What You Should Know About Hungary’s Risk for Recession


There is a surplus of data that suggested Hungary’s fourth quarter wasn’t going well. Still, many hoped this would change. The reality of the 2024 economic outlook for Hungary is that it doesn’t look good due to several factors.

What to Know About the Economy

The Hungarian recession is unexpected as the Ukraine war draws on and undermines economic growth. In fact, dips like this in the Hungarian economy haven’t been seen in years. Bloomberg reported four contractions in a row, which is the most since records first started in 1995.

A senior ING economist stated that the negative turn could be attributed to two factors: the fact that services dropped sharply and that there was less than expected with agricultural contributions. There is also the result of the ongoing cost-of-living crisis. Another large impact on the Hungarian economy is the Russian invasion.

Industrial Production and Its Effects on the Economy

There is evidence suggesting that industry exports may have slowed the economy down during the fourth quarter. This is noted by the sharp decrease in output across multiple industries during November and December. Even with the inventory back in stock, the demand is no longer there. While domestic demand is regaining, external demand is not. Germany is a large trading partner and has had a sharp decline in imports, which doesn’t look promising.

Future Economic Projections

Last year’s fourth quarter had a GDP growth of 0.0% for the YoY or year-on-year, which meant there was stagnant growth for that quarter. Despite being currently in a recession, Hungary is expected to recover gradually and see growth in GDP. Factors to shape this economic growth are high wage growth, a tight labor market, and strategic investments.

There were large cuts to the budget and adjustments to the external balance to get the economy back on track. There is hope in the future that financial problems will ease and commodity prices will level out. This is hoped to be a large factor in paving the way towards growth over the next two years. 2023’s weak ending is likely behind the government’s push for more growth measures.

Tomas Dvorak, Oxford Economics’ senior economist, stated that as central banks stabilize policy and inflation eases, domestic demand should increase. With a gradual increase in demand, we should see the recession start to turn around toward the end of the year, though gradually.

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