Hungary’s latest GDP release points to an economy edging out of stagnation, though the first-quarter improvement was tied to temporary pre-election effects. ING forecasts GDP growth of 1.5% in 2026, with consumption expected to lead, while investment is seen as modest and net exports a drag, alongside lingering effects from the energy price shock as earlier one-off supports fade.
Year-on-year data show domestic demand rising in the first quarter of 2026 as exports kept shrinking and imports increased, leaving growth more unbalanced than in recent quarters. Net exports reduced annual performance by 4.5ppt, but this was offset by a 6.2ppt contribution from domestic demand, with consumption and inventory accumulation adding almost equal support. Public investment reviews and temporary suspensions are flagged as near-term headwinds before activity improves later in the year, while export growth faces constraints from geopolitical uncertainty, higher production costs and possible supply chain disruption linked to the effective closure of the Strait.
Risks to the Forint and Macroeconomic Outlook
We see the recent positive GDP numbers for Hungary as misleading for the weeks ahead. The growth appears fueled by temporary, pre-election spending, not a sustainable recovery. This creates a fragile situation where the underlying economic weakness could reappear suddenly.
The structure of this growth is concerning, with shrinking exports and surging imports creating a significant imbalance. This puts downward pressure on the Hungarian Forint, and we believe the market is underpricing this risk. The EUR/HUF has already drifted towards 402, showing that currency traders are becoming wary despite the headline growth.
Given the conflict between temporary domestic strength and weak external trade, we anticipate heightened volatility. We are considering buying options that profit from large price swings in the Forint, as historical data shows the currency reacts sharply when fundamentals reassert themselves after periods of government stimulus. The uncertainty surrounding the sustainability of consumption makes a directional bet risky.
The Hungarian National Bank is also in a difficult position, complicating interest rate derivatives. The latest inflation data for May came in at 4.1%, slightly above expectations, which will prevent any rate cuts needed to support the faltering industrial sector. This policy tension between fighting inflation and avoiding a recession adds to the market’s nervousness.
Implications for Equities and Budget
On the equity side, we are cautious about the BUX index, particularly for export-reliant companies facing rising costs and geopolitical headwinds. The widening budget deficit, a direct result of the pre-election spending, poses a medium-term risk to the entire market. We see opportunities in using put options on the index as a hedge against a market correction once these temporary growth drivers fade.
