The European Commission has published its Spring Economic Forecast, providing projections for the entire EU and each member state.

The report indicates that the EU economy is expected to grow at a modest pace throughout this year, with growth anticipated to accelerate by 2026, despite ongoing geopolitical uncertainty and trade tensions.

According to the Commission's forecasts, real GDP in the EU is projected to increase by 1.1% in 2025, with the eurozone growing by 0.9%.

This aligns closely with the growth rates recorded in 2024. By 2026, growth in the EU is expected to rise to 1.5% and 1.4% in the eurozone.

Focusing on Hungary, the European Commission has stated that the economic recovery is facing significant challenges.

Real GDP growth for Hungary was recorded at 0.5% in 2024, supported by substantial wage increases and stable consumption.

However, challenges arose from a decline in investments due to an uncertain business environment and reduced public investments.

Export performance remained sluggish, particularly due to weak machinery and vehicle exports.

The forecasts suggest a GDP growth of 0.8% for 2025 and an increase to 2.5% in 2026.

The report notes that private consumption is expected to remain the primary source of growth, bolstered by personal income tax exemptions and benefits.

Investment, particularly from corporations, is projected to be limited in 2025 but may recover in 2026, contingent on a reduction in global trade uncertainties and a resurgence in government-supported construction projects.

Among the risks identified are subdued external demand, which is critical given Hungary's trade exposure and deep integration into global supply chains, particularly in key sectors.

Inflationary pressures also pose significant challenges, exacerbated by high wage increases and other government-funded policy measures.

Nominal wages are anticipated to remain elevated in 2025 and 2026, with a further 9% increase in the minimum wage scheduled for 2025, amid a tightening labor market and public sector wage hikes.

Inflation based on harmonized consumer price indices (HICP) averaged 3.7% in 2024, with the HICP inflation excluding energy and food prices reaching 5.9%.

Domestic demand and rising food prices are expected to keep inflation elevated in 2025.

The budget deficit is projected to decrease from 6.7% of GDP in 2023 to 4.9% in 2024, primarily due to lower spending on energy support measures and the postponement of public investments.

The deficit is expected to further decline to 4.6% in 2025.

Significantly, revenues from income taxes are anticipated to fall as a result of planned personal income tax exemptions for mothers and an increase in family tax benefits, which together account for an estimated 0.6% of GDP.

Public debt as a percentage of GDP rose in 2024, partly due to the depreciation of the forint and the acquisition of Budapest Airport.

Expectations for 2025 indicate further increases, projecting public debt to reach 74.5% of GDP as large cash interest payments from the previous year come due.

Overall, Hungary's economic data places it in the bottom third of EU comparisons, highlighting the ongoing economic challenges faced by the country.