Hungarian Business Confidence Hits Pandemic Lows Amid Economic Uncertainty
Hungarian business confidence fell to its lowest point since the COVID-19 pandemic in January, according to a survey by economic think tank GKI. The decline was driven by deteriorating prospects in the retail and services sectors, which weighed on overall confidence.
The business confidence indicator dropped to -13.9 in January, easing within the margin of error but still hitting its lowest point since November 2020. All subcomponents of the index remained in the red, indicating continued weakness in the economy.
Economist Raymund Petz said the business confidence indicator had been a good predictor of quarterly economic growth in past years and, barring any major upswing in the coming months, it signaled continued weakness for the first quarter. He predicted that fourth-quarter GDP would likely be poor, with negligible growth.
Consumer sentiment also deteriorated in January, with Hungarians becoming more pessimistic about their financial prospects and the outlook for the wider economy over the next 12 months.
Hungary’s economy is struggling with weak demand in the euro zone, its main trading partner, and is vulnerable to potential US tariffs on European imports. Prime Minister Viktor Orban’s government is banking on an economic rebound fueled by wage and pension rises, increased tax rebates for families, a capital injection for small businesses, and a housing stimulus. However, small businesses do not see a major improvement in their prospects, with expectations among retailers gradually deteriorating over recent months.