HUNGARY TRENDS AND DEVELOPMENTS Contributed by: Pál Szabó, Barnabás Simon, Eszter Katona, Ádám Simon, Mihály Harcos, Karim Laribi, Gábor Kutai and István Szalay-Csala, Bird & Bird
Bird & Bird 1051 Budapest Széchenyi István tér 7-8 Hungary
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Hungary’s Path Through 2025 Amid EU Tensions, the Russia-Ukraine Conflict and US Policy Divergence The year 2025 was anticipated to mark a turning point for Hungary economy after years of turbulence shaped by the pandemic, the ongoing Russia-Ukraine armed conflict, and strained relations with both the EU and the USA. However, hopes for robust recovery have proven elusive. Whilst Hungary managed to avoid fall - ing back into technical recession, economic growth remained subdued, with GDP expected to rise by only 0.8 to 0.9% in 2025. Many of the challenges that shaped 2024 − limited access to EU funding, ongo - ing geopolitical uncertainty, inflationary pressures and complex external relations − have persisted, though their impact on the business landscape has begun to shift in notable ways. Hungary’s inflation, which peaked above 25% in 2023, has moderated significantly but remains above the Hungarian National Bank’s tolerance band. Inflation was projected to remain elevated throughout 2025, with the Hungarian National Bank forecasting 4.5% by Q4 2025, which is expected to decline to 3.1% by Q4 2026, before durably converging to the 3% tar - get in 2027. The projections incorporate near term effects stemming from retail margin caps, expected to be phased out by end February 2026, and planned minimum wage increases. The Hungarian National Bank continued its monetary easing policy through - out 2025, keeping the base rate broadly unchanged for most of the year, which initially contributed to a weaker forint in the early months. However, from mid- 2025 onwards, the HUF strengthened significantly against both the euro and the US dollar. This cur -
rency strength has partly offset inflationary pressures, though the risk of more persistent inflation remains, particularly if minimum wage hikes have larger than anticipated effects, which could necessitate tighter monetary policy for longer than currently projected. Hungary’s access to EU funds remained severely constrained throughout 2025, with roughly EUR15 to EUR18 billion still withheld pending progress on rule of law reforms. Partial releases occurred in mid-2025, but the bulk of available funding remains frozen, strain - ing government finances and prompting expanded domestic bond issuance. Hungary’s budget deficit as a share of GDP remains relatively high, with projected deficit nearing 5%, a figure that is above the EU aver - age. The continued inaccessibility of these funds adds to the Hungarian government’s budgetary difficulties and reinforces the business community’s cautious approach to investment. Looking ahead, uncertainty persists over when and under what conditions the remaining funds will become available. A lack of pro - gress in governance reforms being discussed with the European Commission could prompt further delays in receiving EU funds or even cancellation of the same. Any such delays or (even partial) cancellations would have negative consequences for market confidence and Hungary’s external and fiscal positions. Compounding these fiscal constraints, Hungary’s opposition to opening EU accession negotiations with Ukraine has further strained relations with Brus - sels and complicated discussions around the with - held funds. Whilst the government argues that com - mencing talks during an ongoing conflict would create security and fiscal risks, many member states view
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