Hungary’s economy is stumbling at a critical time for Prime Minister Viktor Orbán.
Inflation is creeping back, wages are struggling to keep up with rising prices, and the national currency is weakening.
Consumer confidence has taken a hit, and economists are skeptical about the government’s ambitious growth forecasts.
With elections on the horizon in 2026 and a strong opposition emerging, Orbán is betting big on state spending and investment deals to turn things around.
Hungary is starting to grow, but not fast enough
Officially, Hungary is out of recession for now. The economy shrank for most of 2023, but by late 2024, growth had returned, but only just barely.
The European Commission estimates GDP growth at 0.6% for 2024, with forecasts of 1.8% in 2025 and 3.1% in 2026.
The problem is that these numbers are far below what Orbán needs.
His government had projected 3.4% growth in 2025, but most economists now see it closer to 2%.
Erste Bank, one of Hungary’s most reliable forecasters, puts it even lower.
Hungary relies heavily on exports, mainly to Germany. But Germany’s industrial sector is in decline, which means fewer orders for Hungarian manufacturers.
This is a serious problem because the country’s economic model depends on its factories—especially its automotive sector—remaining competitive.
Orbán is banking on new investments from BMW and China’s BYD to boost production, but these won’t have an immediate impact.
If Europe slows further, these projects could face delays.
Inflation is falling, but prices are still too high
Hungary had the worst inflation in the EU after Russia invaded Ukraine.
At its peak in early 2023, it was above 25%.
It has since dropped to around 3.2%, but the damage has been done. Real wages took a hit, and even as incomes recovered, many Hungarians now feel even poorer.
The Central Bank has warned that inflation risks are rising again.
The forint is weak, hovering near two-year lows against the euro. This makes imports more expensive, adding to food and consumer goods costs.
The government is trying to ease the pressure by raising pensions, increasing family tax benefits, and offering subsidies for home purchases.
But these measures come with risks, as increased government spending could further strain the budget deficit, already above EU limits, and trigger a negative market reaction that weakens the forint even more.
Election spending could backfire
Orbán has used government spending as a political tool before.
According to a Reuters report, ahead of the 2022 election, he launched a $5.35 billion spending package, handing out tax rebates, pension bonuses, and wage hikes. It worked as he won by a landslide.
But it also fuelled inflation, which spiraled out of control.
Now, history could repeat itself. His government is preparing a fresh wave of spending in 2025, aiming to boost growth and regain public support.
Tax breaks, housing incentives, and business subsidies are all on the table.
The problem is that Hungary’s budget deficit is already high, well above EU limits.
Credit rating agencies have warned that Hungary could face a downgrade if public finances weaken further.
Investors are watching closely.
If markets lose confidence, the forint could fall further, making inflation worse.
The political wildcard: Orbán faces real competition
For the first time in over a decade, Orbán’s grip on power looks shaky.
Peter Magyar, a former Fidesz insider turned opposition leader, has shaken up Hungarian politics.
In some surveys, his Tisza Party is polling ahead of Fidesz, and dissatisfaction with the economy is fueling his rise.
A January 2025 EU survey found that nearly 40% of Hungarians expect their finances to worsen this year.
That’s a troubling number for a government that has built its success on economic stability. Magyar is capitalizing on this frustration, positioning himself as a fresh alternative to Orbán’s 15-year rule.
If economic conditions don’t improve, Fidesz could face a real fight in 2026.
Orbán’s economic strategy has always been a mix of pragmatism and political calculation.
He has secured major foreign investments, maintained strong control over public messaging, and used state spending to keep voters onside. But Hungary’s challenges are bigger than media spin.
The economy is growing, but not fast enough. Inflation has slowed, but people still feel the effects.
The government is spending to boost confidence, but this risks worsening the deficit.
And for the first time, a real political challenger has emerged.
Orbán has two years to convince Hungarians that his economic vision still works.
If growth picks up, he may weather the storm. If it doesn’t, his long-standing political dominance could be at risk.
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