According to the first estimate of the Central Statistical Office (KSH), the performance of the Hungarian economy in the first quarter of this year expanded by 1.7% compared to the same period of the previous year, both according to raw data and seasonally and calendar-adjusted and balanced data. That represents a significant acceleration compared to the near-stagnant growth rate seen in the second half of 2025. In a quarterly comparison, based on seasonally and calendar-adjusted data, the expansion was 0.8%.
“Overall, this shows a more favorable picture than the 0.5% quarterly growth we expected. Meanwhile, the German Q1 GDP data has also arrived, which also showed a more favorable picture than expected: the performance of the German economy expanded by 0.5% year-on-year, while a 0.3% growth was registered on a quarterly basis,” MBH Bank said reacting to the latest data.
According to MBH’s analysts, the better-than-expected Hungarian GDP data for the first quarter of 2026, alongside the German GDP figures published on the same day, which also surprised to the upside, can be considered good news overall and pose an upside risk to their growth forecast.
“In principle, based on these data, it would be justified to revise this year’s growth trajectory and raise our forecast, especially in light of the fact that the performance of the German economy, which is key to external demand, is also showing a more stable picture,” the analysts say.
“However, the positive news is currently significantly offset by the downside risks surrounding agriculture. The increasingly worrying news about the drought situation and the resulting production risks increase the chance that agriculture will make a negative contribution to GDP in 2026. In addition, any necessary budgetary adjustments may also curb domestic demand, which could dampen growth momentum in the short term,” the MBH analysts add.
Due to these opposing effects, MBH is taking a wait-and-see approach for now and is not currently changing its GDP growth expectation of 1.6% for 2026. It emphasized that the increasing likelihood of EU funds being released could remain a significant supporting factor in the medium term, but it expects the growth impact would only start to materialize in the economy from 2027. Accordingly, it has not modified its 3.1% growth forecast for 2027 either, based on the current information.
János Nagy, a macroeconomic analyst at Erste Bank, agreed that the data was a positive surprise, exceeding both the bank’s expectations and the market consensus. The detailed breakdown of the first-quarter data is not yet available, but the preliminary quick commentary is, as usual, quite concise. “Services, especially professional, scientific, technical and administrative activities, contributed most to the growth of the gross domestic product. After a long time, the performance of industry also positively influenced the development of GDP,” KSH had said.
The latter sentence suggests that the latest industrial production data may indicate a massive rebound for March. The welfare measures introduced before the elections may also have manifested themselves in the first three months’ data, Nagy believes.
Looking ahead, the easing of political uncertainty from the second quarter onwards may also help economic activity. According to the recently released April surveys, business confidence in Hungary has improved significantly, in contrast to European trends. In the short term, negative growth risks may arise from the prolongation of the war in the Middle East and the possible reduction of budget expenditure.
“It is favorable that, according to press reports, the capacity utilization of domestic battery factories may increase significantly in the second half of the year. The possibility of releasing and drawing down EU funds carries a significant upward risk, presumably in larger volumes starting next year,” concludes Nagy.
The March industrial production data also came as a big surprise, but there is an explanation for why the GDP data in the first quarter was significantly more favorable than expected. According to the latest figures, industrial production volume, adjusted for working-day effects, increased by 3.7% year-on-year in March, after an adjusted 0.9% annual decline in February.
The raw annual data showed a 6.7% annual increase due to the additional working days in March this year. The performance jump was also spectacular on a monthly basis, as industrial output increased by 3.1% from February, based on seasonally and working-day-adjusted data.
KSH will publish the detailed breakdown on May 13. According to the statistical office’s brief commentary, the production volume increased in the vast majority of manufacturing sub-sectors compared to the same month of the previous year.
Of the most important sub-sectors, the production of computers, electronics, optical products, electrical equipment, and food, beverages and tobacco products expanded significantly, while vehicle manufacturing grew slightly.
According to Orsolya Nyeste, an analyst at Erste Bank, this suggests that the improvement occurred on a relatively broad basis. The performance of battery production may have accelerated, and it is also particularly positive news that the annual performance of vehicle production also turned positive in March. However, given the sluggish economies of our most important target markets, especially Germany, the sudden jump in performance is somewhat surprising.
The analyst warns that it is only the performance of the coming months that will decide whether we can truly see the beginning of a positive trend in industry, and whether the capacities previously built in vehicle and battery production will significantly increase industrial output this year.
In any case, the growing concerns about the supply and price of fossil fuels due to the war in Iran may increase the importance and attractiveness of electrification, which may also benefit domestic battery production.
According to its quarterly report, Samsung SDI also plans to ramp up production in the second half of the year at its plant in Göd. Overall, although the outlook remains marked by significant uncertainty due to global risks, Nyeste believes industry could contribute positively to economic growth in 2026 after the subdued performance of recent years.
This article was first published in the Budapest Business Journal print issue of May 8, 2026.
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