The volume of industrial production lagged behind last year’s level by 8.7% in February. Based on working-day-adjusted data, it declined by 8%. According to seasonally and working-day adjusted data, industrial output was 1.3% lower than in January 2025.
Production volume decreased in every manufacturing subsection compared to the same month of the previous year. In the first two months of the year, industrial production was 6.4% lower than in the same period of 2024, according to the latest data released by the Central Statistical Office (KSH). This is now a 14-month low; the last time there was such a significant annual decline was in December 2023.
According to the Ministry for National Economy, Hungarian industrial production continues to be affected by weak external demand. The competitiveness problems of the European Union and the two-year recession in Germany, Hungary’s most important economic partner, are holding back Hungarian exports and industrial output. The adverse effects through supply chains particularly affect the automotive and mechanical engineering industries.
In a statement, the ministry noted that, in addition to the recovery of external markets, large-scale investments such as the expansion of production capacities of CATL, BYD, BMW, Semcorp and EcoPro could bring new impetus to Hungarian industry. The ministry emphasized that the government has also launched its “100 New Factories” program, which will play a significant role in boosting domestic industry and increasing economic performance.
Analysts, however, are not that optimistic. According to Erste Bank’s János Nagy, the outlook is mixed and can be described as gloomy overall. An improvement in the German economy since the beginning of the year and the planned economic recovery in the long term may positively impact business sentiment. At the same time, the massive tariffs announced by U.S. President Donald Trump may result in a decrease in output in the short term, followed by a reduction in investments and a withdrawal of capital.
According to Nagy, electromobility at the European level has not yet gained new momentum, which may delay the implementation of related domestic investments. As of now, the positive growth effect of capacity expansions may mainly appear from 2026, but with the outbreak of the tariff war, uncertainty in this regard has also increased significantly.
Gábor Regős, head macroeconomist at Gránit Alapkezelő, expressed a similar view, reminding that the base effect plays a role in the large decline, as 2024 was a leap year, and thus the number of working days was one more than this year; even seasonally adjusted, this month saw the highest production value last year. However, due to the leap day, it is surprising that the data adjusted for the working day effect hardly differs from the raw data; the decline is still 8%.
The level of production in February is worrying not only in annual comparison but also in comparison to previous months: it is almost 4% lower than the level in October-November, meaning that the industry is still unable to recover from the crisis; in fact, the problems are only getting worse, according to Regős. Vehicle manufacturing and the production of electrical equipment continue to play a marked role in this phenomenon because these two sectors are facing particularly low demand.
Since vehicle and battery manufacturing play such a significant role in Hungarian industry, it can only get on a growth path if the performance of these two sectors improves, or, at least, there is not such a big decline.
The Trump tariffs would not help industrial recovery in any way, but they would not cause an excessively large decline either. The problem is that vehicle manufacturing may once again be the affected sector. However, the fresh production data shows that the industry will continue to restrain economic performance in the first quarter and poses a serious risk to this year’s growth, Regős assumes.
According to ING Bank’s head economist, Péter Virovácz, the February industrial performance data reflects that the restart from the Christmas shutdown at the beginning of the year was less dynamic than in previous years. “The overall picture remains quite gloomy,” he says.
As he put it, after two years of decline, it does not look like 2025 will be the year when the Hungarian industry finally climbs out of the pit. In fact, it seems that rock bottom has not even been reached. He adds that the change in the global trading system caused by Trump is generating huge additional uncertainties.
All in all, the outlook for export-producing sectors has deteriorated recently, and if the tariff war really heats up, it could ultimately negatively affect world trade. Of course, the entry of new capacities will have a unique effect in Hungary, but it seems very likely that, due to the external environment, the positive impact of launching production will be postponed from this year to 2026, according to the analyst.
He warns that although industrial sectors producing for the domestic market can count on continued growth in consumption, and this may bring some expansion, the development of domestic orders does not seem encouraging either. But even if there is some recovery in the Hungarian industry, due to the predominance of the export sector, this will be just a drop in the “industrial” ocean and overall, industry may significantly drag down the performance of the Hungarian economy throughout 2025.
This article was first published in the Budapest Business Journal print issue of April 22, 2025.
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