Tuesday, 15 September 2026
Hungary’s economy returned to firmer growth during the first half of 2026, supported by stronger household spending, expanding services and an improvement in industrial activity. Inflation fell substantially, helping restore consumer purchasing power, but investment and construction remained weak and the labour market showed some signs of softening. GDP increased by 1.7% during the first six months compared with H1 2025. The economy expanded by 0.8% during the first quarter compared with the final three months of 2025 and by a further 0.5% in Q2. Compared with a year earlier, GDP was 1.7% higher during both quarters, confirming that economic activity had strengthened following an extended period of weak performance.
Services provided the largest contribution to second-quarter growth. Activity across the sector increased by 1.9% year-on-year and contributed around 1.1 percentage points to the overall increase in GDP. Industry also improved, expanding by 3.7%, while manufacturing output was 2.7% higher than a year earlier. Agriculture moved sharply in the opposite direction, declining by 12.4%, while construction was 0.3% lower. Household demand became an increasingly important source of growth during H1, as lower inflation allowed improvements in income to translate more directly into purchasing power after several years in which rapidly rising prices placed substantial pressure on household budgets.
Retail figures reflected this improvement. Sales volumes increased by 4.5% during January-June compared with the first half of 2025. In June alone, calendar-adjusted retail sales were 3.0% higher year-on-year. Non-food sales increased by 5.1% and food retail by 1.8%, while automotive-fuel sales declined slightly. Industry also recorded a stronger first-half performance, with production increasing by 2.4% between January and June compared with H1 2025. Export sales from industry increased by 2.8%, while domestic industrial sales declined by 2.5%, illustrating the continuing importance of international demand to Hungarian manufacturing.
June industrial production was 10.1% higher than a year earlier before adjustment for working days. Once the difference in working days was taken into account, growth was 4.1%. Production nevertheless declined by 1.4% compared with May, demonstrating that the industrial recovery remained uneven from month to month. Several manufacturing segments performed more strongly during the first half. Transport-equipment production increased by 3.8%, while computer, electronic and optical manufacturing recorded considerably stronger expansion. Manufacturing order books were also higher at the end of June than a year earlier, providing a more supportive starting point for activity during the second half.
Investment remained one of the weakest parts of the economy. Gross fixed capital formation was 4.8% lower in Q2 than a year earlier, showing that stronger consumption, services and industrial activity had not yet developed into a broad recovery in capital expenditure. Construction presented a similarly difficult picture. Output across the first six months was 0.7% below its level in H1 2025. In June, construction activity declined by 1.2% year-on-year before adjustment and by 3.9% compared with May. Building construction was 5.5% lower than a year earlier, while civil engineering increased by 5.6%. The future development pipeline also showed signs of weakness, with new construction contracts signed during June substantially below their level a year earlier and the total stock of outstanding contracts slightly lower than in June 2025.
Housing development provided a more positive signal. Hungary completed 6,278 new dwellings during the first six months of 2026, 22% more than during H1 2025. Building permits and simplified declarations covered 16,588 planned homes, representing an increase of 29%. Budapest accounted for 2,224 completed dwellings during the first half, also 22% more than a year earlier. Residential development in the capital remained highly concentrated, however, with a relatively small number of districts responsible for the majority of new housing completions.
Inflation declined considerably during the first half and became an important source of support for household purchasing power. Consumer prices were 1.7% higher in June than a year earlier and were unchanged compared with May. Price developments varied considerably between different categories. Food prices increased by only 0.2% year-on-year in June, while services were 4.0% more expensive. The difference indicates that Hungary’s earlier inflation shock has eased substantially, although price pressure remains present in parts of the domestic economy.
The labour market remained relatively tight but weakened slightly. Average employment during April-June stood at approximately 4.63 million people, around 28,000 fewer than during the corresponding period of 2025. The employment rate among people aged between 15 and 64 nevertheless remained around 75%. Approximately 214,000 people were unemployed in June, producing an unemployment rate of 4.4%. Hungary therefore continued to maintain relatively low unemployment despite modestly lower employment and ongoing restructuring within parts of industry.
Foreign trade remained another important component of the economy. Hungary exported goods worth approximately €14.9 billion in June and imported around €13.6 billion, resulting in a monthly trade surplus of approximately €1.3 billion. Export volumes increased more strongly than imports compared with a year earlier, although differences in working days influenced the annual comparison. The combination of stronger industrial exports and weak capital formation highlights the unusual balance within Hungary’s current economic recovery. The country has attracted substantial automotive, battery, electronics and related manufacturing investment in recent years, and the wider economic impact will increasingly depend on new capacity progressing into sustained production and exports.
The Hungarian National Bank expects GDP to increase by approximately 2.0% across 2026 before growth accelerates to around 3.0% in 2027. Its June outlook anticipates average inflation of approximately 1.8% this year. The European Commission’s earlier assessment is slightly more cautious, projecting GDP growth of approximately 1.8% during 2026 and 2.1% in 2027. Its forecast puts average inflation at 3.2% this year, with the difference partly reflecting the timing and assumptions underlying the respective projections.
Public finances remain a significant risk to the outlook. The European Commission expects Hungary’s government deficit to reach approximately 6.2% of GDP during 2026, compared with 4.7% in 2025. Public debt is forecast to increase to around 75.1% of GDP this year and 76.8% in 2027. For Hungary’s commercial property sector, the first-half economic environment has improved but remains mixed. Stronger household spending provides a better backdrop for retail property, while recovering industrial production and exports support manufacturing and logistics activity. Increased housing completions and permits also point towards renewed activity in parts of the residential market.
Weak capital formation and construction remain important constraints. Businesses are still cautious about committing to investment, while weaker construction contracts could translate into a thinner development pipeline if current conditions persist. This creates a market in which demand may improve before development activity fully recovers. Hungary entered the second half of 2026 with growth more firmly established than during the preceding period of stagnation. Household spending has strengthened, services are expanding, industry has improved and inflation has fallen substantially. Investment, construction and public finances remain the principal weaknesses. The durability of the recovery will depend on whether stronger consumption and industrial activity can eventually encourage renewed private investment and whether Hungary’s substantial manufacturing capacity translates into sustained production and exports.
Source: CIJ.World Research & Analysis Team
