Budapest, Hungary:Â An International Monetary Fund (IMF) mission, led by Srikant Seshadri and comprising Maria Gelrud, Nora Neuteboom, Augustus Panton, and Atticus Weller, visited Budapest from September 23 to October 6 to conduct discussions on the 2026 Article IV Consultation with the Hungarian authorities. Jerome Vandenbussche, the IMF 2026 Financial Sector Assessment Program (FSAP) mission chief, joined the mission. At the end of the visit, the IMF team issued the following statement:
- Hungary’s economy is under simultaneous strain from several factors: weak investment, a growing gap between wages and productivity, a persistently challenging global environment, and an aging population. The budget deficit for this year is likely to be between 7-7.5 percent of GDP, and public debt is rising. These challenges call for a comprehensive set of reforms—particularly fiscal policies and also structural changes that enhance productivity and innovation.
- Hungary has a unique opportunity to revitalize its economy. The new government has committed to deeper European integration and has moved swiftly to unlock previously frozen EU funds. Growth is gradually picking up and headline inflation is below target. Markets have responded positively.
- The government’s stated goal of adopting the euro could provide a suitable anchor—but it is not a substitute—for broad reforms. Fiscal consolidation should be credible and growth-friendly, while monetary policy should remain appropriately cautious until disinflation becomes durably sustained. Financial-sector oversight and macroprudential policies should contain emerging vulnerabilities, while structural reforms should raise productivity, investment, and innovation.
 - We look forward to the government’s medium-term fiscal program to be announced soon, and stand ready to help—through our analyses, policy suggestions, as well as technical assistance.Â
Economic Outlook
Growth is projected to strengthen gradually over the medium term. Under current policies, growth is projected at around 2 percent in 2026, rising to around 2½ percent over the medium term as €16 billion (7 percent of GDP) in previously frozen EU funds disburse, boosting public investments in energy security, infrastructure and human capital, and car and battery plants bolster production. Inflation is projected, on average, to remain well below the central bank’s current 3 percent target this year but to rise back towards 3 percent in 2027. This mainly reflects the expected dissipation of the exceptionally benign environment for food prices, the increase in excise duties on tobacco products from November 2026, and volatile global energy prices. The fiscal deficit under unchanged policies (i.e., without further policy announcements) is expected to exceed the Maastricht criteria through the medium-term and the public debt ratio would continue to rise. Higher energy prices are expected to push the external balance into a small deficit this year, before it returns to surplus along with the expected normalization of energy prices and expansion of export capacity.
The unblocking of EU funds could help catalyze growth and relieve external and fiscal financing pressures. By putting in place stronger governance standards, and more transparent public procurement, the new government paved the way for the release of about €16 billion (around 7 percent of GDP) in previously frozen grants and loans to finance needed investments in energy security, infrastructure, and human capital development. Used well, these resources and a more level playing field in the private sector (see below) could help to raise potential growth while easing pressure on the budget and external balances.
Risks to the outlook are tilted to the downside. A prolongation and/or escalation of the war in the Middle East could push energy prices higher, weighing on growth, the budget, and the external balance. Weaker demand in Europe or new trade barriers would hurt Hungary’s export-oriented manufacturers. Inflation could also prove higher and more persistent than envisaged if wages continue to outpace productivity, weighing on competitiveness. Recent currency strength and sharply lower yields could reverse if reforms do not meet market expectations. On the other hand, a credible fiscal adjustment package could stimulate further positive market sentiment.
There is no time like the present…
Hungary’s economy faces major structural challenges. For much of the past decade, Hungary grew by attracting foreign investment into manufacturing—especially in the auto sector—supported by generous state incentives. That model now faces stiffer global competition, a workforce that is rapidly aging, and wages that have risen faster than productivity. After three years of near-stagnation, investment remains weak. At the same time, increasingly interventionist policies have blunted competition and the incentive to innovate. These include a range of consumer price protections that come at considerable fiscal cost, subsidized loans to businesses and home buyers, and sector-specific taxes. Reviving growth requires a new engine led by a dynamic private sector, a more efficient state, and a better-skilled workforce.
