Economic growth continues to disappoint in Q3

GDP growth struggles to take off: GDP increased 0.6% in annual terms in Q3, following 0.1% growth in the previous quarter. Q3's reading was the strongest since Q2 2024, but it was underwhelming compared to the rest of the EU. On a seasonally adjusted quarter-on-quarter basis, economic output stagnated in Q3, following 0.5% growth in the previous quarter.

Underlying momentum remains weak: Compared to the prior quarter's data, readings in Q3 improved for fixed investment (-3.0% in annual terms vs -5.7% in Q2), exports of goods and services (-0.6% vs -1.0% in Q2) and imports of goods and services (+3.9% vs -0.8% in Q2). In contrast, readings softened for private consumption (+2.6% vs +3.5% in Q2) and government consumption (-6.3% vs +4.8% in Q2). Domestic demand grew sharply in Q3, but available data suggests this was due to a base effect and a sharp rise in inventories. Still, the underlying dynamics remained weak amid a protracted slump in investment and decelerating private spending, hinting that government measures to reignite the economy are proving ineffective. Moreover, net exports dragged on the expansion.

Brighter days ahead: Our panelists see the economy growing at the fastest rate in four years in 2026, recovering slowly from its three-year slump. A pre-election boom in public stimulus should fuel a rebound in fixed investment; private spending should accelerate on the back of tax cuts, while exports should return to growth due to increased automotive and battery production capacity and strengthening activity in Germany—a key trade partner. That said, weaker-than-expected economic growth in Q4 could dampen our panelists’ projections due to negative carryover effects. Additionally, persistent pessimism among consumers and businesses plus weaker-than-expected EU demand pose key downside risks to Hungary’s economic recovery.

Panelist insight: ING’s Peter Virovacz and Zoltán Homolya commented on the outlook: “The Hungarian economy is still facing a confidence deficit. Though there has been some improvement in recent months, the country is not yet out of the woods. Despite the government's numerous targeted measures, signs of recovery are few and far between. However, the biggest impact may be ahead of us in the fourth quarter of this year and the first half of next year, given the timing of the next general election in spring 2026. Fiscal measures, a stronger forint and temporarily lower inflation may be just what the doctor ordered for an ailing economy. However, if these measures do not translate into a marked and sustained improvement in business and consumer confidence, the long-term GDP outlook will remain moderate at best.”

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