Hungary’s first-quarter GDP data fell well short of expectations. The volume of gross domestic product stagnated according to raw data and was 0.4% lower according to seasonally- and calendar-adjusted and reconciled data in Q1 2025 than in Q1 2024. Compared to Q4 2024, the economic performance lessened by 0.2% according to seasonally- and calendar-adjusted and reconciled data.
The total performance of services positively affected GDP. Industry and construction slowed the economic performance, according to the latest report released by the Central Statistical Office. The data was not only disappointing for both the government and analysts, but it was also the worst in the European Union.
In the first quarter, the eurozone’s GDP exceeded the previous quarter by 0.4%, an improvement from the 0.2% at the end of 2024. Similar growth had been expected, so the data was a surprise on the upside. Of the GDP data revealed so far for EU countries (some are still to report), Hungary is the only one showing a decline.
The data is much worse than the government originally projected: the government based the 2025 budget on 3.4% economic growth. Only a month ago, the Ministry for National Economy lowered this growth forecast to 2.5%. So far, the government hasn’t modified its expectations for this year in light of the fresh data.
The statement by the ministry published following the KSH release does not provide any clues in this regard, stating that “the Hungarian government will continue not to give up its plan to achieve the highest possible economic growth, and the economic policy programs for 2025 and 2026 will continue to set this ambitious goal.”
Péter Kiss, investment director of Amundi Fund Management, reacted in his quick comment that the much worse-than-expected first-quarter GDP data shows that the downside risks to the Hungarian economy have materialized. According to him, the previous trend has continued: household consumption has pulled services up, while industry and investments have been a drag on performance.
“The negative trends have further strengthened due to the increasing global economic and trade policy uncertainty in the first quarter. If the high level of uncertainty extends into the second quarter, which is a possibility, since the U.S. administration has granted a 90-day postponement of the counter-tariffs, then it could mean another technical recession in Hungary in the first half of the year,” Kiss warns.
He added that Amundi’s previous 1.9% full-year growth expectation will likely be significantly reduced in light of the latest data. Kiss also noted that while the further deteriorating growth picture increased the pressure on the central bank to ease, he believes this would be very risky for the time being due to the current inflation path and global risk aversion. Kiss pointed out that the outlook was surrounded by negative risks such as the escalation of the trade war, the potential for a drought, and the foot-and-mouth disease epidemic.
“We do not want to sound alarm bells for the time being, but we would like to point out that if these risks become more acute, they do not need to have a major shock effect to call into question the fact that the outlook for this year’s GDP growth number remains positive,” he wrote.
Orsolya Nyeste, Erste Bank’s chief macroeconomic analyst, highlighted in her assessment that “in annual comparison, according to raw data, it [the Hungarian economy] stagnated, while according to seasonally and calendar-adjusted and balanced data, the economic performance in January-March decreased by 0.4%.”
The “zig-zag” performance that has been a pattern since 2022 (in which an increase in one quarter is followed by a decline in the next, and the economy cannot get on a sustainable path of improvement) continued at the beginning of this year, indicating weak fundamental processes and structural problems, she said.
Nyeste pointed out that this data does not yet include the possible adverse effects of the tariff war, which pose a further downward risk to GDP in the coming quarters.
According to Dávid Németh, the chief macroeconomic analyst at K&H Bank, the Hungarian economy has had a poor start to the year, and its current outlook is not very bright. In his commentary, he mentions that this is only a first estimate for now, and detailed data will have to be awaited for an accurate assessment, but even so, the overall picture is quite weak. He underlined that the outlook for the second quarter is also unfavorable.
As he puts it, in the case of industry, this is because orders are falling short of last year’s level. For this reason, the sector’s performance in Q2 may remain in the negative range. Furthermore, the construction contract backlog does not indicate that there will be a sharp rebound in this sector.
Moreover, developments in the trade war also make the outlook for the second quarter uncertain. Nor should it be forgotten that agriculture has also faced serious shocks in recent months: frost damage, the relatively dry period so far, and the effects of the foot-and-mouth disease epidemic.
Based on the current outlook, Németh expects weak growth of 0.3-0.5% in the second quarter compared to the first, adding that “due to the weak start to the year, we have revised our GDP forecast for the whole year downwards.” He had already been expecting well below 2% growth, but now says it is questionable whether the figure will even start with one.
This article was first published in the Budapest Business Journal print issue of May 16, 2025.
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