Improving inflation and lower country risk premiums are helping the country move closer to meeting the entry requirements, but sustained progress will require consistent economic and monetary policy.

Hungary met none of the convergence criteria based on last year’s data, said Péter Aradványi, Equilor’s chief analyst. Favorable inflation developments could allow it to meet the price stability requirement this year, while declining risk premiums have supported progress toward interest rate convergence.

The fiscal requirements remain the most difficult to meet. Relatively high government debt and the associated interest burden constrain the budget, making consolidation central to Hungary’s prospects for joining the eurozone.

Equilor expects euro adoption to bring greater exchange rate stability, lower interest rate premiums and deeper integration into the EU economy. However, Hungary would give up its independent monetary policy and the ability to use nominal currency depreciation, while fiscal policy would also operate within tighter constraints.

Stronger corporate investment and the effective use of EU funding could help reduce the growth costs of bringing the deficit under control, the analysis said.

Hungary has emerged from its earlier period of stagnation and near-recession, but growth remains limited, according to Aradványi. Household consumption continues to support the economy, while severe drought is weighing on agricultural output.

New battery, vehicle and electronics manufacturing capacity could provide a stronger contribution from 2027. However, weak external demand continues to constrain industry, while the strong forint is weighing on the trade balance. Equilor expects incoming EU funding to provide only a limited direct boost to growth because of the high import content of the associated spending.

The investment firm forecasts economic growth of around 2.5% over the next two years, with the central bank’s base rate declining to 4% and the euro trading between HUF 360 and HUF 370.

Equilor said the National Bank of Hungary’s newly announced 2.5% inflation target, effective from 2028, could justify a more cautious approach to monetary easing, as current inflation appears less low when assessed against the reduced target.

Fiscal policy is likely to remain a central concern. Equilor forecasts a budget deficit of 7.5% of GDP in 2026, pushing government debt to 77.5% of GDP. The debt ratio is expected to decline only gradually, reaching 76.5% in 2028.

The credibility of the 2027 budget will therefore be a key issue in the coming months, particularly as all three major credit rating agencies maintain negative outlooks on Hungary’s sovereign rating, the analysis said.

Aradványi emphasized that consolidation must be credible and sustainable without undermining domestic consumption and economic growth. Announced spending cuts are unlikely to be sufficient on their own, potentially requiring additional revenue measures.

Targeted subsidies could face review on the expenditure side, while tax increases may be needed to raise revenue. Equilor considers a deficit of 5%-6% of GDP realistic for 2027, warning that excessive cuts to investment would improve the short-term figures at the expense of potential growth.

International conditions also present risks. Equilor described the global growth outlook as positive but said inflation and geopolitical risks had intensified. The eurozone has avoided recession, although its expansion remains modest.

According to the analysis, rising energy prices linked to the Middle East conflict have interrupted disinflation, prompting the European Central Bank to raise interest rates and leaving further tightening possible. U.S. growth is stronger, but increasingly dependent on technology investment associated with artificial intelligence.

The prospect of euro adoption could nevertheless support Hungarian equities by reducing currency risk and making the market more attractive to international investors. Equilor expects banks, interest-sensitive sectors such as regulated real estate investment companies, and highly leveraged businesses to benefit most.