The Hungarian economy is expected to grow by 1.4% this year and 2.2% next year, while average annual inflation could accelerate to 4.5% in 2027 from 3.2% this year, due to rising energy prices and the potential partial phasing out of certain price-capping measures, Erste Bank shared its latest forecast with MTI.
The bank’s analysts had previously projected GDP growth of around 2%, but they revised their outlook downward due to the energy crisis following the closure of the Strait of Hormuz.
The performance of the Hungarian economy continues to be supported by household consumption, while a moderate uptick in investment activity is expected; however, the outlook for industry remains uncertain due to the fragility of the German economy, they reported.
According to their forecast, household consumption could grow by 3.3% this year and 3.0% next year, while investment, after many years of decline, could rise by 1.2% next year and 3.0% in 2027.
Inflation was curbed by numerous government measures at the beginning of the year, but following the conflict in the Middle East, all “leading price indicators” — such as industrial producer prices, global food and agricultural producer prices, as well as expectations in the retail and service sectors, all point to rising prices, which could gradually feed into domestic consumer prices in the coming months. In addition, the base effect and the improving economic climate could also push consumer prices upward next year.
According to Erste’s projections, the budget deficit could fall from 6.0% this year to below 5% next year. The current account balance could turn negative this year (-0.3% of GDP) and return to a surplus next year (+0.8% of GDP).
They noted that following the elections, the country’s risk assessment improved significantly, the forint strengthened and government bond yields fell.
However, the forint’s appreciation could be curbed by accelerating inflation, the state of the budget, and the external balance, which is expected to deteriorate gradually. In the medium term, there is still room for nominal appreciation, in which the credibility of the convergence program could be key, they noted. The euro-forint exchange rate could be HUF 365 at the end of the year and HUF 350 next year.
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