Hungary flags 2025 pre-election stimulus as economic recovery falters

By Gergely Szakacs

BUDAPEST (Reuters) - Hungary's economic recovery from an inflation-led downturn will be weaker than hoped for, Economy Minister Marton Nagy said late on Thursday, flagging stimulus measures for households and small businesses in the 2025 pre-election year.

In power since 2010, Prime Minister Viktor Orban saw his worst result in a national or European Union vote in nearly two decades in last month's European Parliament ballot, which some economists said could pressure him to spend more next year.

Nagy said a rebound from last year's recession, driven by a surge in inflation to more than 25% - the highest in the EU - will be slower than previously expected, with economic growth coming in at around 2.2% to 2.3%.

The new forecast is below the European Commission's 2.4% growth estimate published in May and also below the 2.5% growth seen in April.

Economic growth could "approach", rather than exceed 4%, next year if Hungary's export markets recover and the government takes steps in the 2025 budget to boost the economy, Nagy told private broadcaster InfoRadio.

"We need to include action plans: one for small businesses and one for families that will help the revival of activity and help us approach growth of around 4% next year," Nagy said.

He did not elaborate on the planned measures. The cabinet will submit the 2025 budget draft to parliament in November.

Orban's government, which announced a fiscal stabilisation plan to keep the 2024 deficit under 4.5% of GDP, had been banking on an economic upswing to shore up state finances in the second half of the year.

Nagy did not elaborate on how weaker growth would affect public finances. The budget watchdog has warned that Hungary must hit its 2024 deficit goal to comply with a constitutional debt reduction rule.

Nagy, a former central banker, said high interest rates were also harming the economy. The National Bank of Hungary lowered its base rate by another 25 basis points to 6.75% on Tuesday, which is still the EU's highest benchmark alongside Romania.

(Reporting by Gergely Szakacs; editing by Miral Fahmy)