K&H Analyst Commentary: Hungarian economy shows faint signs of life

“Although the latest quarterly data were slightly more favorable than our expectations, the half-year data is in line with our forecast. We expected that the first-quarter decline would be compensated for by the second quarter. Thus, the economy practically stagnated in the first half of the year compared to the same period last year,”

Dávid Németh, K&H’s chief analyst, assessed the actual data released on Tuesday.

As expected, services drove the economy in the second quarter, with the information and communication sector performing particularly well. It was also clear from the monthly data that industry performed poorly, which pulled back GDP growth. In addition, agriculture also hindered expansion due to unfavorable weather. Regarding the development of the demand side of GDP, the expert said that household consumption may have supported the second-quarter growth, while investments and net exports may have driven the economy in a negative direction.

Dávid Németh also said that further recovery can be expected in the next two quarters based on the current outlook. “We see positive signs in the construction industry, and within industry it seems that car and battery production may have passed the bottom, so the latter subsectors may also contribute positively to the third and fourth quarter GDP figures. The performance of agriculture is very uncertain. It is important that the weather has been more favorable in recent weeks, as a result of which it is possible that the actual agricultural indicator will be more favorable compared to the current estimate. On the demand side, household consumption remains decisive, although the increase in net real wages is slowing down, which carries some risk. Government stimulus measures may also improve performance, although their effect may partially appear in 2026. The decline in investments may be cushioned by ongoing large corporate projects,” the expert added.