Economy rebounds in the fourth quarter

Shallow recovery in both Q4 and 2024 as a whole: A second release confirmed that GDP rebounded 0.4% year on year in Q4, contrasting the 0.8% contraction logged in Q3. On a seasonally and calendar-adjusted quarter-on-quarter basis, economic activity increased 0.5% in Q4, contrasting the previous quarter's 0.6% contraction. Over 2024 as a whole, the economy grew 0.5%, a shallow recovery from 2023’s 0.9% decline.

Household spending fuels rebound: Domestically, private consumption chiefly supported Q4’s annual rebound in GDP, accelerating to 5.4% growth from the third quarter's 5.2% expansion. Moreover, fixed investment slid at a softer rate of 10.8% in Q4, following the 12.7% decrease in the prior quarter. Conversely, government spending slid at a quicker rate of 6.2% in Q4 (Q3: -1.4% yoy). Externally, exports of goods and services slid at a sharper rate of 2.0% in Q4 (Q3: -1.8% yoy). Similarly, imports of goods and services declined at a faster clip of 1.3% in Q4 (Q3: -0.4% yoy).

Economic growth to accelerate in 2025: Looking ahead, the economy should continue gaining steam in 2025, backed by rebounds in public spending, fixed investment and exports. That said, full-year GDP growth will fall short of the Central and Eastern Europe average. Drags include decelerating private spending and higher U.S. tariffs. A protracted freeze on EU funds and escalating trade tensions pose downside risks.

Panelist insight: ING analysts Peter Virovacz and Kinga Havasi commented on the outlook for 2025: “We expect the Hungarian economy to grow by 1.9%, a negligible downward revision of 0.1ppt compared to our previous forecast. However, this includes some significant shifts within the growth structure. We now forecast stronger consumption growth, much weaker investment activity with a possible drag on GDP growth, and a slightly less negative contribution from net exports.” EIU analysts said: “After falling back into recession for most of 2024, the economy will recover in 2025-26, albeit slowly at first. The external sector will become a net severe drag on growth in 2025-26. Growth in Hungary's main trade partner, Germany, will remain slow. […] However, we expect household spending to remain a driver of improving growth prospects as real wages continue to grow and borrowing costs gradually fall.”

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