Hungary’s economy shrinks unexpectedly by 0.2% in Q2

Hungary’s economy unexpectedly contracted in the second quarter of 2024, with GDP falling by 0.2 per cent from the previous quarter and growing just 1.5 per cent year-on-year, well below the 2.3 per cent forecast. The decline is attributed to weak demand for electric vehicle (EV) batteries and struggling industrial exports, particularly to Germany.

Prime Minister Viktor Orban’s government had heavily invested in EV battery production, drawing companies from China.

However, recent economic policies, including new taxes and budget measures, have not yet reversed the downturn. The government plans to propose a budget for 2025 post-US elections, aiming to support small businesses and boost growth to over 4 per cent.

The central bank, with a benchmark interest rate of 6.75 per cent, continues its cycle of rate cuts to stimulate growth. European Union (EU) funds to Hungary have been partially cut due to concerns over corruption and rule of law issues.

Attribution: Bloomberg.