Hungary: Economic and Political Overview
In this page: Economic Outline | Political Outline
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) | 212.46 | 228.81 | 245.62 | 260.72 | 275.76 |
| GDP (Constant Prices, Annual % Change) | -0.9 | 1.5 | 2.9 | 3.0 | 3.0 |
| GDP per Capita (USD) | 22,132 | 23,881 | 25,703 | 27,351 | 29,000 |
| General Government Balance (in % of GDP) | -6.4 | -4.3 | -4.2 | -3.3 | -2.9 |
| General Government Gross Debt (in % of GDP) | 73.5 | 73.5 | 73.6 | 73.0 | 71.9 |
| Inflation Rate (%) | 17.1 | 3.8 | 3.5 | 3.1 | 3.0 |
| Unemployment Rate (% of the Labour Force) | 4.1 | 4.4 | 4.2 | 4.1 | 4.0 |
| Current Account (billions USD) | 0.41 | 3.55 | 1.52 | 1.25 | 2.02 |
| Current Account (in % of GDP) | 0.2 | 1.6 | 0.6 | 0.5 | 0.7 |
Source: IMF – World Economic Outlook Database, Latest data available.
Note : (E) Estimated data
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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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.
Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation
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.
Source: The Economist Intelligence Unit - Business Environment Rankings 2021-2025
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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.).
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.
Political freedom in the world (interactive map)
Source: Freedom in the World Report, Freedom House
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