Ever since Fidesz won its first election 15 years ago, Hungary has been the bullied kid in the European Union. The bullying has increased over time, conspicuously on par with the successes that Viktor Orbán’s government has delivered. 

Recently, the government in Budapest warned of a weakening economy. The Magyarophobic bullies turned themselves inside out to predict economic disaster and the demise of the Fidesz government. 

On July 29th, Reuters reported:

Hungary’s government slashed its 2025 economic growth forecast to 1% on Tuesday [July 29th] from 2.5% expected at the start of the year.

Financial Times asks, with poorly concealed gloat, if “Hungary’s faltering economy” could “topple Orbán.” As I will show in a moment, there are strong economic reasons to predict that the Financial Times will be wrong on this point. 

That does not prevent others from taking a stab at the same kind of wishful forecasting. The same day as the Reuters story broke, AIinvest.com told its readers that the Hungarian economy suffers from “deepening structural vulnerabilities”:

While the government’s deficit has narrowed from 6.7% of GDP in 2023 to 4.6% in 2025, the broader picture reveals a nation struggling to reconcile political dominance with economic sustainability. For foreign investors, the Hungarian case underscores the risks of entangling capital with a regime that prioritizes short-term stability over long-term resilience. 

This is an almost comical attempt at economic analysis. It alleges that the Hungarian economy suffers from a “reliance on consumption,” which in their view is a structural problem symptomatic of an even deeper structural problem. In reality, an economy that ‘relies’ on private consumption is actually strong and exhibits resilience through tougher economic times. In fact, private consumption is the ultimate goal with all economic activity: private consumption is nothing more, nothing less than the satisfaction of human needs. 

As far as foreign direct investments are concerned, Hungary has done very well under the Fidesz government, even better than the country did before their first election win. According to the OECD, the inflow of foreign direct investments into Hungary increased by 201% from 2013 to 2023 (the last year for which they have data). This beats most other countries in the EU, including Germany (186.7%), Italy (65.1%), and France (49.7%). 

With that said, there is no doubt that the Hungarian economy is at a weak point currently. It is too strong of a word to call it a recession, as GDP has not yet declined two quarters in a row. A ‘breather’ is a better term, though analytically not quite as stringent as a recession. 

On August 14th, the Hungarian Central Statistical Office released its most recent numbers on industrial activity. Overall, it is a pessimistic assessment, showing a decline in productive activity in most sectors. These numbers are backed up anecdotally, e.g., by the Budapest Business Journal (BBJ), which reports weaker business for Hungarian rail freight and a stagnant but modestly positive market for building materials. 

At the same time, the BBJ reports a significant upswing in construction activity compared to last year:

New contract volumes jumped 67.8% year over year. Contracts for building construction rose by 7.0%, while those for civil engineering works surged 147.9%. At the end of June, the total stock of construction contracts was 17.9% higher than a year earlier. 

This is particularly good news, since construction activity is a leading economic indicator: when construction falls, it precipitates a recession; by the same token, when construction rises, it indicates that better economic times are ahead.

The signs of better times are not surprising. Contrary to what its critics like to say, the Hungarian economy is structurally strong. Few economies can go through several quarters of virtually zero economic growth without a sharp rise in unemployment, but Hungary has done just that. While the GDP has been at a virtual standstill for the past year, unemployment has remained at a low 4.3-4.4%. This compares to the EU as a whole, where unemployment in June was a significantly higher 5.7%.

A closer look at the components of GDP reveals strength in the Hungarian economy that is hard to find in other European countries. In the first quarter this year (Eurostat has not yet released disaggregated GDP data for the second quarter), private consumption grew by an inflation-adjusted 4.3% year-to-year. This is far better than the EU average of 1.5% and makes up for a 10.8% decline in business investments. 

A steady increase in consumer spending means that Hungarian families in general feel optimistic about the near-term future. There is no doubt that this number is tied to the aforementioned unemployment ratio, which, again, is impressively low for an economy that currently is standing still.

While it is a negative for the economy that businesses are scaling back their investments, we have to keep two things in mind: 

The -10.8% figure is from the first quarter; based on the recent uptick in construction and the resilience of household spending, I would expect the second-quarter figure to be notably better;

The decline in investments is in itself slowing down; while still at double digits, the decline was -12.1% in the second quarter last year.

There is more silver lining, even good news, in the national accounts figures from the first quarter this year. At -1.6%, government spending was only the latest of a long line of quarters with small but steady declines in public-sector consumption. This shows a sense of prudence among Hungarian lawmakers: they have been able to modestly scale back government outlays in tougher economic times without causing an outright recession. 

When we get the numbers for public sector finances for the second quarter this year, we will most certainly see the Hungarian government exercising an unintrusive form of fiscal responsibility. Normally in European economies, when government rolls back its spending, private consumption suffers due to the high degree of government dependency among the nation’s households. 

The fact that private consumption in Hungary increases while government scales back its spending is a healthy sign that Hungarians in general are relatively independent of the government when it comes to providing for themselves and their families. Therefore, the government in Budapest can do something that most other governments in Europe cannot do: roll back government spending without aggravating a difficult economic situation. 

All in all, nobody should expect an easy economic recovery in Hungary. However, with Fidesz at the helm of government, fiscal policy is characterized by prudence, intelligence, and adaptability. This has made the Hungarian economy adaptable and resilient in the face of challenges.