Hungarian GDP grew by 4.6% in 2022, while we forecast economic output to grow by 1.1% in 2023, 4.3% in 2024, 3.8% in 2025 and 3.6% in 2026. Our forecast is subject to downside risks such as shrinking retail sales, declining industrial sales orders and a drop in investment due to the current high interest rate environment.

In the global context, a key factor is the negative impact of the sanctions measures imposed as a result of the Russia-Ukraine war, which are affecting gas supplies and making fuel procurement more difficult. In addition, gasoline supply and prices could be negatively affected by OPEC’s decision to cut oil production by the end of 2023.

On the positive side, we have seen a recent decline in energy commodity prices, but uncertainties remain about future price developments.

At the same time, inflation in the European Union and the euro area has risen at a slower rate in recent months. These factors could reduce external inflationary pressures in Hungary. In terms of domestic inflationary developments, inflation is likely to peak in Q1 2023, from which point it could moderate. Therefore, by the end of the year, inflation could reach a level below 10%, estimated at 18.6% on an annual basis. Between 2024 and 2026, inflation is projected at 5.1%, 3.1% and 2.7% respectively.

At its latest interest rate meeting in May, the Magyar Nemzeti Bank also cut the interest rate paid on the required reserve, the interest rate on the O/N collateralised credit facility and the overnight deposit quick tender rate by 100 basis points. The central bank is likely to continue cutting interest rates in the coming months, with the policy rate expected to fall to the base rate by Q4 2023.

Looking at economic trends, we expect the economy to expand at a moderate 1.1% this year. In the early part of the year, a contracting domestic market demand may hold back much of economic expansion, while net exports continue to make a positive contribution to growth. The high inflationary environment and presumably declining real wages could lead to a fall in household consumption, but as inflation moderates towards the end of the year, we expect consumption to rise. We also expect similar trends in investment, which may also be subdued at the start of the year due to the uncertain economic outlook and the high interest rate environment. In the second half of the year, the slowdown in investment may be tempered by the focus on energy modernisation projects and the start of state-funded military developments. Taking these effects into account, we expect domestic market demand to contract by 2.2% in 2023. With inflation and interest rates moderating, domestic demand is forecast to grow by 4.6% in 2024, followed by increases of 3.3% and 3.6% in 2025 and 2026 respectively.

We forecast a moderate increase in government spending at the beginning of this year, reflecting the fiscal adjustment announced at the end of last year. On an annual basis, government spending growth could reach 1.5% in 2023, 2.1% in 2024, 1.9% in 2025 and 2% in 2026.

In 2023, we expect the ESA general government deficit to reach 3.9% of GDP and the cash deficit to reach 4.3% of GDP, in line with government plans. We expect higher pension expenditure than in the revised budget, but we assess the annual deficit target as sustainable, provided that budgetary reserves are kept. However, VAT receipts and interest expenditure show additional risks which, if they materialise, could push the budget deficit above the statutory target without corrective measures. We forecast that by the end of the year, gross government debt as a share of GDP will fall to 68.5%.

Our deficit forecast of 3.3%, which is higher than in the draft bill for the 2024 budget, is because the draft budget submitted to Parliament does not include the expenditure related to the MNB’s loss compensation. The State Audit Office of Hungary estimated that the share of the MNB’s expected losses in 2023 to be covered by the 2024 budget year will amount to HUF 430 billion.

Domestic exports grew dynamically in Q1 2023.

Even with external demand continuing to expand, we forecast Hungarian exports to grow by 2.5%, given the high base of the previous year and the persistence of global risks.

In line with the economic growth of external trading partners, export volumes could increase by 6.9% in 2024, 13.7% in 2025 and 11.8% in 2026.

Imports showed lower growth in Q1. Domestic demand is certainly a key driver for imports, so we expect a steady increase in imports as the end of the year draws near. Overall, we expect Hungarian imports to grow by -0.5% in 2023, 6.8% in 2024, 13.1% in 2025 and 11.7% in 2026.


2023 2024 2025


Gross domestic product (volume index)


1.1 4.3 3.8


Internal market demand (volume index)


-2.2 4.6 3.3


Export volume index (based on national accounts)


2.5 6.9 13.7


Import volume index (based on national accounts)


-0.5 6.8 13.1


Balance of international trade in goods (EUR billion)


-3.7 -3.7 -3.7


Consumer price index (%)


18.6 5.1 3.1


Central bank base interest rate at the end of the period (%)


11.7 6.6 3.0


Unemployment rate (%)


4.3 4.6 3.6


Current account balance as a percentage of GDP


-4.1 -3.3 -2.7


Net lending as a percentage of the GDP


-2.1 -1.3 -0.9


ESA balance of public finances as a percentage of GDP


-3.9 -3.3 -1.5


Government debt to GDP ratio


68.2 67.1 64.3