Hungary, long seen by many in Europe as a political “black sheep” due to the long rule of Viktor Orbán, is also a country with a deep history, a strategically important position in Central Europe and one of the region’s most interesting equity markets. Recently, after 16 years of Orbán-led government, Péter Magyar’s Tisza party came to power, opening a new chapter for the country’s political and economic direction. In today’s blog, we look at Hungary’s macroeconomic situation, the expectations for the coming years and the country’s equity market, especially in the context of its new leadership. The key question is simple: can Hungary move from political discount to investment opportunity?
The long reign of Viktor Orbán within Hungary has been marked by many ups and downs, and by almost as many scandals. The former Prime Minister has been one of the leaders of the opposition to many EU policies, including immigration, support for Ukraine, and judicial reforms, among others.
As a result, Hungary was increasingly isolated in EU-level decision-making, resulting in approximately EUR 18bn of EU funds remaining frozen on rule-of-law grounds. Together with high inflation, tight monetary policy, weak domestic demand and pressure from energy prices, this weighed heavily on economic growth.
After the pandemic’s economic rebound (GDP +7.1% in 2021, +4.6% in 2022), economic growth started to slow down heavily, contracting by 0.9% in 2023 and growing below 1% in 2024 and 2025. Inflation, on the other hand, grew by double-digit levels in 2022 and 2023, before returning to the 3.5–4.5% range in 2024 and 2025, and is expected to fall towards the 2% level in 2026. During a longer time period, from 2016 to 2025, cumulative inflation exceeded 73% according to GKI, marking the highest cumulative growth in the EU.
The Hungarian Central Bank (MNB) ran one of the world’s most aggressive tightening cycles to combat said inflation, with the base rate peaking at 13% from September 2022 to October 2023, while the overnight one-day deposit rate was raised to 18% in Autumn 2022. These aggressive moves were not only made to combat inflation but also to support the forint, the country’s currency. The base rate was reduced to 6.5% by late 2024, then held from September 2024 until February 2026. Rate cuts only resumed in 2026, with 2 cuts, down to 6% as of June 2026.
The fiscal picture is also fragile. The general government deficit stood at 5.1% of GDP in 2024 and narrowed only modestly to 4.7% in 2025, while pre-election measures such as PIT exemptions for mothers, pension increases and public-sector wage hikes added further pressure for 2026, with the estimated deficit of 6.2%. However, these figures are now subject to significant revision risk, as Magyar’s government has claimed that the underlying deficit was materially worse than previously disclosed, with some estimates pointing towards a far higher 7-8% government deficit.
Thus, public debt also continued to rise, from approx. 73.6% in 2024, to 74.6% by the end of 2025, and is expected to reach almost 77% by 2027. Alongside corruption allegations, institutional disputes and EU rule-of-law conflicts, the weak economic prospects were one of the key reasons behind the large political shift.
Hungary real GDP growth (2015 – 2027F, %)
Source: MNB, InterCapital Research
However, the situation can best be described as improving, but not yet clean. MNB projections estimate 2.0% GDP growth in 2026 and 3.0% in 2027 (although other sources such as the EC and OECD estimate slightly lower growth, albeit still higher than in the 2023 – 2025 period). One of the main reasons for this expected growth, despite a dire situation in the public finances, is the EU support, which, with the end of Orbán’s rule, could be gradually unlocked if the new government delivers on rule-of-law, judicial and anti-corruption reforms.
After the election, the quick change could already be seen in the European Commission, with its President Von Der Leyen announcing that EUR 10bn would be released from the recovery funds, and EUR 4.2bn from the cohesion funds, with a further EUR 2.2bn to follow as reforms complete.
There are still downsides, though. Hungary retains heavy energy dependence on Russia, remaining among the EU countries most exposed to Russian energy, and one of the only ones that requested exemptions to be allowed to keep importing Russian energy. Furthermore, the previous government focused more on FDI/manufacturing, with an “Eastern opening” toward China. The new government implies a pro-EU pivot, judicial reform, and potential euro-accession preparation, although Hungary would have to improve many of its economic KPIs to do so, even under the new Government.
The pivot towards the EU would also be supportive for foreign investors, especially as reforms are made and the goal of transparency is being worked towards. Even in the last couple of years, when the economy was largely stagnating, the Hungarian stock market performed markedly well, among the best in the CEE/SEE region.
Budapest Stock Exchange market capitalization (2022 – July 2026, EURbn)
Source: BSE, InterCapital Research
As a point of comparison, the Budapest Stock Exchange’s (BSE) market capitalization rose from approx. EUR 25bn in 2022, to EUR 38.9bn in 2023, and then to EUR 43.4bn in 2024, EUR 61.7bn at the end of 2025, and stood at HUF 73.9bn as of early July 2026, an increase of approx. 161% during that period.
BUX index constituents performance (2023* – 2026 YTD, %)
Source: Bloomberg, InterCapital Research
*Performance for SPLUS and GRANIT as of IPO dates
Many companies recorded growth from the beginning of 2023 up until 2026 YTD, with Magyar Telekom leading the way with an almost 690% increase, followed by ANY at 415%, OTP at 363%, and Appeninn at 268%. Almost half the constituents recorded triple-digit growth, almost half recorded double-digit growth, while only 2 companies recorded declines.
To better understand how this drove the overall stock exchange’s growth, a look at the main index, BUX, and its composition is prudent.
BUX index composition (by weight, as of July 2026)
Source: BSE, InterCapital Research
As we can see, the largest constituent by far is OTP, which holds almost 40% of the entire index weight. Following them, we have MOL at 24.4%, Richter Gedeon at almost 22%, and far behind these 3, is Magyar Telekom at 6.5%. In other words, 86% of the entire index is concentrated in these 3 sectors: banking, oil & gas, and pharma.
Other members, except OPUS, make up a negligible % of the weight in the entire index. These three main 3 sectors are expected to keep performing well moving forward, with OTP having high ROE despite its large size, MOL investing heavily both domestically and abroad, and Richter Gedeon continually offering new pharma products. These sectors are quite defensive in a sense, as the need for banking, energy, and pharma not only remains high but is growing.
Other blue chips offer diversification, and these include the telecom industry, industrials, real estate, construction, and insurance, among others. In other words, while the majority of the weight (and trading) is concentrated in the big 3 (OTP, MOL, Richter Gedeon), there is opportunity for price discovery on the others, especially due to the fact that the Hungarian market is, for all intents and purposes, still cheap.
P/E comparison between regional indices
Source: Bloomberg, InterCapital Research
Compared to all regional peers, the BUX index is still cheaper, by several points at the very least, on the P/E ratio. It’s also cheaper on the P/B (an important indicator in this case as banking makes up such a large % of the index). This discount could be justified historically, as the political and economic situation in the country was far from ideal.
However, now it begs the question: with new leadership, larger support from the EU, and an opportunity to fix many of the broken systems that ran within the country for decades, is it still justified? It is hard to say until more time is given, and hopefully, more reforms are passed that will justify the optimism.
Lastly, we leave the readers with one final chart: the performance of the BUX index through a period marked by political isolation, frozen EU funds, high inflation and weak economic growth. Despite these headwinds, Hungarian equities outperformed many regional and developed-market peers. If the political reset translates into institutional reform, EU-fund access and macro stabilization, the key question is whether Hungary’s equity market has room to re-rate further.
BUX index performance (2020 – 2026 YTD, %)
Source: Bloomberg, InterCapital Research