Orban Struggles to Kickstart Hungarian Economy as Vote Nears

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(Bloomberg) — Hungary’s economic performance underwhelmed late last year as a slump in industrial production persisted, shrinking Prime Minister Viktor Orban’s room to reverse an opposition lead less than three months from key elections.

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Gross domestic product increased 0.2% from the third quarter, the statistics office said Friday. That compared with a median estimate of 0.5% in a Bloomberg survey. The economy expanded just an annual 0.4% in the whole of last year. Barring one reading in early 2024, industrial activity has shrunk every month for the past three years.

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The data added to recent indicators which continue to show Orban’s economic stimulus programs failing to show a meaningful impact before parliamentary elections on April 12. Pre-ballot spending has stretched the budget, pushing the government to increase its deficit targets and potentially risking the country’s investment credit grade.

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“The subdued quarterly data indicate that there still wasn’t any meaningful improvement in economic activity at the end of the year,” said Orsolya Nyeste, an economist at Erste Group Bank AG in Budapest. “That also projects a restrained performance ahead for 2026.”

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The forint weakened 0.2% against the euro after the publication of the GDP data, though it remained close to the strongest level in two years amid a rally in emerging-market assets in recent weeks.

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Peter Magyar, whose Tisza party has a double-digit lead in several polls, has hammered Orban and his lieutenants for economic mismanagement, including over optimistic forecasts over the years that repeatedly failed to materialize.

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Tisza is pledging to elevate living standards while adhering to conservative fiscal planning, which Magyar has said the party can do by addressing rule of law and graft concerns that have led to the European Union to block more than $20 billion in funding.

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Tisza is also making plans for Hungary to join the euro area as soon as possible if it wins the vote, Istvan Kapitany, the party’s economy chief, told Magyar Hang newspaper in an interview published Friday.

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That’d be part of a broader move to bring Hungary back into the European fold after Orban became the Kremlin’s loudest supporter in the EU, doubling down on Russian energy purchases even after Moscow’s invasion of Ukraine. Tisza officials have pledged to accelerate energy diversification away from Russia if the party was elected to power.

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(Updates with economist in fourth paragraph, markets in fifth, opposition plans from sixth.)

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