Hungary’s final second-quarter GDP reading, due for release on September 1, is expected to confirm a weaker-than-hoped performance, with agriculture and construction acting as drags, according to ING economist Peter Virovacz. In a note published Wednesday, Virovacz said the demand-side breakdown would likely show investment as a significant negative surprise, offsetting support from services and industry.
However, the economist flagged one potential bright spot: retail data. Virovacz said retail sales figures could offer an upside surprise, a development that would carry implications for the forint and for the central bank’s easing cycle.
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What to expect from the final 2Q26 GDP print
The Hungarian Central Statistical Office (KSH) will release the detailed breakdown of second-quarter GDP on September 1. The preliminary reading, published in mid-August, showed the economy growing by 1.2% year-on-year, a modest acceleration from the first quarter but still below the government’s full-year target of 3%.
Virovacz’s note suggests the final print will not revise the headline figure significantly, but the composition will be telling. Agriculture, hit by drought conditions in parts of the country, and construction, still recovering from a slump in EU-funded projects, are expected to subtract from growth. Services and industry, by contrast, should provide a cushion.
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The bigger concern, he argues, is on the demand side. Investment is projected to be the weakest component, reflecting elevated borrowing costs and lingering uncertainty about the absorption of EU recovery funds. Household consumption, meanwhile, is likely to have grown at a moderate pace, supported by real wage gains but constrained by still-elevated inflation.
Retail sales: a potential bright spot
Virovacz singled out retail sales as the most likely source of an upside surprise. Recent monthly data have shown a gradual recovery in consumer spending, and the economist believes the trend may have strengthened in the second quarter as households regained purchasing power.
If retail sales beat expectations, it would reinforce the view that domestic demand is becoming a more reliable growth engine, reducing the economy’s reliance on net exports. That, in turn, could influence the Magyar Nemzeti Bank’s (MNB) policy path.
The central bank has been cutting its base rate gradually since late 2025, bringing it to 6.25% in August. Markets are pricing in further easing, but the pace remains uncertain. A stronger retail print could prompt the MNB to slow its cutting cycle, as strong consumption might add to inflationary pressures.
Market implications and the forint
For the forint, the stakes are meaningful. The currency has traded in a narrow range against the euro in recent weeks, hovering around 395 per euro, as investors weigh Hungary’s growth prospects against its fiscal position.
An upside surprise in retail data would likely be seen as positive for the forint, as it would signal a healthier domestic economy and reduce the risk of a sharp slowdown. Conversely, confirmation of weak investment could renew concerns about the country’s long-term competitiveness.
Virovacz’s note suggests that the balance of risks is tilted toward a softer GDP print, but that the retail component could offset some of the negativity. He advises clients to watch the September 1 release closely, as the demand-side details will be more informative than the headline number.
The release comes at a sensitive time for the Hungarian economy. The government has revised its deficit target upward for 2026, and the European Commission has placed Hungary under an excessive deficit procedure. Fiscal consolidation efforts are underway, but they risk dampening growth further.
Against this backdrop, the GDP breakdown will be scrutinized not just for what it says about the past quarter, but for what it signals about the trajectory into 2027. If investment remains weak, the government’s growth target of 3% for next year may prove ambitious.
For now, ING’s view is that the Hungarian economy is growing, but below potential, with the composition of growth leaving room for improvement. The retail sector, once a laggard, may be turning into a source of resilience.
This article is for informational purposes only and does not constitute financial advice. Market conditions are volatile and forecasts may not materialize. Readers should conduct their own research before making investment decisions.
