Investments in Hungary fell by 4.1% in the third quarter of the year compared to the same period in 2024, based on seasonally adjusted data, while the total value of investments decreased by 0.3% compared to the second quarter, the latest report on investments released by the Central Statistical Office (KSH) shows.
Looking at the first three quarters as a whole, investments decreased by 5.4% this year, which, while negative, is at least an improvement compared to last year’s 14.2% decline.
Investments have decreased in 12 of the 13 quarters since the 2022 election, based on adjusted data. While the decline in investments, which has lasted for more than three years, has not yet ended, the pace of the decline has slowed significantly recently, suggesting that Hungarian investment performance may be approaching its lowest point.
KSH did not release comprehensive details in the first estimate and will publish the breakdown by technical composition and economic form only a week from now. The statistical office only highlighted that the transport and warehousing and manufacturing sectors contributed to the decline, while the financial field moderated it.
“This is not surprising, the weakness of external demand directly affects industry and related sectors, where it pushes back demand, which results in uncertain prospects and significant free capacities, which negatively affects the willingness to invest and encourages decision-makers to wait and see,” says Dániel Molnár, senior analyst at GFÜ Gazdaságkutató.
According to Molnár, transport and warehousing and manufacturing accounted for 40% of investments in the first half of the year. The weight of other areas, excluding real estate transactions, is much smaller, and the timing of each investment and development can significantly influence the data.
Molnár believes that elements of the Demján Sándor Program may have mitigated the extent of the decline in investments. The investment loan products of the Széchenyi Kártya Program have been available since February at an interest rate of 3%, while the payments of the so-called “1+1 Program” only started in the third quarter, but the effects of the loans provided by Eximbank may already have appeared.
However, the senior analyst adds, the withholding of EU funds may continue to have a negative effect, and may have set back state and local government developments, while the role of investments postponed in recent years due to budgetary constraints should also be mentioned.
It is certainly encouraging that the pace of investment decline seems to be slowing from quarter to quarter, comments ING chief economist Péter Virovácz on the fresh data. He thinks there is a chance the decline has bottomed out. Even so, there are few positives on the corporate side: manufacturing industry is suffering, as it does not want to expand capacity or develop technology while order levels are low.
Last week also saw the October rate-setting meeting of the Monetary Council of the National Bank of Hungary. In line with analysts’ expectations, the council kept the base rate unchanged at 6.5%. Market watchers unanimously believe that monetary conditions will probably not be eased again this year. The key rate has been anchored at its current level since September 2024.
According to Molnár of GFÜ, inflation has been a relatively good news story in recent months. It stagnated at 4.3% for the fourth month in a row, while consumer prices were unchanged on a monthly basis for the third consecutive month. Although the annual index continues to be held back by the government-mandated retail price caps, monthly repricing patterns also show that there is no price pressure in the economy, and the strengthening of the forint exchange rate is gradually being passed on to consumer prices.
“Looking ahead, there are also positive developments: inflation is expected to fall below 4% in December, which may be followed by a significant slowdown in January due to base effects, which could lead to an inflation rate close to, or even below, the inflation target in the first months of the year. However, the timing of the elimination of the margin freeze and high inflation expectations may have justified maintaining a tight monetary policy,” Molnár says.
He does not foresee monetary conditions changing this year. There is no expected shift in the international environment that could lead to a reinterpretation of the policy from its current orientation. At the same time, continued tightening strengthens investor confidence in the forint, and thus helps anchor expectations.
“We expect an interest rate cut to take place only next year, provided that inflationary processes continue to ease and expectations are moderated, while the external environment improves and investors’ risk appetite increases, for example, due to the conclusion of the Russian-Ukrainian war,” Molnár summarizes.
“This would allow the central bank to ease interest rate conditions without jeopardizing the sustainable achievement of the inflation target due to a weakening exchange rate or the credibility that is improving due to a tight monetary policy,” he adds.
According to Erste Bank analyst János Nagy, the MNB’s latest rate decision did not bring anything new in its accompanying messaging and communication.
“The cautious and patient approach remained, and there is still no sign that the Monetary Council would have the easing of conditions on the agenda in the coming period, not even if we see numbers around or below the medium-term target in early 2026. Any changes are only expected after the elimination of regulatory measures,” Nagy says.
This article was first published in the Budapest Business Journal print issue of November 28, 2025.
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