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In a statement following regular Article IV consultations, IMF staff said the new government’s commitment to deeper European integration and swift measures to unlock EU funding had helped create favorable conditions for reform.
“The new government’s agenda — to deepen integration with the rest of the EU, strengthen governance, and restore the health of the public finances — has earned considerable goodwill: the forint has strengthened and the government’s borrowing costs have fallen,” the statement said.
“With inflation below target, a banking system with strong soundness indicators, and the return of EU funds, the necessary conditions for an optimistic future are taking shape,” staff added.
However, they warned that the opportunity could fade without decisive action.
“This window of opportunity is unlikely to last if the goodwill given by the markets is not fully utilized. A comprehensive, credible, and appropriately front-loaded reform package is needed now to translate these favorable conditions into stronger investment, productivity, and durable growth,” the statement said.
IMF staff identified weak investment, a widening gap between wages and productivity, a challenging global environment and an aging population as pressures on Hungary’s economy.
They estimated the 2026 budget deficit at 7%-7.5% of GDP and noted that the public debt-to-GDP ratio was rising.
The government’s stated ambition to adopt the euro could provide “a suitable anchor — but it is not a substitute — for broad reforms,” staff said.
“Labor and product markets need to become more flexible over the transition period to euro adoption, which will help make the economy more resilient to shocks. Public finances also must strengthen substantially to face long-term pressures such as aging and the changing climate,” they added.
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