Industrial production in Hungary declined by 1.2% m/m in June, following a 1.1% drop in May, marking the fourth monthly contraction in the past five months. In annual terms, output fell 4.9% y/y (chart), according to both raw and adjusted data, preliminary data from the Central Statistics Office (KSH) shows. The fresh data underscores troubles facing Hungary's industry, in a downward trend since 2023 with no signs of a turnaround in sight.

The continued slump was largely driven by weak external demand, while structural issues in the automotive sector, Hungary's key industrial segment, have further amplified the downturn.

While detailed data will be published on August 14, the KSH in a short note said that most manufacturing sub-sectors saw output fall. Small gains were recorded in food, beverages and tobacco, electronics, and electrical equipment were not enough to outweigh a significant drop in vehicle manufacturing, a main pillar of Hungary's export-oreinted industry. 

Unless the trends shift, Hungary's industry is on track for a third consecutive year of decline in 2025, which would be unprecedented since the regime change. Output in the first six months dropped 3.9% y/y.

ING senior analyst Peter Virovacz in his note pointed out that the fixed-base index indicates a 7.9% decline in output compared to the 2021 monthly average, suggesting industrial performance has slipped back to levels last seen in autumn 2018, excluding the temporary shutdowns during the pandemic. While some sub-sectors showed modest growth, the broader trend remains negative, and capacity utilisation indicators among domestic firms have worsened heading into Q3. ING Bank expects full-year industrial output to shrink by 4-5%.

 

Analysts broadly agree that while certain sub-sectors or individual companies may show signs of improvement, a full-scale industrial recovery in Hungary is unlikely to materialise before next year.

Although the recent EU–US trade agreement has reduced short-term trade risks, a number of risk factors persist, such as the possibility of tariff hikes for non-compliance or US retaliatory measures.

Major industrial projects, such as the new EV factory of CATL and BMW's e-car plant in Debrecen, are expected to come online, but the new factories are expected to ramp up production only in 2026. Similarly, BYD is set to start serial production at its southern Hungarian plant in Szeged, but according to media reports, the scale-up of production will be slower than initially planned.

Economists also noted the government's economic stimulus scheme (Demjan Sandor programme), offering grants and subsidised loans to SMEs for digital and green transition and improving competitiveness.