BUDAPEST (Reuters) - Hungarian business confidence fell in January to lows last seen during the COVID-19 pandemic, economic think tank GKI said on Thursday, weighed down by deteriorating prospects in retail and services.
The findings of the survey, which focuses mostly on small business expectations, belies the optimism within Prime Minister Viktor Orban's cabinet that Hungary's economy is set for a sharp rebound in 2025 after two years of near-stagnation.
Orban, who faces an election in early 2026, expects Hungary's economy to grow by 3.4% this year compared with the European Commission's 1.8% forecast and GKI's 2.5% projection issued in December, which the think-tank says now looks somewhat optimistic.
GKI's business confidence indicator dropped to -13.9 in January, easing within the margin of error, but still hitting its lowest point since November 2020, as all subcomponents of the index remained in the red, economist Raymund Petz said.
He said the business confidence indicator had been a fairly good predictor of quarterly economic growth in past years and, barring any major upswing in the coming months, it signalled continued weakness for the first quarter.
"These figures indicate that fourth-quarter GDP is likely to be poor, with negligible growth. Barring a rebound in February, a sea change in the first quarter is unlikely," he said.
Consumer sentiment also deteriorated in January, with Hungarians turning more pessimistic about their financial prospects and the outlook for the wider economy over the next 12 months, the survey showed.
Hungary's economy, which is among the most export-reliant in the European Union, is struggling with weak demand in the euro zone, its main trading partner. Any U.S. tariffs on European imports, especially cars, could further crimp growth.
Orban is banking on an economic rebound fuelled by wage and pension rises, increased tax rebates for families, a capital injection for small businesses and a housing stimulus.
However, for the time being, small businesses see no major improvement in their prospects, Petz said, with expectations among retailers gradually deteriorating over recent months.