{ "title": "Hungary: Staff Concluding Statement of the 2025 Article IV Mission", "publication": "IMF News, June 20, 2025", "sourceUrl": "https://www.imf.org/en/news/articles/2025/06/20/hungary-staff-concluding-statement-of-the-2025-article-iv-mission", "canonical": "https://www.imf.org/en/news/articles/2025/06/20/hungary-staff-concluding-statement-of-the-2025-article-iv-mission", "overlayPath": "/en/news/articles/2025/06/20/hungary-staff-concluding-statement-of-the-2025-article-iv-mission/index.md", "summary": "An International Monetary Fund (IMF) mission, led by Anke Weber and comprising Aleksandra Alferova, Jakree Koosakul, Moheb Malak, Augustus Panton, and Atticus Weller, visited Budapest during June 5-17 to conduct discussions on the 2025 Article IV Consultation with the Hungarian authorities", "publishDate": "2025-06-20", "sections": [ { "heading": "Mission summary", "content": "- IMF mission led by Anke Weber visited Budapest during June 5-17 to conduct discussions on the 2025 Article IV Consultation.\n- Core assessment: the Hungarian economy is at a challenging juncture — output has stagnated over the past 3 years, inflation remains well above the central bank’s 3 percent target, and regulatory measures (price, interest and margin caps, windfall taxes, subsidized lending schemes) have distorted market signals and added uncertainty.\n- Policy priority: timely domestic reforms are needed to reinforce resilience amid an unsettled external environment, focusing on well-designed fiscal measures, a continued tight monetary policy, and structural reforms to raise productivity and safeguard growth." }, { "heading": "Economic outlook and projections", "content": "- Growth:\n - 2025: modest consumption-driven growth of 0.7 percent, underpinned by favorable wage dynamics.\n - 2026: growth projected to increase to 2 percent on a recovery in investment and positive impulse from German fiscal expansion.\n - By 2030: growth projected to converge to long-term potential of around 2½ percent.\n- Inflation:\n - Q4:2025: forecast at 4.5 percent.\n - By 2027: forecast to gradually decelerate to the MNB’s 3 percent target.\n- External balances:\n - Current account surplus expected to fall to around 1¼ percent of GDP in 2025 and to increase gradually over the medium term as battery and electric vehicle production expands.\n- Projections are based on the IMF’s April World Economic Outlook global assumptions." }, { "heading": "Risks to the outlook", "content": "- Downside risks predominate:\n - Deepening geoeconomic fragmentation and rising trade tensions could reduce exports and undermine private investment.\n - Geopolitical tensions could lead to commodity price volatility, intensifying inflationary pressures and negatively impacting fiscal and external balances.\n - Domestic risks: delayed fiscal adjustment could heighten market concerns about debt sustainability, increase risk premia, and exacerbate sovereign-bank linkages.\n - Lack of governance reform progress could delay or cancel EU funds, harming growth and market confidence.\n - Inflation could be more persistent than projected, including from larger-than-anticipated effects of minimum wage hikes necessitating tighter monetary policy for longer." }, { "heading": "Strengthening fiscal sustainability", "content": "- Authorities’ targets:\n - Commitments to reach 2025 and 2026 deficit targets of 4.1 and 3.7 percent of GDP, respectively.\n - Medium-term fiscal structural plan (MTFSP) envisages deficit reduction to below 2 percent of GDP by 2028.\n- Staff baseline projections (only legislated or officially endorsed measures):\n - Deficit: decline slightly to 4.8 percent of GDP in 2025 and 4.6 percent of GDP in 2026.\n - Medium term: deficit would remain around 4½ percent of GDP.\n - Debt-to-GDP ratio: rise to about 79 percent in 2030 from 73½ percent in 2024.\n- Staff recommendation for adjustment:\n - Over the medium term, a surplus of around 1¾ percent of GDP excluding debt servicing and adjusting for economic cycles is appropriate.\n - Implied cumulative adjustment of around 2 percent of GDP over 2025-2028 would bring the deficit below 3 percent of GDP by 2027 and reduce the public debt ratio below 70 percent by 2029.\n - Any additional defense spending should be accommodated within staff’s recommended path." }, { "heading": "Fiscal policy measures — design and priorities", "content": "- Revenue enhancements:\n - Recent doubling of family tax allowances and expansion of personal income tax exemptions for mothers will significantly reduce revenues.\n - Staff view: an alternative to minimize fiscal costs and labor market distortions is capped tax credits per child for both parents.\n - Recommendations: implement a more targeted tax regime with fewer exemptions; consider a higher marginal personal income tax rate for high earners; rationalize corporate tax incentives; reduce reliance on distortionary windfall and financial transactions taxes.\n- Expenditure rationalization:\n - Phase out distortive retail energy subsidies and replace them with targeted cash transfers.\n - Review procurement and government employment to better target reduction of administrative expenditures.\n - Limit transfers to SOEs and other public organizations.\n - Reallocate realized savings to underfunded areas—health, primary education, and social protection.\n - Strengthen public financial management and expenditure review processes.\n - Avoid relying on capital spending cuts to achieve targets as this would weaken growth.\n- Long-term spending pressures:\n - Population aging expected to add roughly 3.5 percent of GDP in additional pension and healthcare costs by 2050.\n - Suggested measures: increase retirement age, adjust benefit levels, limited increase in social security contribution rate, improved digitalization, and efficient procurement to contain health expenditures.\n- Fiscal risk monitoring and mitigation:\n - Implement comprehensive, consolidated and regular risk assessment of SOEs.\n - Cap issuance of new guarantees by ceilings and assess stock of guarantees, activation risk, and liabilities annually.\n - Avoid channeling public resources into fund management structures or private equity that undermine budgetary transparency and risk unforeseen contingent liabilities.\n - Limit subsidized lending by state-owned banks to addressing market failures." }, { "heading": "Monetary policy and inflation control", "content": "- Stance:\n - Monetary policy needs to remain tight into next year to durably return inflation to target.\n - With average inflation expected to remain above the tolerance band in 2025, staff sees limited scope for rate cuts this year and recommends a data-driven approach given exceptional uncertainty.\n - The flexible exchange rate regime and adequate reserve coverage help reduce vulnerability to external shocks.\n- Structural measures:\n - Price, fee, and margin controls are not sustainable for lasting disinflation and should be phased out.\n - Staff welcomes the proposed change to the MNB Act prohibiting foundations from engaging in asset management activities and calls for a broader review of the MNB’s non-core functions, including measures related to its secondary goal of environmental sustainability.\n - Recommendation: MNB should focus on price and financial stability; climate-risk supervision can be active but prudential regulation should remain risk focused and consistent with price and financial stability mandates." }, { "heading": "Financial sector stability", "content": "- Overall assessment:\n - Systemic risks broadly contained; banking system remains well-capitalized, liquid, profitable, and resilient to external shocks.\n - Emerging vulnerabilities: increase in share of FX corporate loans, banks’ growing sovereign exposure and significant FX positions, elevated commercial real estate (CRE) vacancies, and buoyant house prices.\n- Macroprudential framework:\n - Capital-based toolkit broadly appropriate; planned introduction of a one percent positive neutral countercyclical capital buffer (CCyB) in July 2025 is welcome.\n - Reactivation of the systemic risk buffer (SyRB) for banks’ CRE exposures in 2024 is noted.\n - Consider incorporating sovereign-bank nexus stress scenarios into regular supervisory stress testing.\n- Borrower-based measures and housing:\n - Differentiation in borrower-based macroprudential limits should be only on financial stability grounds.\n - Recent relaxations of LTV and DSTI limits for first-time buyers and green homes appear partly driven by housing affordability and energy efficiency concerns; such concerns are better addressed through structural and fiscal policies.\n - DSTI limits of 60 percent for first-time home buyers and for energy-efficient homes appear high relative to overall limits in some peers.\n - Reintroduction of voluntary APR ceilings for housing loans distorts risk pricing and should be reversed.\n - Scaling back housing-related fiscal incentives would help contain future price pressures and safeguard financial stability." }, { "heading": "Boosting productivity and structural reforms", "content": "- Firm dynamics:\n - Low firm entry and exit rates amid high regulatory barriers and an insolvency framework that impedes timely exit of non-viable firms.\n - Recommendations: streamline licensing and overlapping permits; enable creditor-initiated and out-of-court restructuring to enhance capital and labor mobility.\n- R&D and industrial policy:\n - Public R&D support should be performance-based and better targeted, especially toward young, high-growth firms.\n - Repeated waves of industrial policies have had elusive impact on sustained productivity growth; given high fiscal cost, IP should not substitute for broader structural reforms.\n - When used, IP must be targeted to address market failures, time-bound, and transparent; coordinated EU-level approach to state aid and IP recommended.\n- Energy security and the green transition:\n - Ongoing diversification and renewable generation efforts are commendable, but the economy remains energy-intensive with high corporate energy prices reducing competitiveness.\n - Recommendations: complement EU-wide measures with domestic reforms—targeted phaseout of household fossil fuel subsidies, enhanced energy efficiency standards, accelerated permitting for renewable investment.\n- Governance reforms:\n - Foundational for a predictable business environment and higher potential growth.\n - Steps taken include 2023 judicial reforms aimed at strengthening the National Judicial Council.\n - Further governance reforms and effective enforcement—public procurement, asset declaration scope, conflict-of-interest rules, regulatory oversight, functioning of the Integrity Authority—could unlock EU funds and amplify growth dividends." }, { "heading": "Closing", "content": "- The mission thanks the Hungarian authorities and interlocutors for productive collaboration, constructive policy dialogue, and hospitality.\n\nSource: IMF staff concluding statement of the 2025 Article IV mission to Hungary (June 20, 2025).\n\n---\n\n\n References\n\n- Hungary and the IMF\n- IMF Policy Advice -- A Factsheet\n- Mission Concluding Statements\n- PRESS CENTER\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2025/06/20/hungary-staff-concluding-statement-of-the-2025-article-iv-mission" } ], "bullets": [ "[Markdown version](/en/news/articles/2025/06/20/hungary-staff-concluding-statement-of-the-2025-article-iv-mission/index.md)", "[Structured JSON version](/en/news/articles/2025/06/20/hungary-staff-concluding-statement-of-the-2025-article-iv-mission/index.json)", "[Bundle manifest](/en/news/articles/2025/06/20/hungary-staff-concluding-statement-of-the-2025-article-iv-mission/bundle-manifest.json)", "Published: June 20, 2025", "IMF mission led by Anke Weber visited Budapest during June 5-17 to conduct discussions on the 2025 Article IV Consultation.", "Core assessment: the Hungarian economy is at a challenging juncture — output has stagnated over the past 3 years, inflation remains well above the central bank’s 3 percent target, and regulatory measures (price, interest and margin caps, windfall taxes, subsidized lending schemes) have distorted market signals and added uncertainty.", "Policy priority: timely domestic reforms are needed to reinforce resilience amid an unsettled external environment, focusing on well-designed fiscal measures, a continued tight monetary policy, and structural reforms to raise productivity and safeguard growth.", "Growth:", "Inflation:", "External balances:", "Projections are based on the IMF’s April World Economic Outlook global assumptions.", "Downside risks predominate:", "Authorities’ targets:", "Staff baseline projections (only legislated or officially endorsed measures):", "Staff recommendation for adjustment:", "Revenue enhancements:", "Expenditure rationalization:", "Long-term spending pressures:", "Fiscal risk monitoring and mitigation:", "Stance:", "Structural measures:", "Overall assessment:", "Macroprudential framework:", "Borrower-based measures and housing:", "Firm dynamics:", "R&D and industrial policy:", "Energy security and the green transition:", "Governance reforms:", "The mission thanks the Hungarian authorities and interlocutors for productive collaboration, constructive policy dialogue, and hospitality.", "[Hungary and the IMF](http://www.imf.org/external/country/HUN/index.htm)", "[IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)", "[Mission Concluding Statements](https://www.imf.org/en/news/searchnews)", "[PRESS CENTER](http://presscenter.imf.org/)", "[https://www.imf.org/en/home](https://www.imf.org/en/home)" ], "alternates": { "markdown": "/en/news/articles/2025/06/20/hungary-staff-concluding-statement-of-the-2025-article-iv-mission/index.md", "json": "/en/news/articles/2025/06/20/hungary-staff-concluding-statement-of-the-2025-article-iv-mission/index.json", "bundleManifest": "/en/news/articles/2025/06/20/hungary-staff-concluding-statement-of-the-2025-article-iv-mission/bundle-manifest.json" }, "generatedAtUtc": "2026-09-26T03:57:20.771Z" }