CIB Bank analysts noted that Hungary’s economic growth is constrained by an unfavorable international environment in 2024, with GDP growth likely to stay below 1%.
“The third-quarter GDP data fell short of even the most pessimistic expectations, prompting us to revise our 2024 growth forecast downward. The annual growth rate will undoubtedly remain under 1%,” said Mariann Trippon, lead analyst at CIB Bank.
Trippon pointed to weak performance across agriculture, construction, and manufacturing sectors, offset only partially by resilience in the service sector and a gradual recovery in household consumption. A turnaround in investments remains elusive.
Looking ahead, CIB Bank anticipates a recovery in 2025, with GDP growth exceeding 3%, contingent on improved external demand.
“The significant increase in real wages, high household savings, and reduced precautionary motives alongside declining financing costs could further boost consumption,” Trippon added.
Hungary’s economic prospects remain intertwined with developments in the eurozone, where growth forecasts have worsened since May. Manufacturing remains in a slump, and short-term recovery seems unlikely, while Germany continues to lag among major economies. However, inflation in the eurozone has eased to 2%, enabling the European Central Bank (ECB) to lower its benchmark rate by 25 basis points in December, according to CIB Bank projections.
In contrast, the U.S. economy maintained stable consumption-led growth in the third quarter, accompanied by declining inflation. Despite earlier expectations of aggressive monetary easing, markets now predict gradual rate cuts by the Federal Reserve.
CIB Bank analysts also highlighted the broader implications of Donald Trump’s victory in the 2024 U.S. presidential election. While his economic policies could stimulate short-term growth, they are likely to result in slower GDP expansion and higher inflation in the long term, affecting global monetary trends.
Hungary’s labor market has begun showing signs of strain, with the unemployment rate rising to 4.6% in the third quarter of 2024. Selective layoffs may continue in the short term, but unemployment is expected to decline from the second quarter of 2025 as economic activity picks up.
Wage growth has remained robust, with average gross and net earnings rising 13.9% in the first eight months of 2024. Real wages grew by more than 10%, aided by a 3.7% average inflation rate during this period. CIB Bank forecasts real wage growth of about 5% in 2025, supported by nominal wage increases and moderate inflation.
Inflation, which fell to an annual rate of 3% by September 2024, is expected to rise temporarily above 4% by December due to a low base effect but will resume its downward trajectory in early 2025. The average inflation rate for 2025 is projected to remain near 3.7%, similar to 2024.
Hungary’s monetary policy has slowed its pace of easing amid external uncertainties and a deteriorating risk perception. The central bank left its benchmark rate unchanged at 6.5% in October, and analysts expect cautious, data-driven decisions in the coming months. While further rate cuts may follow in 2025, with a year-end base rate of 5.25% projected, the forint is likely to remain volatile.
Despite spending much of the summer in the HUF 388–398 range against the euro, the exchange rate climbed above HUF 400 in the wake of heightened geopolitical tensions and market reactions to Trump’s election victory. The forint could see some strengthening by year-end, but for 2025, CIB analysts expect an average exchange rate above HUF 400.
CIB Bank’s analysis underscores a mixed outlook for Hungary, with near-term challenges in 2024 but stronger growth expected in 2025. Household consumption is set to drive economic recovery, though risks related to wage dynamics, global energy prices, and exchange rate volatility remain.
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