Hungary’s Economy Stalls as Election Looms

Hungary is limping toward next year’s general election with growth stuck near zero, fragile confidence, and a worsening inflation outlook. Industry weakness, labor-cost pressures, and election-year fiscal constraints leave little room for policy error, and few signs, yet, of a self-sustaining recovery.

Third-quarter GDP posted no quarter-on-quarter growth, a negative surprise that “keeps the economy trapped in stagnation,” according to a new research note from ING Bank’s Budapest economists. The bank cut its forecasts to 0.5% growth for 2025 and 2.3% for 2026 (both down 0.2 percentage points), arguing that hopes for a quick rebound remain elusive without fuller order books and a broader revival in sentiment.

Retail sales are the lone bright spot, while agriculture, industry and construction continue to drag. After a brief July uptick, industry slipped again in August, with output 4.6% below last year and 8.2% below the 2021 monthly average; only electronics showed resilience, ING notes. Vehicle manufacturing fell sharply, and weak German orders pointed to thin export pipelines ahead.

The labor market is “tight but cooling,” with unemployment at 4.5% in the July–September period and employment at its lowest since early 2022. ING sees supply constraints biting even as demand softens after two years of stagnation. Looming double-digit minimum wage hikes in 2026 and 2027 will force difficult choices next year, potentially translating into layoffs and/or price increases, the bank adds. It expects joblessness to hover around 4.5% near-term and ease to 4.3% by end-2026.

Headline inflation has plateaued at 4.3% and remains above the central bank’s tolerance band despite renewed price-shield measures (margin freezes on food and household items, now expanded). ING has overhauled its inflation path: it sees a temporary dip to an average 2.2% in the first quarter of 2026, followed by a re-acceleration toward 5% year-over-year by late 2026 as measures roll off and firms reprice. Average inflation is now 3.6% in 2026, rising to 4.3% in 2027.

With underlying repricing pressures and stubborn inflation expectations, the National Bank of Hungary held the base rate at 6.50% for a 13th straight month in October and kept a hawkish tone. ING now projects a 6.00% base rate at end-2026, 50 bps higher than its previous call, arguing that the central bank will look through the early-2026 inflation dip to preserve positive real rates and market stability later in the horizon.

Despite weak data and political noise, the forint remains supported by positioning and carry. ING expects the EUR/HUF to range between 385–395 in 2026, with peaks around the spring election and in autumn as easing hopes resurface.