After a prolonged downturn, the Hungarian economy appears to be approaching a turning point. Following three and a half years of stagnation, growth resumed in the first quarter of this year. ING Bank forecasts GDP growth of 1.5% for the full year. This initial recovery is being driven primarily by private consumption, chief analyst Péter Virovácz explained at a press conference in Budapest.
The expert painted an even more optimistic picture for the coming year. Growth is expected to be based on a broader and more balanced foundation, as other sectors of the economy are likely to pick up alongside consumer spending. For 2027, ING Bank forecasts GDP growth of 2.6%.
The analyst also sees positive signs on the inflation front.
The average inflation rate for the current year is estimated at 2.3%.
Next year, inflation is expected to rise again to 3.8% due to cyclical factors before settling at 3.1% by 2028. At the same time, Péter Virovácz considered the Hungarian National Bank’s (MNB – central bank) latest inflation target to be somewhat too ambitious.
Despite the MNB’s already initiated cycle of interest rate cuts, ING Bank forecasts a stable external value for the national currency. The forint exchange rate is expected to fluctuate within a range of 350–360 forints per euro by the end of the year. At the same time, interest rates are likely to continue falling:
- End of this year: Key interest rate to drop to 5.25%
- Next year: Another cut to 5.0%
- By 2028: Stabilization at 4.0%
Virovácz described the country’s fiscal situation as “not hopeless,” even though the new government is facing a difficult budgetary starting point.
A budget deficit of six percent of GDP is expected for the current year.
However, due to declining interest expenses, the analyst believes an improvement of 1.5 to 2 percentage points is feasible in the coming years, making a deficit of less than three percent by 2030 a realistic prospect.
Via MTI, Featured image: Pixabay
