IMF Executive Board Concludes 2025 Article IV Consultation with Hungary
IMF News, August 29, 2025
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- Published: August 29, 2025
Overview and near-term outlook
- The Hungarian economy has experienced stagnant output over the past 3 years and inflation remains well above the central bank’s 3 percent target.
- Regulatory measures—such as price, interest and margin caps, along with windfall taxes and subsidized lending schemes—have distorted market signals and added uncertainty.
- Despite significant fiscal adjustment in recent years, public debt is elevated given high financing costs.
- Growth and inflation projections:
- Modest consumption-driven growth of 0.7 percent is expected in 2025 underpinned by favorable wage dynamics.
- Growth is projected at 2 percent in 2026 on a recovery in investment and a positive impulse from German fiscal expansion.
- Inflation is expected at 4.5 percent in Q4:2025 and then to gradually decelerate to the central bank’s 3 percent target by 2027.
- Under current policies, the fiscal deficit will remain around 4½ percent of GDP through the medium term, with debt-to-GDP rising to around 79 percent by 2030.
Risks to the outlook
- Risks are tilted to the downside, including:
- Deepening geoeconomic fragmentation amid a further escalation in trade measures.
- Intensification of regional conflicts.
- Failure to enact a credible fiscal adjustment.
- Cancelation of EU funds.
- High domestic and external uncertainty are expected to continue weighing on the outlook.
Executive Board Assessment — main messages
- Directors welcomed Hungary’s economic resilience but noted the outlook remains subdued amid weak investment and above target inflation.
- Directors stressed the need for strong reform efforts to promote macroeconomic stability, rebuild buffers, and boost productivity.
- Fiscal policy:
- Emphasized the importance of additional fiscal effort to rebuild fiscal buffers and ensure debt sustainability.
- Welcomed the authorities’ medium term goal of achieving a structural primary surplus.
- Underscored the importance of high quality fiscal adjustment.
- Called for broadening the tax base by reducing exemptions and rationalizing spending—particularly energy subsidies—while reallocating savings to strengthen targeted social support.
- Stressed the need for reforms to contain long term pension and healthcare spending pressures and improve monitoring and mitigation of fiscal risks, including those stemming from state owned enterprises.
- Recommended contingency planning, including in case of additional defense spending.
- Monetary policy and exchange rate:
- Agreed that the monetary policy stance should remain tight to return inflation to target.
- Supported a data dependent approach amid high uncertainty.
- Highlighted the role of continued exchange rate flexibility and adequate reserves in mitigating external shocks.
- Agreed on the need to phase out price, fee, and margin controls to avoid market distortions and strengthen the effectiveness of monetary policy.
- Financial sector:
- Considered the financial sector broadly sound but urged continued vigilance.
- Noted banks are well capitalized, liquid and profitable, but vulnerabilities remain, including from risks in the corporate sector, banks’ growing sovereign and FX exposures, and buoyant housing prices.
- Recommended phasing out housing related incentives to contain price pressures.
- Concurred that differentiation in borrower based macroprudential measures should be introduced only on financial stability grounds.
- Structural and energy policy:
- Emphasized the need for structural reforms to boost productivity and competitiveness.
- Stressed the importance of improving energy security and expanding the use of renewables to strengthen economic resilience.
- Called for advancing governance reforms to foster a more predictable business environment and unlock EU funding.
Key quantitative indicators and projections (selected)
- Real GDP (percentage change)
- 2020: -4.3
- 2021: 7.2
- 2022: 4.3
- 2023: -0.8
- 2024: 0.5
- 2025: 0.7
- 2026: 2.0
- 2027: 2.2
- 2028: 2.4
- 2029: 2.5
- 2030: 2.6
- CPI inflation (average)
- 2020: 3.3
- 2021: 5.1
- 2022: 14.6
- 2023: 17.1
- 2024: 3.7
- 2025: 4.6
- 2026: 3.5
- 2027: 3.0
- CPI inflation (end year)
- 2020: 7.4
- 2021: 24.5
- 2022: 5.5
- 2023: 4.5
- 2024: 3.1
- Public debt (percent of GDP)
- 2020: 78.7
- 2021: 76.2
- 2022: 73.9
- 2023: 73.0
- 2024: 73.5
- 2025: 74.8
- 2026: 75.3
- 2027: 76.3
- 2028: 77.3
- 2029: 78.0
- 2030: 78.6
- General government overall balance (percent of GDP)
- 2020: -7.5
- 2021: -7.1
- 2022: -6.2
- 2023: -6.7
- 2024: -4.9
- 2025: -4.7
- 2026: -4.5
- 2027: -4.6
- 2028: -4.4
- Primary balance (percent of GDP)
- 2020: -5.3
- 2021: -5.0
- 2022: -3.9
- 2023: -3.2
- 2024: -1.2
- 2025: -0.7
- 2026: -0.3
- Gross fixed capital formation (percent of GDP)
- 2020: 26.5
- 2021: 27.3
- 2022: 27.8
- 2023: 25.6
- 2024: 23.4
- 2025: 21.6
- 2026: 21.5
- 2027: 21.8
- Gross external debt (percent of GDP)
- 2020: 80.7
- 2021: 86.4
- 2022: 91.8
- 2023: 85.8
- 2024: 84.8
- 2025: 79.1
- 2026: 75.1
- 2027: 71.7
- 2028: 70.2
- 2029: 68.3
- 2030: 67.5
- Reserves (billions of Euros)
- 2020: 33.7
- 2021: 38.4
- 2022: 38.7
- 2023: 41.4
- 2024: 44.6
- 2025: 49.3
- 2026: 50.9
- 2027: 51.1
- 2028: 55.0
- 2029: 55.8
- 2030: 60.7
- Gross official reserves in percent of the IMF ARA metric
- 2020: 120.2
- 2021: 117.5
- 2022: 107.0
- 2023: 105.0
- 2024: 109.6
- 2025: 112.1
- 2026: 111.4
- 2027: 110.8
- 2028: 114.7
- 2029: 114.0
- 2030: 121.3
- Exchange rate, HUF per euro, period average
- 2020: 351.2
- 2021: 358.5
- 2022: 390.9
- 2023: 381.8
- 2024: 395.4
Policy recommendations (summary)
- Rebuild fiscal buffers through additional fiscal effort and high quality adjustment; pursue the medium term goal of a structural primary surplus.
- Broaden the tax base by reducing exemptions and rationalizing spending, particularly energy subsidies; reallocate savings to strengthen targeted social support.
- Undertake reforms to contain long term pension and healthcare spending pressures and to improve monitoring and mitigation of fiscal risks, including those from state owned enterprises.
- Maintain a tight, data dependent monetary stance and preserve exchange rate flexibility and adequate reserves.
- Phase out price, fee, and margin controls, and phase out housing related incentives to contain price pressures.
- Advance structural reforms to boost productivity and competitiveness, improve energy security and expand renewables, and advance governance reforms to unlock EU funding.
IMF Communications Department, Press Release No. 25/286, August 29, 2025. Authorities consented to publication of the Staff Report.