Hungary's Economic Outlook Post-Trump Victory

By Gergely Szakacs and Karin Strohecker

BUDAPEST/LONDON (Reuters) – Donald Trump’s victory may be politically beneficial for Hungary’s Viktor Orban, but it poses economic challenges, adding to inflationary pressures from a weak forint and potential tariffs on Europe’s auto sector.

Since the Hungarian central bank’s rate cut in September, the forint has struggled, exacerbated by Trump’s win, which has pushed it to 2022 levels, triggering emergency rate hikes at that time.

Analysts warn that if Trump enforces higher tariffs, particularly on China and Europe, Hungary could face greater economic strain. Roger Mark from Ninety One notes the renewed risks for Hungary, given its openness and trade dependency on Europe’s auto industry. The forint’s recent performance has surprisingly been better than expected despite immediate declines.

The European Commission is assessing the broader impacts on the EU, especially on major car-producing nations like Germany and Italy, both of which could suffer significantly from U.S. tariffs.

As of Nov. 7, investors have largely removed expectations for rate cuts in Hungary, which contrasts sharply with prior projections of 140 basis points in reductions. Societe Generale's Marek Drimal suggests the central bank has been overly aggressive in rate cuts amid U.S. election uncertainties.

Facing economic weakness, Orban’s government continues to pressure the central bank for sharp rate cuts as it approaches the tight 2026 election. Finance Minister Mihaly Varga has emphasized that inflation should be the central bank's priority while also needing to collaborate with the government on economic policies.

Concerns exist about a potential alignment of the next central bank governor with Orban’s policies, possibly leading to sharper rate cuts that could destabilize the forint and exacerbate inflation, which surpassed 25% last year.

Viktor Szabo from abrdn highlights the upcoming governor's challenge: balance the central bank's credibility and independence with political pressures for economic growth.

UniCredit warns the forint could hit late-2022 lows, with a weak economy creating additional risks. Barclays economists believe the forint will remain vulnerable due to U.S. tariffs, local political dynamics, and a challenging economic performance, particularly given its heavy reliance on car manufacturing and exposure to Chinese investments.