According to preliminary data from the Central Statistical Office, Hungary's investment volume saw a decline of 12.1% in the first quarter of 2025 compared to the same period in the previous year.

Seasonally adjusted figures indicate an 11.8% decrease in national economic investments compared to Q1 2024. In comparison to the previous quarter, seasonally adjusted data reveals a 3.4% drop in investment value at constant prices.

Manufacturing and the transport and storage sectors were the primary contributors to the reduction in investments.

However, increases in property transactions and a rise in the energy sector's investment activities partially alleviated this decline.

The preliminary gross domestic product (GDP) data for the first quarter suggested that no turnaround in investments had occurred at the beginning of the year, contributing to weaker-than-expected GDP performance.

Detailed sector-specific contributions are not yet available from the preliminary announcement, leaving the extent of the downturn across various sectors—such as corporations and public administration—unclear.

Investment reductions were primarily driven by the manufacturing sector's dependence on external demand, particularly from the European economy, with Germany noted as a key market facing competitiveness issues exacerbated by high energy prices and overregulation.

This situation negatively impacts domestic export-oriented manufacturing, suppressing demand further.

The manufacturing sector's significant overcapacity has compelled firms to postpone investments, compounded by uncertainties stemming from recent trade policy shifts.

Conversely, the increase in property transactions, underpinned by a recovery in the housing market and a growing number of transactions, alongside the development activities in the energy sector, may have somewhat cushioned the overall downturn.

Further recovery in investment dynamics may necessitate an uptick in external demand and improved forecasts, potentially supported by trade agreements between the EU and the USA, as well as the resolution of the ongoing Russia-Ukraine conflict.

Additionally, the effects of local government initiatives, such as the Demján Sándor Program aimed at boosting investment activity among small and medium-sized enterprises, are expected to emerge in statistics in forthcoming quarters.

The inflow of EU developmental funds could also provide a significant boost.

Meanwhile, the Hungarian government's budget report for April 2025 highlighted a significant fiscal deficit, recording a shortfall of 376.4 billion forints in the central budget's primary subsystem for the month.

Cumulatively, the deficit over the first four months of 2025 reached 2,930.5 billion forints, representing one of the worst performances in recent years.

The government has already achieved 70.9% of its deficit target for 2025.

Despite a strong revenue performance, particularly in value-added tax collections, which significantly exceed earlier projections, the fiscal landscape is characterized by high expenditure overruns.

Notably, interest payments on government bonds have increased by 650 billion forints compared to the budgeted amounts in the first four months, reflecting the government's borrowing needs.

Moreover, expenditures on utility subsidies and spending by budgetary institutions exceeded plans considerably, with no signs of significant curtailment expected in these areas for the remainder of the year.