THE MACROSCOPE REPORT HUNGARIAN ECONOMIC OVERVIEW Q3 2024
HUNGARY OUT OF RECESSION, BUT STRONGER GROWTH NOT EXPECTED UNTIL 2025
Having reached the mid-way point of the year, this is an excellent time to look back at how 2024 has progressed through H1 and how it might continue to do so into H2 and beyond to 2025. Hungary’s Economic recovery started in the first quarter of 2024. For now, it is driven by household consumption growth and a positive balance of the trade of goods and services. The global trend of ailing manufacturing while the service sector is doing okay is also the main characteristic of the Hungarian economy. Not only is industry doing poorly, but investment activity is also subdued. The picture for the rest of the year may only marginally improve. The negative cycle in manufacturing is expected to turn around only slowly towards the end of 2024, with 2025 a more promising year. For 2024, GDP growth is expected at 2.2%, rising to 3.4% in 2025. The previous labor market problem of scarce available workers will resurface in 2025. The external balance is turning into a surprisingly large surplus, primarily driven by improving net exports, while the fiscal side is more challenging. The EU’s Excessive Deficit Procedure will start soon, and the Hungarian Government needs to find how to deliver a credible and sustainable fiscal adjustment. If that is secured and the still frozen EU funds are successfully unblocked, a rating upgrade will likely follow. However, for now, the chances seem rather slim for this scenario. Inflation moderated below 4% at the beginning of 2024, but no further decrease is expected for the remainder of the year. Indeed, the contrary is the more likely case. Average inflation is seen at around 4% for 2024, dipping marginally lower in 2025. The EUR/HUF exchange rate is expected 1