OECD Economic Outlook, Volume 2026 Issue 1

Hungary

GDP is projected to grow by 1.6% in 2026 and 2.0% in 2027, after 0.5% in 2025. Due to the energy price shock and the expected phasing out of fuel price caps by mid-2026, private consumption growth will temporarily slow, despite strong nominal wage growth and personal income tax (PIT) cuts. After dropping by 16% over 2022-25, investment is expected to rebound. Exports will be hampered by sluggish growth in the euro area in 2026 before picking up in 2027. A stronger than expected energy shock may deteriorate growth and fiscal prospects, but progress in the discussions around blocked EU funds may boost confidence and lift investment.

In a context of uncertainty and higher energy prices, the central bank is projected to keep its policy rate unchanged in 2026, before lowering it again in 2027. While the fiscal stance is expected to loosen in 2026, amid PIT cuts and public wage increases, rebuilding fiscal space will be necessary to prepare for rising ageing-related spending, as well as climate mitigation and adaptation costs. Moving from energy price caps to targeted cash transfers to vulnerable households would increase incentives for saving energy and renovating dwellings, reduce the fiscal exposure to energy prices, and lower dependence on energy imports.

Economic activity is weak

GDP grew by 0.5% in 2025. Investment declined by 2.8%, amid low business confidence, low capacity utilisation, and trade policy uncertainty. Private consumption was the main engine of growth, supported by strong real wage growth and improving consumer confidence. Headline inflation declined to 2.0% in April 2026 from 4.2% a year earlier, but core inflation excluding food and energy (OECD definition) did not fall below 3.4%. Despite low growth, unemployment has risen only moderately to 4.4% in March 2026.

Hungary

1. National consumer price index excluding food and energy.

2. Data refer to average gross earnings of full-time employees in the private sector.

Source: OECD National Accounts database; OECD Consumer Prices database; and Hungarian Central Statistical Office.

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Hungary: Demand, output and prices

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Hungary imports over 80% of its crude oil and over 70% of its natural gas consumption, which makes it vulnerable to energy supply shocks. The Hungarian forint depreciated by 5% against the US dollar in the first month of the evolving conflict in the Middle East, which compounded the increase in imported energy prices, but has more than fully regained ground since then. Hungary is also closely dependent on economic activity in the euro area, the destination for 50% of its exports.

Monetary policy is expected to restart easing in 2027 with the budget deficit increasing

The central bank lowered its policy rate to 6.25% in February 2026, after keeping it at 6.5% for 18 months. Due to the energy price shock and the surrounding uncertainty, it is expected to restart lowering the policy rate only in 2027, at a moderate pace to ensure that inflation durably reverts to the 3% target. The rate would settle around 5.5% in end-2027. Without any fiscal adjustment measures following the April 2026 general elections, the fiscal deficit is expected to expand from 4.7% of GDP in 2025 to 6.1% in 2026 before narrowing to 5.4% in 2027, amid PIT cuts and one-off public wage premia, but also declining public investment and debt servicing costs as a share of GDP. Maastricht debt is projected to increase from 74.6% of GDP in 2025 to 75.9% in 2027.

Growth is expected to strengthen

GDP is expected to increase by 1.6% in 2026 and 2.0% in 2027, and inflation to rebound over 5% towards the end of 2026 before reverting to 1.7% in the fourth quarter of 2027, driven by fluctuations in energy prices. Regulated electricity and natural gas prices along with the price caps on motor fuels currently shield households from the energy shock, but fuel price caps are expected to be phased out by mid-2026, in line with the current legislation. Consequently, private consumption growth is expected to temporarily decline in the second half of 2026 before rebounding in 2027, driven by strong real income growth. Investment is set to increase moderately in 2026 before accelerating in 2027. Exports will be hampered by sluggish external demand in 2026 before rebounding in 2027. A stronger than expected energy shock may lead to extensions of fuel price caps. This would temporarily support consumption and limit inflation, but at a high cost for public finances. Progress in the discussions with the EU may allow Hungary to regain access to blocked EU funds, which may boost investor confidence and lift investment above the current projection. The availability of new manufacturing capacity may provide a further boost to exports, but due to low manufacturing capacity utilisation, the new factories will be fully exploited only if external demand picks up significantly.

Structural reforms are needed to improve fiscal sustainability and growth

Reforming public pensions, e.g. by tightening eligibility conditions and adjusting benefit levels for some, would limit the increase in ageing-related spending, which is projected to exceed 5% of GDP by 2070. However, financing future pensions will also require additional fiscal space, which calls for consolidation. Restructuring energy support by moving from price caps to targeted cash transfers to vulnerable households would increase incentives for saving energy and renovating dwellings, reduce the exposure of public finances to energy prices, and lower dependence on energy imports. Reducing costs for business creation, improving the insolvency framework to facilitate the reallocation of capital across firms, and ensuring a favourable business environment by strengthening the fight against corruption would support business dynamism, competition and productivity, which is lagging behind OECD peers.