What future for the Hungarian economy?

Markets reacted positively to the outcome of the 12 April 2026 Hungarian election. The forint appreciated to record levels in real terms, government bond yields fell and stock prices surged – except for companies closely tied to the previous government. This market response reflects several factors. 

First, investors expect a return to a market‑friendly policy environment, with state intervention limited to clear cases of market failure and governed by transparent, predictable rules and taxation. Plans to restore the independence and proper functioning of the judicial system should reduce legal uncertainty. Together with a declared zero‑tolerance approach to corruption, these changes could foster a business climate in which merit and performance, rather than political connections, drive success.

Second, the new government has prioritised unblocking European Union funds, frozen over rule‑of‑law concerns. Releasing these funds would provide a significant short‑term boost to growth. Facing tight deadlines, negotiations with the European Commission have already begun. Aligning Hungary’s asylum system with EU regulation is also essential to halt the heavy financial penalties imposed by the European Court of Justice, which have already cost the country nearly one billion euros.

Third, euro-area accession is central to the new government’s plan. Joining the euro would strengthen confidence in monetary policy and help anchor inflation expectations, crucial in a country with a poor track record. Euro adoption would also lower borrowing costs across the economy, supporting investment and fiscal sustainability.

Nevertheless, the road ahead will be challenging. The new government inherits severe fiscal imbalances and it is unclear the extent to which incumbent appointees and vested interests will hinder the transition. Delivering on ambitious institutional and economic promises while restoring fiscal discipline will test both political resolve and administrative capacity in the years ahead.

The Why Axis is a weekly newsletter distributed by Bruegel, bringing you the latest research on European economic policy. 

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