Economic and Political Overview

flag Hungary Hungary: Economic and Political Overview

In this page: Economic Outline | Political Outline

 

Economic Outline

Economic Overview

Resuming the trends observed in recent years, Hungary's GDP rebounded sharply after the softening of the COVID-19 pandemic. Nevertheless, the country’s economy contracted for four consecutive quarters from mid-2022 to mid-2023 due to high inflation, tighter fiscal and monetary policies and sluggish external demand. Hungary entered a technical recession once again in Q3 2024. Consumption grew steadily due to a resilient labour market, high wage increases, and monetary policy accommodation. However, investment remained weak amid postponed public projects and declining business sentiment. Exports were hampered by subdued demand from trading partners, particularly for machinery and transport equipment. For the year as a whole, growth was estimated at 0.6% by the EU Commission, with a projection of 1.8% in 2025 and 3.1% in 2026, driven by strong consumption supported by real income growth and a declining household saving rate. Investment growth may face challenges due to uncertainties in the automotive sector. Exports are expected to rise gradually, boosted by foreign investment in manufacturing, while recovering domestic demand is likely to increase imports and narrow the current account surplus.

Hungary's budget deficit fell from 6.7% of GDP in 2023 to 5.4% in 2024, driven by reduced utility subsidies, postponed public investments, and a moderate tax revenue rebound. The net cost of energy price mitigation dropped from 1.6% to 0.9% of GDP. The deficit is expected to narrow further to 4.6% in 2025 and 4.1% in 2026. Fiscal policy is projected to be expansionary, with subdued primary expenditure growth and declining interest costs. Capital spending is set to rise gradually, while the phasing out of windfall taxes may reduce revenue by 0.6 pps. of GDP in 2025. Hungary's debt-to-GDP ratio reached 74.5% in 2024, driven by a high budget deficit and the Budapest airport purchase. It is expected to stay at 74.5% in 2025 before declining to 73.8% in 2026, supported by strong nominal GDP growth. HICP inflation fell from 17.0% in 2023 to 3.0% in September 2024, as the effects of previous energy and food price hikes and supply chain issues eased. However, inflation excluding energy and food remained high at 5.6%, driven by past inflation impacts on services, strong wage growth, rising consumer demand, and currency depreciation. Underlying inflation is expected to gradually slow as commodity prices and wage growth decrease. HICP inflation is forecast to decline from 3.8% in 2024 to 3.6% in 2025 and 3.2% in 2026 (data EU Commission).

The unemployment rate rose to 4.4% in 2024, up from 4.1% the previous year (IMF). As the economy recovers, labour demand is expected to rise, leading to a gradual decline in the unemployment rate. While the labour market will tighten, nominal wage growth is projected to ease in 2025 and 2026 as the impact of past minimum wage increases fades. Overall, GDP per capita in Hungary was estimated at USD 49,150 in 2024, still below the EU average (USD 62,660 – IMF), while 20% of the population was at risk of poverty or social exclusion as of 2023 (HCSO, latest data available).

 
Main Indicators 2023 (E)2024 (E)2025 (E)2026 (E)2027 (E)
GDP (billions USD) 212.46228.81245.62260.72275.76
GDP (Constant Prices, Annual % Change) -0.91.52.93.03.0
GDP per Capita (USD) 22,13223,88125,70327,35129,000
General Government Balance (in % of GDP) -6.4-4.3-4.2-3.3-2.9
General Government Gross Debt (in % of GDP) 73.573.573.673.071.9
Inflation Rate (%) 17.13.83.53.13.0
Unemployment Rate (% of the Labour Force) 4.14.44.24.14.0
Current Account (billions USD) 0.413.551.521.252.02
Current Account (in % of GDP) 0.21.60.60.50.7

Source: IMF – World Economic Outlook Database, Latest data available.

Note : (E) Estimated data

 

Main Sectors of Industry

The agricultural sector, which used to be the dominant force in the Hungarian economy for many years, now represents 2.5% of the GDP and employs 6% of the working population (World Bank, latest data available). The country has an agricultural area of 5,278k ha, around 56.7% of its territory (FAO). Cereals, fruits, maize, vegetables and wine are the main crops. More specifically, major crops include wheat (1 million ha), corn (1 million ha), and oilseeds (1 million ha) - mostly sunflower and rapeseed (0.9 million ha). According to the first 2024 estimates from the Hungarian Statistical Office, the total output of agriculture exceeded BGN 4 thousand billion, 8% lower than the previous year. This decline was due to a 4.4% decrease in production volume and a 3.8% drop in price levels. Crop production was 11% lower and livestock production 4.9% higher than in 2023.

Industry accounts for 22.7% of the country's GDP and employs 30% of the working population. Hungarian industry is very open to foreign investment, with manufacturing almost consistently ranking top receiver of foreign direct investment. The automotive and electronics sectors are the two main industrial sectors, and the manufacturing sector alone accounts for around 17% of the country’s GDP. The electronics industry is one of the largest industrial sectors in Hungary, accounting for one-fifth of total manufacturing production. According to the latest figures by the Hungarian Central Statistical Office, in 2024 the volume of industrial production was 4.0% below the 2023 level.

The services sector contributes 62.5% of GDP and employs almost 65% of the labour force. Trade, tourism and finance account for the largest share of activity and employment within the tertiary sector. In recent years the added value produced by the ICT sector increased by more than one-fifth, to USD 20 billion, with the digital economy currently making up more than 20% of Hungary's overall gross value added. In 2024, compared to the previous year and adjusted for calendar effects, the volume of retail trade increased by 2.6%. Sales grew by 3.7% in specialized and non-specialized food shops, 2.4% in non-food retail trade, while automotive fuel retail trade saw a slight decline of 0.1% (data HSO). Concerning the tourism sector, in 2024, there were 5.8% more tourism nights at tourist accommodation establishments than in the previous year (44.2 million tourism nights). The banking sector consists of 39 institutions: 17 commercial banks, 11 specialised credit institutions (mortgage banks, building societies, development and trade finance banks), 9 foreign bank branches and 2 guarantee institutions (European Banking Federation).

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 4.4 31.2 64.4
Value Added (in % of GDP) 4.7 24.3 57.6
Value Added (Annual % Change) 68.7 -5.2 -0.5

Source: World Bank, Latest data available.

 

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Indicator of Economic Freedom

Definition:

The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.

Score:
67,2/100
World Rank:
55
Regional Rank:
31

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation

 

Business environment ranking

Definition:

The business rankings model measures the quality or attractiveness of the business environment in the 82 countries covered by The Economist Intelligence Unit’s Country Forecast reports. It examines ten separate criteria or categories, covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure.

Score:
6.99/10
World Rank:
33/82

Source: The Economist Intelligence Unit - Business Environment Rankings 2021-2025

 

Country Risk

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Political Outline

Current Political Leaders
President: Tamas SULYOK (since 5 March 2024) - Fidesz
Prime Minister: Viktor Orban (since 29 May 2010) - Fidesz
Next Election Dates
Presidential: 2027
National Assembly: April 2026
Current Political Context
For the past fourteen years, Viktor Orban and the right-wing Fidesz party have dominated Hungarian politics. The Fidesz-KDNP party won a resounding victory in the April 2022 election, securing 135 of the 199 seats. Six seats were won by the nationalist party Our Homeland, while the coalition United for Hungary took home 57 seats overall. However, its supremacy is being increasingly challenged. The opposition, led by Péter Magyar's moderate centre-right Tisza party, gained traction in large cities in the October 2024 local elections, but not as much in rural areas. Tisza presents itself as a "third political force" seeking to reestablish democratic norms and bring Hungarians together from a variety of backgrounds. Furthermore, President Katalin Novák resigned in February 2024 due to a scandal surrounding her pardon of a vice principal who had covered up child molestation accusations. On February 26, 2024, her resignation was accepted by the National Assembly. With 134 votes or 67.67% of the assembly, Tamás Sulyok, an independent candidate backed by the Fidesz–KDNP alliance, was subsequently chosen as the new president.
Hungary's relationship with the European Union remained complicated throughout 2024. Because of worries about Hungary's administration and rule of law, the EU has kept withholding certain funds. There was also disagreement about Hungary's position on EU sanctions against Russia, particularly in light of the current situation in Ukraine. These tensions were not significantly reduced by Hungary's second-half 2024 EU Council chairmanship. Relationships with its European counterparts may continue to suffer as a result of the government's present strategy, which is centred on strategic partnerships with China and Russia.
Main Political Parties
Hungary is a multi-party democracy largely divided between the conservative right and opposition. The three main parties/coalitions at the latest election were:

- Fidesz-Hungarian Civic Alliance (Fidesz): centre-right, nationalist, socially conservative, the most popular party across all legislative districts. It currently holds a majority in the National Assembly with 135 seats and has maintained control of the presidency since 2010. Furthermore, it has supported the election of every president since 2000
- United for Hungary: a big tent coalition formed by the following parties: Hungarian Socialist Party, Democratic Coalition, Movement for a Better Hungary (Jobbik), LMP – Hungary's Green Party, Dialogue for Hungary and the Momentum Movement
- Our Homeland Movement (MHM): far-right, nationalist.

Other parties include:
- Christian Democratic People’s Party (KDNP): right-wing, propagates national conservatism; acts as a sister organisation of Fidesz
- Jobbik: initially far-right and anti-EU, the party has switched to the more mainstream right political line
- Politics Can Be Different (LMP): centre, green-liberal, champions protection of the environment, supports sustainable development and aims to work against corruption
- National Self-Government of Germans in Hungary (MNOÖ): German-Hungarian interests
- Momentum Movement: centrist, liberal.
Type of State
Parliamentary republic
Executive Power
The President is the Chief of State and the Prime Minister is the Head of Government. The President is elected by the National Assembly for a five-year term (eligible for a second term). His role is primarily ceremonial, with limited executive power. The Prime Minister is elected by the National Assembly on the recommendation of the President. The PM holds significant executive authority, including the selection and dismissal of cabinet ministers.
The Cabinet is a Council of Ministers elected by the National Assembly on the recommendation of the President; other ministers are proposed by the Prime Minister and appointed and relieved of their duties via the presidential elections.
Legislative Power
The Hungarian Parliament is unicameral. The National Assembly is composed of 199 members elected every four years and can either initiate new legislation or approve those introduced by the Government. Out of the total, 106 members are directly elected in single-member constituencies by simple majority vote and 93 members are directly elected in a single nationwide constituency by party-list proportional representation vote.
 

Indicator of Freedom of the Press

Definition:

The world rankings, published annually, measures violations of press freedom worldwide. It reflects the degree of freedom enjoyed by journalists, the media and digital citizens of each country and the means used by states to respect and uphold this freedom. Finally, a note and a position are assigned to each country. To compile this index, Reporters Without Borders (RWB) prepared a questionnaire incorporating the main criteria (44 in total) to assess the situation of press freedom in a given country. This questionnaire was sent to partner organisations,150 RWB correspondents, journalists, researchers, jurists and human rights activists. It includes every kind of direct attacks against journalists and digital citizens (murders, imprisonment, assault, threats, etc.) or against the media (censorship, confiscation, searches and harassment etc.).

World Rank:
92/180
 

Indicator of Political Freedom

Definition:

The Indicator of Political Freedom provides an annual evaluation of the state of freedom in a country as experienced by individuals. The survey measures freedom according to two broad categories: political rights and civil liberties. The ratings process is based on a checklist of 10 political rights questions (on Electoral Process, Political Pluralism and Participation, Functioning of Government) and 15 civil liberties questions (on Freedom of Expression, Belief, Associational and Organizational Rights, Rule of Law, Personal Autonomy and Individual Rights). Scores are awarded to each of these questions on a scale of 0 to 4, where a score of 0 represents the smallest degree and 4 the greatest degree of rights or liberties present. The total score awarded to the political rights and civil liberties checklist determines the political rights and civil liberties rating. Each rating of 1 through 7, with 1 representing the highest and 7 the lowest level of freedom, corresponds to a range of total scores.

Ranking:
Free
Political Freedom:
3/7
Civil Liberties:
3/7

Political freedom in the world (interactive map)
Source: Freedom in the World Report, Freedom House

 

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Latest Update: March 2025