Hungary Falls into Recession Again, Economic Outlook Grows Bleaker

For the second time in two years, Hungary’s economy has slid into recession, as its gross domestic product (GDP) turned negative for two consecutive quarters. New data shows an unexpectedly sharp economic downturn, with Hungary returning to recessionary territory last seen during the 2022 energy crisis.

Hungarian GDP fell by 0.7% in the third quarter year-over-year, according to initial estimates from the Hungarian Statistical Office (KSH) using seasonally and calendar-adjusted figures. Quarter-on-quarter, GDP also dropped by 0.7%, following a 0.2% decline in Q2, marking a technical recession.

Since Prime Minister Viktor Orbán’s 2022 re-election, Hungary has struggled to keep pace with Europe’s economic growth, showing expansion in only three of the past nine quarters. In Q3, Hungary recorded the weakest economic performance in Europe on both annual and quarterly scales, with the eurozone achieving 0.4% annual growth and Germany posting a modest 0.2% rise. This trend challenges the government’s stance that Hungary’s sluggish performance stems from weak external demand and a slow automotive sector in Europe.

The downturn largely reflects contractions in agriculture, industry, and construction - sectors making up about one-third of Hungary’s GDP - though the services sector provided a partial offset.

As Hungary’s regional peers and the EU post growth, this economic slump signals a worrying divergence. Analysts are revising growth projections not only for 2024 but for 2025 as well. Péter Virovácz, an ING Bank analyst, noted that the Q3 figures drastically reshape Hungary’s economic outlook. “We’re no longer aiming for 1.5% GDP growth, the government’s official target, but hoping for 0.5%,” he said, adding that continued stagnation could lead to even lower outcomes.

ING’s 2025 projection of 2.9% trails the government’s 3.4% target, far below Prime Minister Orbán’s goal of 3-6% growth set in his recent economic plan. Virovácz cautioned that the newly announced economic measures are unlikely to drive a 2024 recovery, with no clear signs of increased external demand or investment on the horizon.

Economy Minister Márton Nagy had cautioned that GDP was likely to fall short of projections, attributing Hungary's economic difficulties to Germany's stagnation, the country’s largest export partner. In response, the government is drafting stimulus programs aimed at reigniting growth ahead of the 2026 elections.

“A significant boost in economic performance can only be expected in the third quarter of 2025,” Nagy stated following the data release.

Though the government is counting on a boost from rising consumer spending, this disappointing data may dampen confidence and lead to a feedback loop that further hinders growth.

Following the data release, the EUR/HUF exchange rate dropped to 409, the lowest level in nearly two years. The currency's weakness has already disrupted the central bank's plans to continue reducing interest rates, which, at 6.5%, remain the highest in the European Union.