in the former case and a nearly 10-year low in the latter. The favorable inflation data are mainly attributable to the high base effect, the introduction and extension of price margin limits and the significant appreciation of the forint. It is also important to note that falling fuel prices, lower global food prices and moderate price changes in market services also played a decisive role in decelerating inflation. However, the outbreak of the conflict in Iran has pushed inflation expectations higher: while the global rise in fuel prices has less of a direct impact on inflation in Hungary due to the introduction of price caps, it indirectly feeds into inflation through higher transportation costs, rising food and fertiliser prices, and the weakening of the forint.

It is expected that both margin caps and price caps on fuel will be phased out in May, so we have factored this into our forecast. The phasing out of fuel price caps and profit margin limits is expected to trigger a spike in inflation, so we can expect the rate of inflation to accelerate steadily starting in the middle of the year. We expect consumer prices to rise by 3.6% in 2026. Due to this year’s low base, inflation in Q1 2027 may also exceed the central bank’s target range, after which it could slow to around 3% by the end of the year, meaning consumer prices could rise by 3.8% next year.

On 25 February, following a wait of one and a half years, the Hungarian National Bank cut the base rate by 25 basis points and then, in March, kept it unchanged in response to international developments, meaning that it currently stands at 6.25%. It is difficult to predict the likely interest rate trend in the current geopolitical and global economic environment; however, given the current market conditions and factors, we expect a moderate reduction in interest rates over the next two years: We expect the base rate to remain unchanged in 2026, given that the MNB holds the interest rate at a significantly higher level than major central banks around the world and other central banks in the region, and we anticipate three cuts by 25 basis points each in 2027.

GDP

Seasonally and calendar-adjusted and balanced data show that Q4 2025 GDP was 0.6% higher on an annual basis and 0.2% on a quarterly basis. In 2025, based on data calculated in a similar manner, GDP volume increased by 0.3%. We expect that the Hungarian economy will expand by 1.5% in 2026 and 2.6% in 2027.

Like last year, consumption will once again be the main source of growth for the Hungarian economy this year. Our calculations indicate that consumption may increase by 3.1% this year and 1.9% next year. Consumption growth is supported by the minimum wage increase, the housing assistance programme for public sector employees, the 13^th and, gradually, the 14^th monthly pension payments, and the one-time combat bonus. However, the main driving force remains the expected rise in real wages this year and next. Despite these positive factors, we expect growth to be slower than in the past due to uncertainties caused by geopolitical risks and the global economic environment.

Investment growth will likely be driven primarily by residential housing developments. Due to the lack of business confidence stemming from weak external demand, as well as uncertainties surrounding energy sources, companies are likely to adopt a wait-and-see approach. Corporate investment is likely to pick up in the second half of the year, so we have revised downwards our investment forecasts from our previous projections: we now expect investment to rise by 3.0% this year and 5.8% next year.

With regard to the external environment, we continue to assume that the euro area’s output gap is negative, which implies that export demand will remain subdued and will not close until the end of the forecast horizon (the second half of 2027). At the same time, Hungary’s exports are expected to grow by a modest 2.1% this year, followed by a 4.6% increase next year. With weaker exports and dynamic consumption growth, imports could rise by 3.5% this year, followed by a further increase of 4.7% next year. Net exports are expected to have a negative impact on growth this year; a positive contribution is most likely to be seen starting in the second half of 2027.

Labour market

In Q4 2025, the employment rate was 65.0% and the unemployment rate was 4.4%, meaning that both figures were the same as those recorded in Q4 2024.

The trends behind the main figures have been stable over the past two years, as economic activity and the employment rate remained at high levels between 2024 and 2025 (the two-year average for the former was 68.2%, and the latter 65.1%), fluctuating by 0.1 to 0.2 percentage points in all eight quarters, depending on seasonal and other one-off effects. Unemployment averaged 4.5% over the past two years, a rate considered economically healthy and low even by EU standards.

The decline of the economically active population is a recurring issue every quarter, but a closer look at the data reveals that the working-age population has declined faster than usual in the last period, which is a characteristic feature of the age structure, as is the case in other developed countries.

By the time we completed our analysis, the Central Statistical Office had also released its labour market data for February 2026, which showed an unemployment rate of 4.8%, slightly higher than previous figures. We believe that this is mainly attributable to developments in the manufacturing and construction sectors, and we took all of this into account when preparing our forecast.

In addition to economic and labour market indicators, our forecast also takes into account strategic changes aimed at sustainable labour market growth: the government’s goal is for the activity rate of the 15–64 age group in Hungary to reach 85% by 2030 (it stood at 78.6% in 2024). This requires helping current jobseekers into the labour market, as well as identifying the potential labour reserves in the inactive population and helping them into work through the right labour market action plan. We expect unemployment to slightly increase and then start to decline over the next two years (4.6% in 2026, 3.9% in 2027), while we project that gross wages will rise by 6.5% in 2026 and 6% in 2027.

Government budget

In fiscal year 2025, the central government’s finances are on a stable but tight path, despite the fact that revenues from EU programmes fell short of expectations. The government debt-to-GDP ratio rose from 73.5% in 2024 to 74.6% by the end of 2025, reflecting a moderate increase in the deficit and financing needs. The 2026 budget shows strong spending pressure due to the minimum wage increase, public sector wage increases, the 13^th and 14^th monthly pensions, and housing support policies. At the same time, data from the beginning of the year suggest that tax and contribution revenues are likely to be higher than a year ago, which will ease the pressure on the expenditure side. Government debt could rise further to 75.3% in 2026 and then fall to 74.4% in 2027.

Forecasts for 2026 indicate that the primary budget deficit will widen to 1.3% of GDP. At the same time, interest expenditure as a share of GDP is expected to moderate to around 4.0%. The combined effect of these two factors could result in a general government deficit of 5.3% of GDP, representing a temporary increase from 4.8% in 2025. In 2027, the primary budget deficit could fall to 0.6% of GDP. Interest expenditure as a percentage of GDP is expected to decline further (to 3.6%), thereby improving the general government deficit to 4.2% of GDP.

Table: Forecast of Századvég Konjunktúrakutató

Remark: The base rate of the central bank applies to the last quarter of the year.