BUDAPEST (Reuters) -Hungary's government slashed its 2025 economic growth forecast to 1% on Tuesday from 2.5% expected at the start of the year, prolonging an anaemic recovery from an inflationary
Hungary's government slashes 2025 growth forecast to 1%
Hungary's Economic Outlook
BUDAPEST (Reuters) -Hungary's government slashed its 2025 economic growth forecast to 1% on Tuesday from 2.5% expected at the start of the year, prolonging an anaemic recovery from an inflationary surge triggered by Russia's 2022 invasion of Ukraine.
Government's Growth Projections
Prime Minister Viktor Orban's government had hoped a rebound in economic growth would help him secure another term in next year's elections, when political analysts expect him to face the stiffest opposition challenge in over a decade.
Impact of Inflation and Policy Measures
But the economy remained flat in the first quarter, worse than expectations, and the performance in the second quarter was likely to have been similar, Economy Minister Marton Nagy said, weighed down by agriculture and industry.
Budget and Deficit Management
"On a quarterly basis, growth will likely be positive, but in annual terms, we can expect near stagnation," Nagy told a media briefing, adding that weak farm sector output had probably cut between 0.3 and 0.4 of a percentage point off growth.
The new forecast is more closely aligned with the Hungarian central bank's 0.8% projection and the OECD's 0.9% estimate, rounding off the weakest three-year stretch leading up to a national election since Orban took power in a 2010 landslide.
Orban aims to fend off the opposition challenge with large-scale tax cuts for families, cheap loans to first-time home buyers and pension rises due to higher-than-expected inflation, now seen averaging 4.7% this year.
Nagy said Sunday's U.S.-EU framework trade agreement would reduce uncertainty, adding that he believed the car sector would be able to absorb a 15% tariff rate. Neighbouring Romania has said it expected a small hit to growth from tariffs.
Despite the weaker economic performance, Nagy said there was no need to amend the 2025 budget, as consumption-linked tax revenues were on track and as the government had already implemented a spending freeze earlier this year.
Orban's government targets a shortfall worth 4.1% of output this year, down from a higher-than-forecast 4.9% level in 2024. Hungary's debt, the EU's highest outside the euro zone, is expected to stagnate at around 74% this year and next.
Nagy said the government was committed to keeping the deficit below 4% of economic output next year, adding however, that 192 billion forints ($555.59 million) worth of reserves would be needed to cover risks from lower-than-expected growth.
($1 = 345.58 forints)
(Reporting by Gergely Szakacs; Editing by Sharon Singleton)
