Hungary's economy delivered a stronger-than-expected performance in Q1 of 2026, expanding by 0.8% from the previous quarter and 1.7% year-on-year, according to revised GDP data, the Central Statistics Office confirmed in a detailed reading on June 2, financial website Portfolio.hu writes on June 2.

On the production side, services were the main engine of growth, with gross value added rising by 2.3% and contributing 1.4pp to overall GDP growth. The strongest expansion was recorded in professional, scientific, technical and administrative activities, where output increased by 5.3%, accounting for nearly one-third of total GDP growth.

Industrial output returned to growth, rising by 0.8% y/y after a prolonged period of weakness. Manufacturing increased by 1.3%, supported primarily by producers of computer, electronic and optical products. Agriculture also posted modest growth of 1.9%.

Construction remained the weakest sector, with value added falling by 4.3%, subtracting 0.1pp from GDP growth.

On the expenditure side, consumer spending continued to underpin the recovery. Household final consumption expenditure increased by 5.5%, while overall household actual consumption rose by 4.9%. Spending increased across all categories, led by semi-durable goods (+7.9%), durable goods (+7.6%) and non-durable goods (+7.0%). Services consumption rose by 4.1%.

The latest data show that the economy has expanded for four straight quarters, suggesting that the extended period of stagnation has come to an end, according to ING Bank senior analyst Peter Virovacz in a Portfolio.hu podcast. However, the composition of growth remains largely unchanged, with household spending remaining the primary driver of economic activity.

Consumer spending rose sharply as households benefited from sizeable pre-election fiscal transfers and improving confidence, driving a 5.5% annual increase in consumption. While the rebound is significant, Virovacz noted that spending levels still lag well behind the trajectory Hungary might have followed without the shocks of recent years.

Q1 also brought some long-awaited relief from the industrial sector. Manufacturing posted its strongest quarterly expansion in more than three years.

The improvement was driven by the gradual ramp-up of major industrial investments, as new facilities such as those of BMW and CATL began adding to production. However, according to Virovacz, a significant share of this output is still ending up in inventories rather than being sold abroad

Growth was also recorded in professional, scientific, technical, and administrative services, which is likely linked to pre-election spending, such as polling and advertising, as well as increased engineering. Furthermore, planning connected to housing developments under the state subsidises the Home Start mortgage loan scheme, also boosting output.

The analyst cautioned against reading too much into the data, saying growth could moderate in the coming quarters as temporary factors fade and external headwinds become more pronounced.

Trade performance remains a weak spot as imports have increased significantly while exports continue to underperform, reflecting strong demand for machinery, components and raw materials needed for new production capacity. Virovacz said this imbalance should eventually ease as inventory build-ups are converted into actual exports.

ING left its 2026 GDP growth forecast unchanged at 1.5%, despite being among the more optimistic forecasters earlier in the year. The bank sees growing risks from disruptions to global supply chains and commodity markets linked to tensions in the Middle East. The new Tisza government's plans to review public investment projects could also weigh on activity.

Although the release of EU funds would provide an important boost, Virovácz said the economic impact is likely to be delayed. Most of the growth effects are expected to emerge only from late 2027 onwards, with a larger contribution in 2028. If geopolitical risks subside and exports recover, Hungary could return to annual growth rates of 2.5-3% later in the decade, he noted.

The better-than-expected Q1 data have boosted prospects for 2026, making annual GDP growth above 1% likely even if momentum weakens later in the year, Portfolio.hu opined.

There is reason to be cautious, they said, noting that current growth is largely driven by temporary fiscal support, while external risks are increasing and the benefits of EU funding are not expected to arrive until 2027. Reaching the 2% growth target still looks ambitious, it adds.