Europaudvalget 2025
KOM (2025) 0217
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EUROPEAN
COMMISSION
Brussels, 4.6.2025
SWD(2025) 217 final
COMMISSION STAFF WORKING DOCUMENT
2025 Country Report - Hungary
Accompanying the document
Recommendation for a COUNCIL RECOMMENDATION
on the economic, social, employment, structural and budgetary policies of Hungary
{COM(2025) 217 final}
EN
EN
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ECONOMIC DEVELOPMENTS AND KEY POLICY
CHALLENGES
Growth is projected to rebound
slowly in a context of high
inflation
Economic growth was subdued in 2024.
GDP grew by 0.5% in 2024 after a contraction
of 0.8% in 2023. The sluggish GDP growth in
2024 was driven by weak external demand, a
deterioration in business sentiment and lower
investment. GDP growth is forecast to reach
0.8% in 2025 and to pick up to 2.5% in 2026,
driven by improving demand and new
capacities in manufacturing, notably in the
electric vehicle industry. However, Hungary’s
economic outlook remains highly uncertain
over the prospect of tariffs due to its high
level of integration in global value chains.
Graph 1.1:
Harmonised Index of Consumer
Prices, 2015=100
180
170
160
150
140
130
120
110
100
of earlier energy and food price increases and
supply chain bottlenecks dissipated. However,
inflation excluding food, energy, alcohol and
tobacco remained high at 5.9% in 2024, while
inflation picked up in the first quarter of 2025.
Domestic demand and rising food prices are
expected to keep inflation elevated in 2025.
Inflation expectations also remained high,
partly because Hungary went through the
highest consumer price increase in the EU
(Graph 1.1).
Graph 1.2:
Price index of construction
investment, 2015=100
255
235
215
195
175
155
135
115
95
2021
2015
2016
2017
2018
2019
2020
2022
2023
EU27
2nd highest
Hungary
lowest
Source:
Eurostat
Hungary
EU27
Source:
Eurostat
Inflation picked up in early 2025 due to
elevated underlying price pressures.
Inflation declined significantly from a peak of
17.0% in 2023 to 3.7% in 2024, as the impact
Investment dropped from a high level.
Investment decreased by 7.7% and 11.1% in
2023 and 2024 respectively, the largest drop
in the EU, while in 2024 the investment-to-
GDP ratio was 23%. At the same time,
Hungary registered the highest increase in
construction prices in the EU (Graph 1.2). A
combination of high construction costs and an
uncertain economic environment for firms
have contributed to the recent investment
underperformance. The decline in investment
poses risks to medium-term growth
perspectives.
2020
2025
2015
2016
2017
2018
2019
2021
2022
2023
2024
2
2024
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Economic vulnerabilities remain
Hungary continues to face vulnerabilities,
primarily over competitiveness and
government financing needs. Policy action
to tackle them has been limited.
This
finding was highlighted in the in-depth review
that was part of the macroeconomic
imbalance procedure Hungary underwent
earlier this year (
1
). First, public debt increased
in 2024, with debt-servicing costs and gross
financing needs remaining at high levels. At
the same time, the risk related to the high
share of government bonds in banks’ total
assets has deepened due to tax incentives for
domestic banks in return for purchasing
government
debt.
Second,
inflationary
pressures have remained persistent, while
rising labour costs have eroded cost
competitiveness. Third, the economic recovery
is slow and can be even slower as challenging
external conditions and domestic policy
uncertainty have continued to weigh on
exports and investment. Fourth, while the
trade balance improved in 2024, policies
aimed at boosting domestic demand and
substantial energy imports pose risks on the
sustainability of the country's financial
position vis-a-vis other countries. Finally, the
in-depth review of Hungary highlighted that
house prices accelerated in 2024. This was
driven by strong demand, fuelled by easier
financing conditions, generous housing policies
and restricted supply.
Some government interventions are
distorting the functioning of the financial
market.
As a way to boost domestic demand,
Hungary makes widespread use of poorly
targeted subsidised loans to households and
corporations, as well as administratively
controlled mortgage rates. The proportion of
subsidised loans remains high compared to
the pre-COVID level. These schemes can lead
to capital being allocated in a suboptimal way,
by financing projects with low returns and
limited productivity gains. Such practices also
limit the effectiveness of
the central bank’s
policy to control interest rates.
With debt forecasted to remain high,
debt-servicing costs and risks over the
sustainability of government finances are
elevated.
Public debt rose slightly in 2024, to
73.5% of GDP, and is expected to decrease
only gradually. At 7%, yields on Hungarian 10-
year
bonds
remain
high,
reflecting
expectations of persistent
inflation. Hungary’s
debt-servicing costs are projected to remain
among the highest in the EU, with the implicit
interest rate on government debt close to 6%
in 2025. Risks over the sustainability of
government finances are low in the short term,
but high in the medium term and medium in
the long term, according to the Commission’s
debt sustainability framework (see more in
Annex 1).
Hungary’s
achievement of budgetary
targets is at risk.
In 2024, the government
deficit decreased to 4.9% of GDP, from 6.7%
the year before, on the back of temporary cuts
in public investment, revenue from taxes
levied on companies in the energy, financial
and retail sectors, and lower energy subsidies.
However, in the absence of additional
consolidation, the budgetary deficits are set to
remain elevated, at 4.6% of GDP in 2025 and
4.7% in 2026, according to the Commission
2025 Spring Forecast. The 2026 budget law,
submitted to Parliament on 6 May 2025, has
revised the 2026 deficit target from 2.9% to
3.7% of GDP.
Net expenditure is set to grow strongly in
2025 but remain below the cumulative
limit for 2024 and 2025 combined.
In
2024, net expenditure(
2
) in Hungary grew by
2.3% (see Annex 1). This increase was mainly
driven by lower-than-expected growth in
nationally-financed primary expenditure, as
(
2
) Net expenditure is defined in Article 2(2) of Regulation
(EU) 2024/1263 as government expenditure net of (i)
interest expenditure, (ii) discretionary revenue
measures, (iii) expenditure on programmes of the Union
fully matched by revenue from Union funds, (iv)
national expenditure on co-financing of programmes
funded by the Union, (v) cyclical elements of
unemployment benefit expenditure, and (vi) one-off
and other temporary measures.
(
1
) SWD(2025) 127 final.
3
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well as the partial phaseout of the windfall
profit tax on the banking sector and special
taxes on energy sector. In 2025, net
expenditure is forecast by the Commission to
grow by 6.1%, which is above the maximum
growth rate recommended by the Council(
3
).
This increase is driven by the projected rapid
growth
in
nationally-financed
primary
expenditure, in particular on public wages and
operating expenditure. The cumulative growth
rate of net expenditure in 2024 and 2025
taken together is projected at 8.6%, which is
below the maximum rate recommended by the
Council. The projected deviation is allowed
under the conditions of the national escape
clause on current projections for defence
spending.
A realistic and stable medium-term
budgetary framework would make
Hungary’s fiscal
policy more credible and
effective.
As discussed in the 2023 and 2024
in-depth reviews and 2024 European
Semester country report,
Hungary’s fiscal
framework suffers from several weaknesses
which reduce budget transparency while
exacerbating the expansionary bias (
4
). The
continued practice of adopting budgets early in
the year (with one exception in 2024) and
frequent revisions of the budgetary targets
reduce reliability. In turn, this limits policy
predictability and proper accountability. The
introduction of the ‘state of danger’, in force
since 2020 and extended repeatedly, lifted the
requirement to publish a three-year budget
plan, and increased the discretion in
implementing annual budgets. Frequent
changes to the annual budget law decrease
predictability.
Hungary‘s
medium-term
budgetary
planning
lacks
multiannual
spending ceilings that would make it easier for
it to meet the requirements of the reformed
EU economic governance framework. Two
(
3
) Council Recommendation with a view to bringing an end
to the situation of an excessive deficit in Hungary
(C/2025/5896) and Council Recommendation of 18
February 2025 endorsing the medium-term fiscal-
structural plan of Hungary (OJ C, C/2025/1707,
18.3.2025, ELI: http://data.europa.eu/eli/C/2025/1707/oj
(
4
)
Fiscal policy is often called expansionary or ‘loose’ if it
increases demand in the economy via higher spending
and tax cuts.
spending reviews on healthcare and housing-
and family-related support were conducted in
2023-2024, but these have not been
published and are not reflected in the
budgetary planning so far. The mandate and
operational capacities of the Hungarian Fiscal
Council remain limited.
Budgetary oversight may be weakened
further by new public fund management
structures.
In recent years, Hungary has set
up an increasing number of funds (public
interest trusts, central bank foundations, etc.)
to carry out public duties such as education
and research. These bodies received
substantial public assets and/or annual
funding from the budget. However, they seem
to operate without effective oversight and
control mechanisms. Board members are
nominated without transparent and objective
selection criteria and without any need to
demonstrate asset management experience.
Moreover, they have significant discretion in
investment decisions. As these funds are part
of the general government sector, any
management errors may impact government
finances.
The impact of population ageing on
government finances continues to be a
challenge.
The ratio of potential workers per
person aged 65 or older is projected to drop
from 2.9 in 2023 to 1.8 by 2070. Population
ageing means
Hungary’s
public spending-to-
GDP ratio for pensions is facing one of the
largest increases in the EU, set to rise 4.3 pps
between 2022 and 2070 (see Annex 1).
According to the Commission’s projections,
Hungary’s public debt will also start to rise in a
decade if ageing-related spending remains
unaddressed. The design of the pension
system also generates equity issues. These
include large pension gaps between pensioners
from different age cohorts and increasing
expenditure on pensions for high-income
individuals. As part of the reform roadmap
included in Hungary’s
recovery and resilience
plan, in July 2024 the OECD published a
report, at the request of the Hungarian
government, assessing the challenges and
opportunities of the current pension system,
4
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and identifying policy options (
5
). However,
Hungary’s
medium-term fiscal-structural plan
states that the government does not plan any
changes to the pension scheme in the near
future.
Graph 1.3:
Labour productivity per person
employed, EU-27=100
79
77
75
Structural reforms are key to
continuing income convergence
Labour productivity is one of the lowest
in the EU and is at the same level as 15
years ago.
This is in contrast with EU
countries with similar income levels, whose
productivity increased by 10 pps during the
same period (Graph 1.3). While the income
level has increased steadily, this has been
driven by a significant increase in employment
rather than an increase in skills and
productivity levels. In 2024, the employment
rate in the 20 to 64 age cohort was 81.1%, up
19 pps since 2010 (see Social Scoreboard in
Annex 13). As a result, 720 000 more people
are employed in 2025 than 15 years ago. The
significant increase in employment largely
came from low-skilled people entering the jobs
market, which impacted average productivity.
Further impetus to growth would need to come
from innovation and investment in high value
added activities, also taking into account
regions’ competitive advantages. However,
future productivity growth may be held back
by the weak quality of education,
comparatively low levels of skills and lack of
predictability in the business environment.
73
71
69
67
65
2011
2018
2012
2013
2014
2015
2016
2017
2019
2020
2021
2022
Hungary
Peer average
(1) Peer countries: BG, EE, HR, LT, LV, PL, RO and SK
Source:
Eurostat
A shortage of skilled labour continues to
hamper growth prospects.
As a result of
strong employment performances in recent
years, the issue of labour and skills shortages
is becoming ever more pressing. The education
system is not producing enough highly skilled
workers to meet growing demand on the jobs
market.
Hungary’s
tertiary
education
attainment rate has not improved in the last
decade and is now one of the lowest in the EU.
Weak basic and digital skills among the
disadvantaged and high early leaving from
education limit employment prospects and
skills development opportunities later in life. In
addition, many highly skilled Hungarians leave
the country, as the weak business environment
fails to attract high value added investments.
These factors hinder the establishment of high
value added firms in Hungary.
The business environment remains a
major barrier to innovation.
Surveys
regularly highlight obstacles such as
unpredictable
regulatory
changes,
an
overwhelming presence of the State in
domestic business transactions, hostility
towards certain firms (foreign-owned in
particular), limited government effectiveness,
high perceived corruption and weak
competition in key sectors.
(
5
)
OECD (2024)
Strengthening-the-Hungarian-Pension-
System.pdf
Energy import dependence continues to
weigh on the trade balance.
Net energy
5
2023
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imports decreased from 4.7% of GDP in 2023
to 3.4% of GDP in 2024, mainly due to a
decrease in oil and gas prices. Net electricity
imports as a percentage of domestic electricity
supply also decreased, driven by increasing
solar power generation. The national energy
and climate plan sets a target to reduce the
net import share of electricity to 20% by
2030; progress has been made towards this
target. Nevertheless, to minimise the country’s
exposure to energy price shocks, more action
is needed.
The benefits of economic growth have
not been equally distributed.
While the
overall poverty indicators perform better than
the EU average, poverty outcomes remained
worse than the EU average among children in
large families, low-skilled workers, older
people, persons with a disability and the Roma
population. The situation is relatively worse for
the poorest parts of the population due to the
low progressivity of the tax system, the
decreasing impact of social benefits, unequal
access to basic and social services and the
poorly targeted tax, housing and energy
subsidy schemes. By contrast, the highest
income groups benefit from generous
transfers. In addition, the benefits of economic
growth are not evenly distributed across the
regions, while the
country’s
least developed
districts continue to face multiple barriers to
economic and social convergence.
6
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Box 1:
Barriers to private and public investment
Private investments in Hungary are supported by developed transport infrastructure, low
corporate income tax, lax employment protection legislation, low labour costs and generous
state subsidies. However, obstacles exist, in particular in the services sector:
•
Frequent regulatory changes
and
discretionary state intervention
make
investment decisions less predictable. This impedes the growth of firms, in
particular innovative and fast-growing ones. The high number of incorrectly
transposed single market directives hinders the effective functioning of product
markets.
Businesses face high costs
on energy and banking, sector-specific taxes and
high interest rates. Access to finance is underdeveloped and firms heavily rely on
state subsidies to make investments.
A shortage of skilled workers,
resulting from below-average performance in
skills and education as well as a low tertiary graduation rate, acts as a barrier to
high value added investments.
•
•
Public investment is facilitated by shorter authorisation and permitting procedures invoking the
national interest. However, there are factors which hinder public investments:
•
•
Access to EU support
is limited mainly by the lack of effective mechanisms to
protect the
EU’s
financial interests.
Persistent problems related to the
anti-corruption framework, weaknesses in
control procedures, and competition in public procurement
(e.g. limited by
framework agreements) result in ineffective allocation of public resources, higher
prices and longer implementation timespans for investments.
Budget constraints cause a
lack of clarity in investment objectives,
which
results in uncertainty and delays in the implementation of investments.
•
The implementation of Hungary’s RRP faces considerable challenges. At present, Hungary has
fulfilled 0% of the milestones and targets in its RRP. It remains important to accelerate the
implementation of cohesion policy programmes. The mid-term review offers opportunities to
speed up progress and better address EU strategic priorities related to competitiveness,
defence, housing, water resilience and the energy transition. While Hungary has signalled
interest in leveraging the Strategic Technologies for Europe Platform under cohesion policy,
Hungary can further support the development or manufacturing of critical technologies in the
areas of digital and deep tech, clean and resource efficient technologies, and biotechnologies.
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Box 2:
UN Sustainable Development Goals (SDGs)
Despite making progress on most of the SDGs, including all SDGs related to competitiveness
(SDGs 4, 8 and 9), Hungary remains below the EU average on all SDGs apart from SDGs 1
(No poverty), 11 (Sustainable cities and communities) and 15 (Life on land). Moreover,
Hungary is moving away from several SDGs on sustainability (2, 11, and 12).
Hungary is improving on most SDGs related to fairness (SDGs 1, 3, 4, 5, 7 and 8), but is
moving away from SDG 10 (Reduced inequalities).
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INNOVATION, BUSINESS ENVIRONMENT AND
PRODUCTIVITY
Ineffective competition and high
costs hamper innovation
The business environment in Hungary
poses challenges for most companies.
Several features of the business environment
create an attractive location for investments,
mainly for manufacturing. In particular,
Hungary has a central geographical location,
developed transport infrastructure, the lowest
corporate income tax in the EU (9%), lax
employment protection legislation, loose
enforcement of environment protection rules
and generous state subsidies. However, many
industries face obstacles and the overall
perception of the business environment is
rather negative. According to the International
Institute for Management Development’s
World Competitiveness Yearbook, Hungary
ranked among the last in the EU in 2024. The
2024 European Investment Bank Investment
Survey found that the most frequently
mentioned barriers to investment are
uncertainty about the future (72%), energy
costs (60%) and the availability of skilled staff
(51%).
Other
surveys
mention
the
unpredictable and quickly changing regulatory
environment, high inflation, tax rates, complex
administrative procedures and corruption.
Businesses face a high level of regulatory
volatility.
Over the past two decades, the
proportion of decrees compared to laws has
surged (Graph 2.1). The frequency of
legislative amendments increased as well,
which makes long-term business planning
increasingly difficult. While the volume of new
legislation
remained
relatively
stable,
amendments doubled between 2004 and
2024 due to the increasing number of
omnibus bills, including several draft laws on
diverse subjects. This regulatory inflation
forces businesses to dedicate more resources
to legal monitoring and adaptation. For small
and medium-sized enterprises this is even
more burdensome.
Graph 2.1:
Legislation in force in Hungary
7000
6000
5000
4000
3000
2000
60%
40%
100%
80%
20%
1000
0
0%
Share of laws (R)
Number of laws (L)
Share of decrees (R)
Number of decrees (L)
Source:
njt.hu
Regulatory unpredictability is further
aggravated by limited stakeholder
involvement.
According to the OECD
indicators of regulatory policy and governance,
Hungary underperforms on public consultation
and the evaluation of existing legislation. Since
end-2022, public consultations on draft
legislation have become regular, although
stakeholders reported that there is no
meaningful feedback. The public is not
consulted on important draft laws, as they are
often tabled in Parliament by individual
members instead of the government, thus
circumventing the need to conduct a public
consultation. In January 2025, the government
introduced a new format for impact
assessments. Summary impact assessment
sheets are published for most draft legislation,
but there is room to improve their quality and
information content.
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The government continues to widely use
emergency decrees to regulate.
The ‘state
of danger’, which has been continuously
extended for the last five years for various
reasons, allows the government to amend
laws through decrees. This bypasses
parliamentary
oversight
and
public
consultation, introducing sudden, often major,
policy shifts potentially disrupting normal
business operations.
The ineffectiveness of the anti-corruption
framework remains an obstacle to
business.
A far higher percentage of
companies than the EU average consider
corruption to be widespread and a problem
when doing business. The Hungarian recovery
and resilience plan includes several measures
targeted at strengthening the anti-corruption
framework.
These
include:
(i)
the
establishment and operation of a truly
independent and effective integrity authority;
(ii) the adoption and implementation of a new
medium-term national anti-corruption strategy
and action plan; (iii) the strengthening of the
rules on conflict of interest and asset
declaration; and (iv) the possibility for judicial
review of decisions of the prosecution service
or investigating authority to dismiss a crime
report or terminate criminal proceedings. It
remains vital to ensure that these measures
are timely and effectively applied in practice
and in particular that the integrity authority
can carry out its tasks effectively.
The lack of equal treatment of companies
limits competition.
According to the World
Bank’s Business Ready report
(
6
), the market
structure is concentrated and only a few firms
compete in specific markets. Several services
are entrusted to state-owned or private firms
which operate without competition. Such
services include textbook publishing, waste
management, mobile payments, the cash-in-
transit market, tobacco wholesale and retail
trade, gambling, motorway construction and,
from 2025, cybersecurity audits. The
government discretionarily exempts mergers
and specific investment projects from
administrative procedures, creating an unequal
(
6
)
Business Ready.
playing field for firms and increasing the
importance of connections with the state
apparatus. The large-scale use of framework
agreements in public procurement procedures
also limits competition by locking in certain
firms and helping them acquire a dominant
market position. The number and value of
framework agreements has increased sharply
in recent years. In 2023, they exceeded the
value of all other tenders and around 70% of
them were concluded with a single tenderer.
The State is active in business
transactions and crowds out private
actors.
In recent years, the State purchased
an 80% share in Budapest airport (the
transaction costs amounted to 2.5% of GDP)
and a wide range of office buildings (1% of
GDP). It also facilitated the purchase of
several large companies such as the third
largest telecommunications company (1.2% of
GDP) and the creation of the second largest
bank with subsidised financing. Various state
interventions have been used to force
–
mostly
foreign
–
owners to sell their firms, facilitating
the creation of public or government-
connected national champions.
The increasing presence of private equity
funds creates new challenges.
The number
and size of private equity funds have
increased significantly in recent years and
reached more than 2.5% of GDP in 2024. This
company structure is used in particular by
individuals with links to the government as it
ensures anonymity, similar to offshore
companies (
7
). Private equity funds are
increasingly behind companies winning public
procurements and securing high value
concessions, and have a strong presence in
business transactions with the State. In
addition, many private equity funds received
public support through the national
promotional bank. Currently, the Hungarian
beneficial ownership register does not contain
complete and accurate information on the
ultimate beneficial owners of private equity
funds. Banks and the Supervisory authority
cannot rely on a verified central registry of
ownership data to comply with prudential rules
(
7
) See infringement case INFR(2023)2098.
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on loans to owners of the bank and company
group loans if the borrower company or the
bank is owned by a private equity fund. In
November 2024, Hungary amended the
legislation on private equity funds to
complement the database on ownership.
However, the database will contain data for
already established funds only as of July
2026. Moreover, the tax authority cannot
verify the data, and non-governmental
organisations and investigative journalists with
a legitimate interest do not have access to it.
Taxes targeting specific sectors increase
the prices of services and goods.
The cost
of banking and energy for firms is one of the
highest in the EU. Money transfers, except low
value transactions, are taxed at a rate of
0.45% (up from 0.3% in August 2024). In the
euro area, such transfers are free of charge.
Banks can also pass on to customers the cost
of the bank levy. These two taxes increased
banking costs for households and businesses
by 0.9% of GDP in 2024. Hungarian
households spend 3% of their consumption
expenditure on banking, compared with 0.8%
in the euro area. A surtax amounting to 0.1%
of GDP has been imposed on mobile
telecommunication, which contributes to the
relatively high cost of mobile telephone
services in Hungary. From 2025, medium-sized
and large firms in the services sector also
have to pay a cybersecurity fee.
The retail sector operates in an unstable
business environment.
The tax burden in
this sector disproportionately impacts larger,
often foreign-owned companies. Conditions for
opening and making changes to stores larger
than 400 m² lack transparency. Retailers are
also affected by administrative interventions
in price setting, such as retail price caps, limits
on sales margins and mandatory discounts. In
September 2024, the European Court of
Justice ruled that in 2022 and 2023 Hungary
had breached single market rules by fixing a
maximum price for the sale of certain
agricultural products in the country and
imposing an obligation to offer a specific
quantity of such products for sale. In March
2025, the government introduced a 10%
retailer profit margin cap for 30 food products
to fight against inflation. A similar 15%
margin cap was introduced in May 2025 for
30 personal hygiene and household cleaning
products. Legislation on combating food waste
contains a prohibits retailers from selling food
products 48 hours before their expiry date,
potentially
disrupting
the
effective
management of inventories. The mandatory
online price reporting affecting food retailers
(essentially the foreign-owned ones) imposes
an additional administrative burden.
Measures and high taxes in the retail
sector decreased their competitiveness.
After the highest food inflation in the last
decade, the price of food almost reached the
EU average in 2023. Country-specific factors
accounting for high prices include large
administrative burdens, the highest VAT rate in
the EU (27%), a local business tax (1-2% of
the retail margin) and a retail tax (amounting
to 4.5% on turnover in 2024). The high tax
burden is a competitive disadvantage, in
particular for retail companies operating with
low margins, such as food retail, fuel and e-
commerce firms.
Inefficient R&D spending and
limited access to finance hold back
innovation
Stagnating R&D investment hinders
Hungary’s scientific and innovation
performance.
The 2024 European Innovation
Scoreboard shows that while Hungary’s
innovation performance has improved over the
years it is still performing poorly compared
with the EU average. R&D intensity increased
only marginally over the past decade and
remains well below the EU average (1.4%, vs
2.2% of GDP in 2023). The main obstacles to
innovation are the unstable public funding
framework, the unpredictable business
environment, high interest rates, insufficient
access to market-based financing, the low
level of high-skilled workers and low
entrepreneurial skills among managers.
Low public R&D spending decreases
Hungary’s capacity for fundamental
research.
Public R&D spending, including in
universities, is one of the lowest in the EU
11
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(0.4%, vs the EU average of 0.7%). The low
public investment holds back scientific
excellence. The ongoing reorganisation of
research institutes, as well as unclear internal
evaluation
mechanisms,
contribute
to
uncertain working conditions for researchers.
Technology transfer offices are not yet
sufficiently embedded in and accepted by
academic circles, and spin-off channels are
not yet well developed. As a response, the
John von Neumann Program launched the
renewal of the university technology transfer
procedures. Cooperation between academia
and businesses is mainly limited to incumbent
firms with links to universities. While
cooperation between innovative small and
medium-sized enterprises has improved due to
support programmes, in 2024 it was well
below the EU average.
Business R&D benefits from generous
government subsidies.
Hungary provides the
most generous subsidies to business R&D
activity (0.3% of GDP in 2021) in the EU,
through direct grants and tax allowances.
However, the R&D spending of businesses
decreased to 1% in 2023 from 1.2% in 2021.
Moreover, design and patent applications as a
share of GDP are one of the lowest in the EU
and Hungary does not participate in the
unitary patent system. Only a few, mainly
large, companies innovate and benefit from
the various subsidies. This is due to the heavy
administrative burden and not always clear
eligibility rules on innovation expenditure.
Entrepreneurship education is limited.
There are several initiatives supporting the
development of entrepreneurship skills.
However, entrepreneurship education is used
in a narrow sense in the national school
curriculum, being limited to economic and
financial literacy According to the Global
Entrepreneurship Monitor, only a low
proportion of respondents feel they have the
skills and knowledge to start a business.
There is potential for better use of digital
solutions
by
businesses.
Digital
infrastructure is well developed, enabling
better connectivity than the EU average.
Despite the significant increase in the take-up
of advanced technologies, most businesses, in
particular small and medium-sized ones, are
not yet reaping all the benefits of these digital
technologies. The proportion of small and
medium-sized enterprises with at least a basic
level of digital intensity is still lower than the
EU average (53.2% vs 57.7%). As for digital
public services for businesses, Hungary has
not yet set up and notified eID schemes for
legal entities. This means businesses cannot
authenticate themselves to access public
services provided by other countries.
The market-based financing of fast-
growing
small
and
medium-sized
enterprises and start-ups
remains
limited.
Venture capital funding amounted to
0.05% of GDP in 2023, below the EU average
of 0.1%. 40% of venture capital investments
came from state-owned funds drawing on
national and EU funds. This is the highest
proportion among EU countries in the OECD.
While these programmes may temporarily
boost venture capital financing, they cannot
contribute to long-term market development.
Moreover, high interest rates coupled with a
frequently changing regulatory environment
hinder the financing of innovative start-ups.
Recent measures such as simplified approval
procedures for lending by wealthy individuals
who invest in early-stage companies and the
use of convertible loans by start-ups may help
make the market more dynamic.
The significant involvement of the State
in business financing distorts the
efficient functioning of the markets.
In
response to rising interest rates, the
government has expanded subsidised lending
schemes for firms. On average, the share of
subsidised loans amounted to 38.5% of new
loans for small and medium-sized enterprises
in 2022-2024 (Graph 2.2). However, the
effectiveness
of
these
schemes
is
questionable, as they have not necessarily led
to increased productivity (
8
) among loan
recipients and create a cost to taxpayers. The
overall state subsidies, including grants, to
firms are also the highest in the EU,
amounting to an average of 2.6% of GDP per
(
8
) Telegdy, Á. and G. Tóth (2024), A támogatott hitelezés
hatásvizsgálata Magyarországon, Közgazdasági Szemle
71:113-130 (in Hungarian).
12
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3035349_0014.png
year between 2017 and 2022 (EU average:
1.4%).
Graph 2.2:
New loans for small and medium-
sized enterprises
2,500
2,000
1,500
1,000
500
0
5.0%
4.5%
4.0%
3.5%
3.0%
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%
subdidised (HUF bn)
non-subsidised (HUF bn)
New SME loan % of GDP (right axis)
Source:
MNB, Hungarian Central Statistical Office
Incentives skewed towards low-risk
investments hamper the development of
capital markets.
Capital markets as channels
for financing start-ups and highly innovative
small and medium-sized enterprises are
underdeveloped in Hungary. In 2023, the stock
market capitalisation stood at 17.6% of GDP
(EU average: 68%). Recent policy measures
have further obstructed the development of
capital markets. In 2022, the government
began issuing tax-free long-term bonds for
retail investors, while increasing the
withholding tax on interest income from 15%
to 28% (effective July 2023). Tax incentives
on housing investment also allocate savings
away from the capital market.
obstacle to start a business. Moreover, the
World Bank’s B-READY
indicators suggest that
there is potential to reduce the time required
to obtain a property transfer, a construction-
related permit, energy system connection and
environmental licence. The requirement to
register and pay fees to the Chamber of
Commerce can also be burdensome for firms
and could be made optional. At the same time,
the
government
regularly
simplifies
administrative and tax procedures. For
example, from 2025 the minimum net
turnover threshold for audit purposes was
raised from HUF 300 million to HUF 600
million, easing the requirements for smaller
firms. The government is working with the
Hungarian Chamber of Commerce and
Industry to explore ways to reduce
bureaucratic burdens, particularly regarding
legal, tax and data reporting obligations for
firms. Under the recovery and resilience plan,
the government committed to reducing the
number of taxes by 10% compared to 2023.
The increasing use of sector-specific
taxes complicates the tax system and
disproportionately
impacts
non-
Hungarian firms.
In 2023, revenues from
sector-specific taxes accounted for 2.7% of
GDP. This represents twice the revenue from
corporate income taxation, despite the much
narrower tax base of sector-specific taxes. The
sectors most affected include banking, energy,
retail, construction materials, insurance,
telecommunication and utilities. These sector-
specific taxes are often not levied on earnings
and frequently target industries with
significant foreign ownership (
9
) such as retail,
cement, construction and ceramic materials.
This leads to an uneven playing field that
disrupts the functioning of the single market.
In some instances, this additional tax burden
contributed to foreign companies divesting
their Hungarian subsidiaries. In a positive
development, from 2025 some sector-specific
taxes
such
as
the
surtaxes
on
telecommunication and air travel were phased
out. However, this does not significantly
2018
2019
2020
2021
2022
2023
Complex administrative
procedures and distortive sectoral
taxes are further constraints
The regulatory burden imposed by certain
procedures negatively impacts firms’
investment
decisions.
For
instance,
administrative procedures for starting new
businesses are complex and the minimum
capital requirement can be an additional
2024
(
9
) See infringement cases on retail tax (INFR(2024)4022)
and on building materials (INFR(2022)4009).
13
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reduce the overall distortive impact of sectoral
taxes.
14
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DECARBONISATION, ENERGY AFFORDABILITY AND
SUSTAINABILITY
A well-functioning energy market
is key for competitiveness
High dependence on Russian fossil fuel
poses a security-of-supply risk.
Hungary
continues to heavily rely on Russia for fossil
fuels (in 2024 more than 70% of natural gas
and more than 80% of crude oil consumed
was of Russian origin) and for nuclear energy,
although some steps have been taken to
diversify supply. As Hungary is a land-locked
country, gas and crude oil arrive through
pipelines. However, sanctions and interrupted
commercial relationships between Ukraine and
Russia and damage to infrastructure may
make Russian fossil fuel products inaccessible.
Despite these risks, Hungary’s efforts to shift
away from Russian dependence are slow.
Hungary acquires significant quantities of
natural gas from Russia, amounting to about 7
billion cubic metres in 2024, of which about
4.5 billion cubic metres under a long-term gas
contract.
Without more system flexibility, fast
deployment of renewables fails to reduce
reliance on electricity imports.
Domestic
electricity generation by solar power increased
from 0.2% to 25% in electricity production
between 2014 and 2024, which is the highest
share in the EU. This increased exports during
sunny hours but cannot replace import needs
during peak consumption periods. As a result,
the energy balance has improved in the last
decade, but gross imported electricity did not
decrease (Graph 3.1). Moreover, the tax on
energy producers makes import prices more
competitive.
Generous subsidies were key in the
expansion of solar energy generation.
Solar energy generation capacity expanded
due to: (i) the net accounting of residential
solar energy generation and the electricity use
of the same household; (ii) guaranteed feed-in
tariffs for commercial solar power plants (KÁT
and METAR); (iii) 100% grant support under
the recovery and resilience plan for residential
solar panels; and (iv) other subsidy schemes.
The subsidised household energy prices
(electricity is less than 10 eurocent/KWh, vs an
EU average of 32 eurocent/KWh in 2024), and
electricity feed-in tariffs (1.2 eurocent/KWh)
are low. This makes
households’
renewable
and energy-efficiency projects financially
unattractive without generous subsidies.
Graph 3.1:
Electricity imports, exports and
solar production in Hungary, in GWh
25000
20000
15000
10000
5000
0
2016
2014
2015
2017
2018
2019
2020
2021
2022
2023
Exports
Imports
Solar
Source:
Eurostat
The extreme volatility of the wholesale
electricity price over the course of
individual days points to a need for
improved grid infrastructure, storage and
flexibility solutions.
There are more and
more hours with negative prices during solar
peaks and high prices at solar off-peaks,
resulting in extreme price volatility over the
course of individual days. The fast deployment
of solar power plants was not supported by
the necessary flexibility solutions.
15
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Currently the electricity grid network
lacks ample classic and smart grids, and
storage infrastructure.
The RRP and other
EU programs include measures on grid
development and storage, the implementation
of which are crucial. The time taken to connect
a utility-scale renewable energy source to the
grid is six years on average, which is higher
than the EU average of four years. The use of
wind energy in electricity production is well
below the EU average and is unable to
adequately contribute to the electricity
system’s balance. Household consumers have
limited access to dynamic pricing, and the roll-
out of smart meters is low (below 10%), also
impeding flexibility. The implementation of the
reform on dynamic pricing and the measures
increasing the use of smart meters included in
the recovery and resilience plan should
contribute to more flexibility. Decarbonisation
measures and an expansion of electricity-
based manufacturing (in particular batteries)
are expected to massively drive up demand for
electricity.
Graph 3.2:
Electricity price for firms, EUR per
KWh
0.50
0.45
0.40
0.35
0.30
0.25
0.20
balancing market, they sell the energy they
produce at a much higher price than before.
Hungary is missing out on the benefits of
cross-border balancing as it has delayed
joining the European PICASSO platform.
The persistence of high energy prices for
companies hinders their competitiveness.
The energy price for businesses in Hungary is
one of the highest in the EU (Graph 3.2) due to
low competition, burdensome regulations and
taxes, and protracted investments in the last
decade. In addition, the regulated low energy
prices for households also put an indirect
burden on energy prices for businesses. The
current system of guaranteed fixed feed-in
tariffs (‘KÁT’) for a large part of industrial
renewable
energy
producers
creates
significant extra costs that are passed on to
business consumers (0.2% of GDP in 2024)
through the network transmission fee (Graph
3.3). The high energy windfall tax (‘Robin Hood
tax’) drives up energy prices for businesses
and hinders energy companies’ investments in
new energy generation infrastructure. It also
reduces incentives for setting up power
purchase agreements, whose penetration is at
this stage very limited. The high electricity
price compared to gas acts as a disincentive to
decarbonisation.
Graph 3.3:
Network transmission cost for
firms, EUR per KWh in 2023
0.20
0.18
0.16
0.14
0.15
0.10
0.05
0.00
2018
2023
2015
2016
2017
2019
2020
2021
2022
2024
0.12
0.10
0.08
0.06
0.04
Hungary
EU27
The balancing energy market in Hungary
relies heavily on gas-fired power plants.
These companies need to cover their costs and
earn their profit in a shorter period of time.
With low competition on the Hungarian
(1) In purchasing power standard (PPS), consumption
from 500 MWh to 1 999 MWh
Source:
Eurostat
Hungary has one of the highest figures in
the EU for fossil fuel subsidies.
These
16
Sweden
Austria
Czechia
Netherlands
Romania
Luxembourg
Germany
Slovakia
Spain
Finland
Estonia
Denmark
Portugal
Latvia
Poland
France
Slovenia
Greece
Cyprus
Bulgaria
Belgium
Lithuania
Ireland
Italy
Croatia
Hungary
(1) Excluding taxes and levies, in purchasing power
standard (PPS), consumption from 500 MWh to 1999
MWh
Source:
Eurostat
0.02
0.00
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3035349_0018.png
subsidies, which Hungary is not planning to
phase out before 2030, amount to 1.01% of
GDP. Scaling down and phasing out these
subsidies is in line with EU commitments and
can help Hungary to control government
spending. Fossil fuel subsidies which do not
target energy poverty nor genuine energy
security
concerns
and
which
hinder
electrification and are not crucial for industrial
competitiveness include: (i) the utility cost
reduction programme; (ii) a VAT reduction for
district heating using natural gas; and (iii)
excise tax refunds for agricultural use of diesel
(see also Annex 8).
although some responsibilities still remain
under other ministries.
Progress is slow in embracing the circular
economy.
According to 2023 data, Hungary’s
resource productivity of 1.33 euro/kg and
circular material use rate of 5.9% are
substantially below the EU average (2.74
euro/kg and 11.8%) and no convergence can
be observed. Hungary is generating less waste
than the EU average (429 kg/capita vs
511 kg/capita, in 2023), but has made no
significant progress lately on waste
management. While the recycling rate for
municipal waste gradually improved until
2018, this positive trend came to a halt
afterwards, standing at 33.4% in 2023 (EU
average: 48.9%). The recycling rate for
packaging and for construction and demolition
waste remained well below the EU average. All
this could be linked to scarce resource
allocation, insufficient treatment capacities
and gradually decreasing competition in the
waste management sector. In 2023, Hungary
introduced a single 35-year concession system
for waste management, aiming to provide
increased efficiency and stability in waste
management. Hungary also extended producer
responsibility the same year. A national
circular economy strategy is under preparation
to address remaining issues.
Hungary’s industrial policy
has potential
to focus more comprehensively on net-
zero industry while decreasing industrial
emissions to the atmosphere.
Hungary has
emerged as a leader in electric vehicle battery
manufacturing, but development of other net-
zero technologies remains modest. Labour
shortages
and
ineffective
retraining
programmes limit the potential growth of the
battery value chain. Moreover, action is lacking
to ensure a comprehensive regulatory
framework on net-zero technologies e.g. on
permitting, public procurement and the
development of industrial clusters promoting
innovation. At the same time, industrial
emissions into the atmosphere in Hungary
caused more damage to the environment than
on average in the EU, while the number of
deaths attributable to air pollution was one of
the highest in the EU. These two statistics
highlight the importance of Hungary taking
The path to a green economy is
facing significant obstacles
Hungary faces challenges over water
resilience, droughts and flash floods.
Hungary is increasingly affected by climate
risks, evidenced by the droughts it experienced
in 2022 in particular but also in 2024, which
led to significant losses in the agricultural
sector. Moreover, water quality is poor due to
pollution from agriculture, industry and human
settlements, with only 11.3% of surface
waters in good ecological status (EU average:
37.3%). Hungary’s wastewater treatment
remains a major concern, with poor
compliance with EU standards, declining
treatment capacity and significant pollution
risks. The situation is expected to worsen with
illegal water extraction from natural sources
(such as rivers, lakes and groundwater) and
the expected increasing demand for water
from industry, which takes up 82% of total
surface water abstraction. Hungary’s water
strategy focuses on providing more water to
industry and agriculture, relying mainly on
‘grey’
infrastructure such as land drainage,
water reservoirs and irrigation canals, with
only a few measures promoting natural water
retention. The low administrative price of
drinking water prevents water utility
companies from investing in infrastructure
maintenance. 2024 saw improvements to the
governance structure of water management
due
to
increased
centralisation
of
responsibility under the Ministry of Energy,
17
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action to ensure compliance with legislation on
air quality and industrial emissions and to
tackle pollution from all sources.
18
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SKILLS, QUALITY JOBS AND SOCIAL FAIRNESS
These schools also face severe teacher
shortages, lowering educational quality. Over
10% of secondary students enrol in three-year
vocational education and training programmes
that do not provide direct access to higher
levels of education, limiting upskilling and
career
progression.
Expanding
general
education content in these schools could
improve the
system’s permeability
(smooth
transition of learners within the entire
education and training system, horizontally
and vertically), resulting in more graduates
continuing their studies and successfully
passing the upper secondary school leaving
examination (matura). Additional resources to
disadvantaged schools could help reduce
performance gaps and segregation.
The government has taken several steps
to make the teaching profession more
attractive.
In Hungary, teacher shortages are
a pressing concern, especially in most
disadvantaged regions and rural areas. This is
mainly due to an ageing teacher workforce
and insufficient number of highly qualified
candidates. In 2024, Hungary started
implementing a major reform of teachers’
salaries, co-financed by the European Social
Fund Plus. Continuing this reform, together
with greater teacher autonomy and a teacher
assessment system that rewards innovative
and inclusive teaching approaches, could help
attract high-achieving candidates and keep
young teachers in the profession.
Despite increasing demand for a highly
skilled workforce, tertiary education
attainment remains low.
The employment
rate of recent tertiary graduates (93.ö%)
exceeds the EU average (86.6%), indicating
high demand. However, tertiary education
attainment rates among 25-34 year-olds have
been decreasing in the past decade. In 2024
the figure had reached 32.3%, one of the
lowest in the EU (Graph 4.1). Innovation
potential is further constrained by the low
Education and skills are not
keeping pace with the needs of the
economy
Skills
shortages
hinder
Hungary’s
potential
for
innovation
and
competitiveness.
Skills shortages in Hungary
are mainly driven by weak basic skills among
disadvantaged and vocational education and
training students, low tertiary education
attainment, and limited upskilling and
reskilling for vulnerable groups. Despite recent
increase in unemployment to 4.5% in 2024,
the employment rate remained high. There is
room to involve more people in the jobs
market, in particular young and low-skilled
workers, but Hungary also relies on foreign
workers (ca. 80 000 in 2025).
Stronger basic skills are key if Hungary is
to expand its productive workforce.
Early
school leaving remains above the EU average,
particularly among persons with disabilities, in
the least developed regions and in rural areas,
and among the Roma community (see Annex
10). The 2022 PISA (
10
) survey shows one of
the largest gaps in average maths
performance between general and vocational
programmes in the EU, largely due to socio-
economic disparities. Without stronger basic
skills, half of disadvantaged students struggle
to access the jobs market.
Structural inefficiencies in the education
system make these challenges harder to
address.
Disadvantaged
students
are
concentrated in some schools already from
primary level, with particular issues in three-
year secondary vocational schools, resulting in
one
of EU’s highest levels of segregation.
(
10
) OECD Programme for International Student Assessment.
19
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number of science, technology, engineering
and mathematics graduates, except in
information and communications technology
fields, reducing the country’s ability to attract
investment in high-tech sectors. The low
participation of disadvantaged students in
tertiary education is a missed opportunity to
expand Hungary’s high-skilled workforce.
Graph 4.1:
Tertiary educational attainment
level (%)
50
45
accounts and an adult training fund, and has
expanded measures to help the jobless find
work, access for vulnerable groups remains
limited.
Effective
reskilling
and
upskilling
opportunities, and appropriate support
services are lacking.
Measures to help the
jobless find work are in place, but the 2021
legislation on public employment service
further reduced access to upskilling and
reskilling. The 2024 amendment now enables
public employment service to play more
prominent role in the provision of labour
market trainings. Limited availability of quality
training might appear as a challenge. Targeted
skills
development
measures
and
comprehensive support services are crucial if
in the long term these groups are to become
employable and enter the jobs market. The
three-month unemployment benefit limits the
time for finding suitable employment or
adequate
upskilling
opportunities
and
increases risks of low-quality jobs, long-term
unemployment and poverty. To cover
Hungary’s labour force needs, the government
set rules to allow non-EU nationals to
temporarily work in Hungary. As of 2025 the
number of countries from where foreign
workers could come has been narrowed to
only three, which makes measures to help the
jobless find work all the more important. The
2024 job trial pilot programme offers some
support, but more targeted measures are
needed. Hungary has developed skills
forecasting tools to better inform its skills
development policies, but these remain
fragmented, not interlinked and data is
unavailable to the public.
Social dialogue between employers and
trade unions remains weak, especially in
the public sector.
Although the private sector
tripartite forum received a legal mandate for
minimum wage negotiations in 2024, major
economic policies proposed in 2024 and 2025
were adopted without consulting relevant
employers and trade unions. The public sector
forum has not met in recent years, and the
introduction of separate employment status
for some public employees (in healthcare,
education, the cultural sector, etc.) has further
weakened collective bargaining, voiding
40
35
32.1
32.3
30
25
20
2017
2014
2015
2016
2018
2019
2020
2021
2022
2023
EU27
Hungary
2030 target
(1) Share of the population aged 25-34 who have
successfully completed tertiary studies
Source:
Eurostat
Low basic skills and limited lifelong
learning among vulnerable adults hinder
labour mobilisation.
The OECD Programme
for the International Assessment of Adult
Competencies (PIAAC) 2022 survey shows that
Hungarian adults (including 16-24 years old),
especially
those
from
disadvantaged
backgrounds, perform below the EU average
on basic skills. Vulnerable groups (the
unemployed, low-educated adults and people
aged 55 or older) also lag behind in basic
digital skills and participation in lifelong
learning (see Annex 10). While the government
has launched initiatives such as
‘micro-
credential’(
11
) training, individual learning
(
11
) According to the Council Recommendation of 16 June
2022 on a European approach to micro-credentials for
lifelong learning and employability, micro-credential
means the record of the learning outcomes that a
learner has acquired following a small volume of
learning.
2024
20
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agreements for some groups. Recent skills and
social policy initiatives were also developed
without consulting employers and trade
unions.
to access quality early childhood education
and care would aid their early development.
Redistribution policies hardly improve
income inequalities.
Income inequality
(measured by the ratio of total income
between the lowest and highest quintiles)
stagnated in the last decade, against a higher
but gradually improving EU average. Wealth
inequality increased significantly and is among
the highest in the EU, with the top 1% of the
population holding 33% of the total wealth in
2023 (
13
). The tax and social benefit system
provides significantly more monetary support
to high-income households than it does to the
lower income groups. The average social
income per person among the top income
group was almost 3 times that of the lowest
income group in 2023 (Graph 4.2).
Graph 4.2:
Distribution of incomes among
quintiles, 2023, annual income in HUF 1 000
8,000
7,000
6,000
Poverty has started to rise, testing
social policy
Poverty and social exclusion are on the
rise, reversing long-standing positive
trends.
The rate of people at risk of poverty
or social exclusion increased in 2023 and
2024, while still remaining below the EU
average.
This puts at risk Hungary’s progress
towards its national poverty target for
2030(
12
).
Educational
attainment
and
employment status play an important role in
determining poverty risks. The effects were
significantly more pronounced for people with
disabilities and people from the Roma
community, who often have a low level of
education and are under-represented on the
jobs market. There are also signs of increasing
poverty among the elderly. An EU-funded
programme supporting housing, social services
and education in the 300 most disadvantaged
municipalities is a major step forward. This
could benefit from further measures to
improve access to mainstream social and
basic services.
Poverty increased significantly among
children.
Despite Hungary’s focus on family-
friendly policies, more than one in five children
and 28% of families with three or more
children were at risk of poverty or social
exclusion. Almost 7 out of 10 children whose
parents have low levels of education are
affected. Children also experienced an
increase in the depth of their poverty. Free
school meals and affordable transport for
children help address some aspects of poverty,
but further efforts to make it easier for
children at risk of poverty and social exclusion
(
12
) HU expresses its national poverty reduction target as a
reduction in the material and social deprivation rate for
families with children (to 13% by 2030) that can be
translated into a reduction by 292 000 of people at risk
of poverty or social exclusion by 2030.
5,000
4,000
3,000
2,000
1,000
0
1
other income
2
3
4
5
social income
labour income
Source:
Hungarian Central Statistical Office
The tax system disproportionately
burdens lower-paid workers through the
income tax rate and high consumption
taxes.
Due to the flat personal income tax,
the taxation of earnings from labour is
relatively high for low-income earners, and
relatively low for high-income earners. Most of
the social support is through tax credits, as a
result of which high-income households get
higher benefits than low-income groups. The
(
13
)
World - WID - World Inequality Database.
21
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tax exemption on holding government bonds
alone provides a transfer amounting to 0.4%
of GDP to high-income households in 2025.
The income tax exemption for mothers with
two or more children announced in February
2025 will result in higher household income
among high earners, while the income among
families with the lowest levels of income will
provide only limited relief for
families’ living
conditions. This also needs to be seen in the
context of the continued high food and
housing prices and limited access to quality
public services locally. From 2025, pensioners
will receive VAT refunds on certain food items,
including fruit and vegetables. While this may
improve the income situation of low-income
pensioners, the measure is not targeted to
them.
The adequacy of social protection further
deteriorated.
The impact of social benefits
has declined significantly since 2021 in terms
of reducing poverty (especially for children)
and remained low in terms of reducing income
inequality. The major sources of income for
low-income households have not kept up with
the cost of living in the last decade. The
nominal value of the minimum income
(‘foglalkoztatást helyettesítő támogatás’)
has
not increased since 2012, while consumer
prices have increased by 75% since then.
Consequently, the adequacy of minimum
income benefits is one of the lowest in the EU.
Pegging the minimum income to the inflation
rate or the minimum wage could somewhat
improve its adequacy.
High housing costs negatively impact
living standards.
The proportion of
households who spend over 40% of their
household income on housing costs increased
between 2021 and 2024. The figure is
particularly high among people living below
the poverty threshold, especially among
children. House prices increased by 230%
between 2010 and 2024, the most in the EU,
making home ownership less affordable in
spite of the significant rise in wages. There are
significant regional differences in house prices,
with the price level in rural areas only 13% of
prices in the capital in 2024. The price rise was
amplified by government measures targeting
the demand side of the market and the
regulatory environment (notably no heritage
and gift tax, and a very low property tax and
transaction fee). In parallel, rents increased by
108%, putting a large proportion of tenants
under financial pressure. On housing quality,
poor housing conditions are widespread
among marginalised communities.
Low-income households have limited
access to housing support.
Various types of
subsidised lending schemes have provided
incentives for people to buy a home, especially
for higher-income households. Most of these
require own resources and taking out loans,
which
tends to
exclude
low-income
households. Government support for home
rental is available for young employees, but
there are no larger-scale means-tested
measures for people renting. The rental
market is not regulated, which creates
uncertainties both for tenants and landlords,
and results in higher prices and lower supply.
The social housing stock is small and
decreasing, due to the lack of a clear
government policy and a lack of resources in
local authorities. The government announced
that a housing capital programme would be
launched in 2025 to expand housing market
supply and make homeownership more
accessible for people.
Low healthcare spending impacts health
outcomes.
Hungary’s healthcare
spending
amounted to 4.1% of GDP in 2023, among the
lowest in the EU. Chronic underfunding results,
among others, in low availability of key
diagnostic technology. Hungarians pay more
on healthcare from their own pocket than
people in other EU countries, particularly on
pharmaceuticals.
The health system is hospital centric.
A
large proportion of health expenditure is
allocated to hospital services, with high
number of hospital beds and a low proportion
of general practitioners among doctors. To
improve accessibility, primary and ambulatory
care needs strengthening. Hungary faces
persistent shortages of health professionals,
having one of the lowest numbers in the EU.
The uneven geographical distribution of
doctors is a major barrier to accessing care in
outlying regions of the country. Policy
measures to address these challenges remain
22
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limited, despite some commitments in the
recovery and resilience plan.
Poor health outcomes negatively impact
Hungary’s workforce.
Life expectancy at
birth is among the lowest in the EU. This is due
to the limited focus on disease prevention and
limited accessibility of the health system.
Premature mortality due to cardiovascular
diseases and cancer is among the highest in
the EU. Behavioural risk factors are a key
driver of mortality, including above average
alcohol consumption and smoking, low
consumption of fruit and vegetables and low
levels of physical activity outside working time.
Air pollution causes more deaths in Hungary
than the EU average.
There are significant regional disparities
in education, social protection, housing
and healthcare, and in measures to help
the jobless find work.
Four regions are
particularly affected by high poverty and
social exclusion and income inequalities. This
is related to the high rates of early school
leaving, large numbers of people not in
education, employment or training and adults
with low educational attainment. There is also
higher
unemployment
in
the
South
Transdanubia, North Hungary and North Great
Plain regions. In these regions, the poorest part
of the population lacks access to basic
services such as education, healthcare, social
services, housing and a sufficient level of
services to help the jobless find work.
These findings are consistent with the
second-stage analysis in line with the
Social Convergence Framework.
The
analysis points to challenges over the
increasing share of people at risk of poverty or
social exclusion and to weak education and
jobs market outcomes for vulnerable groups.
However, it does not point to overall social
convergence challenges for Hungary, also in
light of the measures implemented or planned
(
14
).
(
14
) European Commission,
SWD(2025)95.
The analysis
relies on all the available quantitative and qualitative
evidence and the policy response undertaken and
planned.
23
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KEY FINDINGS
To foster competitiveness, sustainability and
social fairness, Hungary would benefit from:
•
urgently
accelerating
the
implementation of the recovery and
resilience plan,
including the REPowerEU
chapter;
•
swiftly implementing cohesion policy,
taking advantage of the opportunities
under the mid-term review and
making
optimal use of EU instruments,
including InvestEU and STEP,
to improve
competitiveness;
•
pursuing effective policy coordination
and improving economic policy to
ensure
the
sustainability
of
government finances and foreign trade
including by strengthening the medium-
term budgetary framework and annual
budgeting, avoiding the tendency to expand
government spending and removing
distortive government interventions on the
credit and product markets;
•
reforming the pension system
to
improve
medium
and
long-term
sustainability of government finances while
making sure pensions remain sufficient for
people to live on in particular by addressing
income inequalities;
•
improving the effectiveness of the
anti-corruption framework
by tackling
delays in implementing measures in the
recovery and resilience plan and ensuring
they are effectively applied in practice;
•
improving the quality of the business
environment
by ensuring a predictable
regulatory framework, a level playing field
for all companies, the consistent
application of single market rules, including
avoiding arbitrary action by administrative
authorities,
market-distorting
state-
supported transactions and the use of
distortive legislation, applying competition
scrutiny
systematically
to
business
transactions and reducing the use of
emergency legislation to what is strictly
necessary, in line with the principles of the
single market and the rule of law;
•
reducing costs for companies
by
phasing out distortive taxes imposed on
specific sectors and simplifying the
administrative procedures, in particular in
the retail sector;
•
improving access to finance for
innovative and fast-growing small and
medium-sized enterprises
by ensuring a
level playing field for capital market
development through regulatory measures
and improving the effectiveness of existing
support measures;
•
fostering innovation
through more
predictable and efficient public R&D
spending and a stronger involvement of
small and medium-sized enterprises in
knowledge and technology transfer
channels;
•
accelerating the green transition
further
by phasing out dependence on
Russian fossil fuels and taking concrete
steps to phase out fossil fuel subsidies in
particular those related to excise duties on
diesel and those hindering electrification in
the residential sector;
•
improving flexibility and competition
in the electricity sector
by strengthening
the balancing market, improving smart grid,
storage and smart meters infrastructure,
expanding solutions to manage energy
demand, boosting cross-border electricity
trading and reducing regulatory burden and
taxes, while adjusting the current system of
regulated energy prices;
24
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•
investing
in
sustainable
water
management and climate adaptation
including increased natural water retention
and through strengthened administrative
capacities as well as further improvements
to circularity by strengthening waste
treatment capacities;
•
making
further
progress
to
decarbonise by supporting further
expansion of the net-zero technology
sector
with a comprehensive regulatory
framework
and
addressing
labour
shortages;
•
to support upward social convergence,
improving the participation on the jobs
market
of vulnerable groups, including
Roma and persons with disabilities by
reskilling and upskilling and strengthening
the capacity of the public employment
service
to
provide
training
and
comprehensive support services;
•
ensuring effective social dialogue
between employers and trade unions
particularly in the public sector, and
engaging effectively with employers and
trade unions;
•
improving educational performance to
strengthen labour productivity and
innovation
potential
by
further
increasing the attractiveness of the
teaching profession and tertiary attainment
rate, focusing on the development of basic
skills, making different
educational
programmes available up to the highest
education level and making it easier to
transition between them and increasing
participation;
•
increasing the proportion of upper-
secondary graduates passing the
matura
school leaving exam
as well as
of those
holding a tertiary diploma
in
tertiary education;
•
providing
more
effective
social
assistance
by improving the adequacy of
the minimum income and social benefits,
including unemployment benefit;
•
increasing access to housing
through
more targeted housing subsidies, and by
regulating the rental market and
introducing measures to increase housing
supply including for social housing;
•
improving access to quality preventive
and primary care services
by allocating
more resources to preventive care and
addressing shortages of healthcare staff.
25
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ANNEXES
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LIST OF ANNEXES
Fiscal
A1.
A2.
Fiscal surveillance and debt sustainability
Taxation
32
32
39
Productivity
A3.
A4.
A5.
A6.
Innovation to business
Making business easier
Capital markets, financial stability and access to finance
Effective institutional framework
43
43
48
53
61
Sustainability
A7.
A8.
A9.
Clean industry and climate mitigation
Affordable energy transition
Climate adaptation, preparedness and environment
66
66
73
80
Fairness
A10. Labour market
A11. Social policies
A12. Education and skills
A13. Social Scoreboard
A14. Health and health systems
87
87
92
97
101
102
Horizontal
A15. Sustainable development goals
A16. CSR progress and EU funds implementation
A17. Competitive regions
105
105
107
114
LIST OF TABLES
A1.1.
A1.2.
A1.3.
A1.4.
A1.5.
A1.6.
A1.7.
A1.8.
A1.9.
General government balance and debt
Net expenditure growth
Net expenditure (outturn and forecasts), annual and accumulated deviations vis-à-vis the recommendation
Defence expenditure and the national escape clause
Macroeconomic developments and forecasts
General government budgetary position
Debt developments
RRF
–
Grants
RRF - Loans
33
33
34
34
35
35
36
36
37
29
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A1.10.
A1.11.
A2.1.
A3.1.
A4.1.
A5.1.
A6.1.
A6.2.
A7.1.
A8.1.
A9.1.
A13.1.
A14.1.
A16.1.
A16.2.
A17.1.
Projected change in age-related expenditure in 2024-2040 and 2024-2070
Fiscal Governance Database Indicators
Taxation indicators
Key innovation indicators
Making Business Easier: indicators.
Financial indicators
Hungary. Selected indicators on administrative burden reduction and simplification
Digital Decade targets monitored through the Digital Economy and Society Index
Key clean industry and climate mitigation indicators: Hungary
Key Energy Indicators
Key indicators for progress on climate adaptation, preparedness and environment
Social Scoreboard for Hungary
Key health indicators
Selected EU funds with adopted allocations - summary data (million EUR)
Summary table on 2019-2024 CSRs
Selected indicators at regional level in Hungary
37
38
39
47
52
59
62
63
72
79
86
101
103
110
111
115
LIST OF GRAPHS
A2.1.
A2.2.
A2.3.
A3.1.
A3.2.
A4.1.
A5.1.
A5.2.
A5.3.
A5.4.
A5.5.
A6.1.
A6.2.
A6.3.
A7.1.
A7.2.
A7.3.
A7.4.
A8.1.
A8.2.
A8.3.
A9.1.
A9.2.
A10.1.
A10.2.
A10.3.
A11.1.
A11.2.
A12.1.
A12.2.
A14.1.
A14.2.
A15.1.
A16.1.
A16.2.
A17.1.
Tax revenue shares in 2023
Tax wedge for single and second earners, % of total labour costs, 2024
FDI and use of SPEs in Hungary and the rest of the EU* as % of GDP, 2023
Public expenditure on R&D (GOVERD + HERD) as a percentage of GDP in 2023
Patent applications to the EPO by country of applicants and inventors in 2023
Making Business Easier: selected indicators.
Net savings-investment balance in Hungary
International investment position of Hungary
Capital markets and financial intermediaries in Hungary
Composition of NFC funding as % of GDP
Composition of household financial assets per capita and as % of GDP
Trust in justice, regional / local authorities and in government
Indicators of Regulatory Policy and Governance (iREG)
Median time for law adoption in Parliament (days)
GHG emission intensity of manu-facturing and energy-intensive sectors, 2022
Manufacturing industry production: total and selected sectors, index (2021 = 100), 2017-2023
Greenhouse gas emissions from the effort sharing sectors, 2005 and 2023
Municipal waste treatment
Retail energy price components for household and non-household consumers, 2024
Monthly average day-ahead wholesale electricity prices and European benchmark natural gas prices (Dutch TTF)
Hungary's installed renewable capacity (left) and electricity generation mix (right)
Direct dependency(1) on ecosystem services(2) of the gross value added generated by economic sector in 2022
Investment needs and gaps in EUR million, in 2022 constant prices
Unemployment rates (%)
Labour market slack
Unit labour costs and productivity
At-risk-of-poverty-or-social-exclusion rate and its component rates
Impact of social transfers on poverty reduction (%)
Underachievement in mathematics, reading and science by students' socio-economic background (%)
Adult learning participation and digital skills of some vulnerable groups
Life expectancy at birth, years
Treatable mortality
Progress towards the SDGs in Hungary
Distribution of RRF funding in Hungary by policy field
Distribution of cohesion policy funding across policy objectives in Hungary
Labour productivity per hour worked
40
40
42
43
45
49
53
53
54
56
57
61
62
62
68
68
69
70
73
74
76
83
84
87
88
90
92
94
98
100
102
102
105
108
108
114
30
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LIST OF MAPS
A17.1.
Regional Competitiveness Index 2.0, 2022 edition
116
31
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FISCAL
ANNEX 1: FISCAL SURVEILLANCE AND DEBT SUSTAINABILITY
This Annex contains a series of tables relevant for the assessment of the fiscal situation in Hungary,
including how Hungary is responding to Council recommendations issued under the reformed Economic
Governance Framework.
The reformed framework, which entered into force on 30 April 2024(
15
), aims to strengthen debt
sustainability and promote sustainable and inclusive growth through growth-enhancing reforms and
priority investments. The medium-term fiscal-structural plans (hereinafter, MTPs or plans) constitute the
cornerstone of the framework, setting the budgetary commitment of Member States over the medium
term. The latter is defined in terms of net expenditure growth, which is the single operational indicator for
fiscal surveillance.
Hungary submitted its plan on 4 November 2024 and subsequently submitted an addendum to the plan
on 20 December 2024 reflecting more recent data. The plan covers the period until 2028, presenting a
fiscal adjustment over four years. On 18 February 2025, the Council adopted the Recommendation
endorsing Hungary’s
plan.(
16
) On 18 February 2025, the Council also adopted a Recommendation under
Article 126(7) TFEU to correct the excessive deficit in Hungary
17
. The corrective net expenditure path
recommended by the Council under the excessive deficit procedure is consistent with the path set out in
the plan.
The assessment of the implementation of the Council Recommendation endorsing Hungary’s
plan is
carried out on the basis of outturn data from Eurostat and
the Commission’s Spring 2025 Forecast,
and
taking into account the Annual Progress Report (APR) that Hungary submitted on 30 April 2025.
Furthermore, given Hungary’s
request to activate the National Escape Clause
(
18
) following the
Commission Communication of 19 March 2025(
19
), the assessment also considers, as appropriate, the
projected increase in defence expenditure based on the Commission Spring 2025 Forecast.
The Annex is organised as follows. First, developments in
government deficit and debt
are presented
based on the figures reported in Table A1.1. Then, the assessment of the
implementation of the
Council Recommendation to correct the excessive deficit and of the Council Recommendation
endorsing the plan
follows, based on the relevant figures presented in Tables A1.2 to A1.9, including
data on defence expenditure.
The Annex also provides information on the
cost of ageing
and the
national fiscal framework.
Fiscal
sustainability risks are discussed in the Debt Sustainability Monitor 2024.(
20
)
(
15
) Regulation (EU) 2024/1263 of the European Parliament and of the Council (EU) on the effective coordination of economic policies
and on multilateral budgetary surveillance, together with the amended Regulation (EC) No 1467/97 on the implementation of the
excessive deficit procedure, and the amended Council Directive 2011/85/EU on the budgetary frameworks of Member States are the
core elements of the reformed EU economic governance framework.
(
16
) OJ C, C/2025/1707, 18.03.2025, ELI:
http://data.europa.eu/eli/C/2025/1707/oj.
(
17
) Council Recommendation with a view to bringing an end to the situation of an excessive deficit in Hungary, C/2025/5896.
(
18
) On 30 April 2025, Hungary requested to the Commission and to the Council the activation of the National Escape Clause. On this
basis, the Commission adopted a Recommendation for a Council Recommendation allowing Hungary to deviate from, and exceed,
the net expenditure path set by the Council, COM/2025/608.
(
19
) Communication from the Commission accommodating increased defence expenditure within the Stability and Growth Pact of 19
March 2025, C(2025) 2000 final.
(
20
) European
Commission (2025) ‘Debt Sustainability Monitor 2024,’
European Economy-Institutional Papers
306.
32
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Developments in government deficit and debt
Hungary’s government deficit amounted to 4.9% of GDP in 2024. Based on the Commission’s Spring 2025
Forecast, it is projected to decrease to 4.6% of GDP in 2025. The government debt-to-GDP ratio amounted
to 73.5% at the end of 2024 and, according to the Commission, is projected to increase to 74.5% at end-
2025, reflecting a high general government deficit and a positive stock-flow adjustment due to large
interest payments in cash terms accrued in the previous year. In the absence of additional discretionary
measures and given the muted macroeconomic outlook that is dampening growth in tax revenues, the
reduction of the deficit is forecast to stall in 2025 and 2026. The Commission forecast projects a higher
deficit in 2025 than Hungary’s Annual Progress
Report due to significantly lower revenue from production
and income taxes in line with a lower level of nominal GDP.
Table A1.1:
General government balance and debt
Variables
1
2
2024
% GDP
% GDP
Outturn
-4.9
73.5
APR
-4.1
73.1
2025
COM
-4.6
74.5
APR
n.a.
n.a.
2026
COM
-4.7
74.3
General government balance
General government gross debt
Source:
Commission Spring 2025 Forecast (COM), Annual Progress Report (APR)
Developments in net expenditure
The net expenditure(
21
) growth of Hungary in 2025 is forecast by the Commission(
22
) to be above the
recommended maximum, corresponding to a deviation of 0.7% of GDP. Considering 2024 and 2025
together, the cumulative growth rate of net expenditure is projected below the recommended maximum
cumulative growth rate. The Commission forecast projects lower net expenditure growth in 2025 than
Hungary’s Annual Progress Report due to differences in the projections of nationally-financed
expenditure.
Table A1.2:
Net expenditure growth
Annual
REC
2024
2025
2026
Cumulative*
COM
REC
Growth rates
2.3%
n.a.
6.1%
9.1%
6.0%
13.5%
APR
n.a.
9.8%
n.a.
COM
n.a.
8.6%
15.1%
APR
2.3%
7.4%
n.a.
n.a.
4.3%
4.0%
* The cumulative growth rates are calculated by reference to the base year of 2023.
Source:
Council Recommendation to correct the excessive deficit in
Hungary, Annual Progress Report (APR) and Commission’s
calculation based on Commission Spring 2025 Forecast (COM).
Source:
The assessment of the net expenditure growth and in particular the comparison with the recommended
net expenditure path considers that Hungary has requested the activation of the national escape clause to
(
21
) Net expenditure is defined in Article 2(2) of Regulation (EU) 2024/1263 as government expenditure net of (i) interest expenditure,
(ii) discretionary revenue measures, (iii) expenditure on programmes of the Union fully matched by revenue from Union funds, (iv)
national expenditure on co-financing of programmes funded by the Union, (v) cyclical elements of unemployment benefit
expenditure, and (vi) one-off and other temporary measures.
(
22
) Commission Spring 2025 Forecast
European Economy-Institutional paper 318,
May 2025.
33
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facilitate transitioning to a higher level of defence expenditure. General government defence expenditure
in Hungary amounted to 1.1% of GDP in 2021, 1.4% of GDP in 2022 and 1.9% of GDP in 2023(
23
).
According to the Commission 2025 Spring Forecast, expenditure on defence is projected at 2.0% of GDP in
both 2024 and 2025. Based on current projections for defence spending, the deviation that is projected
for Hungary is within the flexibility provided by the national escape clause.
Table A1.3:
Net expenditure (outturn and forecast), annual and accumulated deviations vis-à-vis the
recommendation
Variables
Total expenditure
Interest expenditure
3
Cyclical unemployment expenditure
4
Expenditure funded by transfers from the EU
5
National co-financing of EU programmes
6
One-off expenditure (levels, excl. EU funded)
Net nationally financed primary expenditure (before
7=1-2-3-4-5-6
discretionary revenue measures, DRM)
8
Change in net nationally financed primary expenditure (before DRM)
9
DRM (excl. one-off revenue, incremental impact)
Change in net nationally financed primary expenditure
10=8-9
(after DRM)
11
Outturn / forecast net expenditure growth
12
Recommended net expenditure growth*
13=(11-12) x 7
Annual deviation
14 (cumulated from 13)
Cumulated deviation
15=13/17
Annual balance
16=14/17
Cumulated balance
17
p.m. Nominal GDP
1
2
bn NAC
bn NAC
bn NAC
bn NAC
bn NAC
bn NAC
bn NAC
bn NAC
bn NAC
bn NAC
% change
% change
bn NAC
bn NAC
% GDP
% GDP
bn NAC
2023
Outturn
37145.1
3533.9
-55.6
582.9
193.4
0.0
32890.5
2024
Outturn
38209.9
4039.9
-44.9
489.2
193.8
0.0
33532.0
641.4
-116.6
758.0
2.30%
4.6%
-754.9
-754.9
-0.9
-0.9
81514.2
2025
COM
40603.2
3644.4
-48.6
1020.9
419.3
0.0
35567.3
2035.3
-19.9
2055.2
6.1%
4.3%
613.3
-141.6
0.7
-0.2
86207.1
2026
COM
42859.8
3658.8
-48.3
1524.5
694.9
0.0
37029.9
1462.6
-665.0
2127.6
6.0%
4.0%
704.9
563.3
0.8
0.6
91529.7
75568.9
* The growth rate for 2024 is not a recommendation but serves to anchor the base, as the latest year with outturn data when
setting the net expenditure path is year 2023.
Source:
Commission Spring 2025 Forecast and Commission’s calculation
Table A1.4:
Defence expenditure and the national escape clause
1
2
3
4
Total defence expenditure
of which: gross fixed capital formation
Flexibility from increases in defence expenditure
Cumulated balance after flexibility
% GDP
% GDP
% GDP
% GDP
2021
1.1
0.2
2022
1.4
0.3
2023
1.9
0.6
2024
2.0
1.0
2025
2.0
1.0
0.9
-1.0
2026
2.2
1.0
1.1
-0.5
Source:
Eurostat (COFOG), Commission Spring 2025 Forecast and Commission’s calculation
(
23
) Eurostat, government expenditure by classification of functions of government (COFOG).
34
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Table A1.5:
Macroeconomic developments and forecasts
Variables
1=7+8+9
2024
Outturn
0.5
5.1
-4.6
-11.1
-3.0
-4.0
APR
2.5
3.5
0.4
2.3
3.0
3.6
2.7
0.0
-0.3
-3.8
0.1
4.3
2.4
4.5
5.2
7.8
n.a.
2025
COM
0.8
3.4
0.3
-1.5
0.2
1.1
1.4
0.0
-0.6
-1.2
0.1
4.4
0.8
4.1
4.9
8.7
2.6
APR
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
2026
COM
2.5
3.2
1.5
4.0
2.8
3.5
2.9
0.0
-0.4
0.0
0.3
4.3
2.2
3.3
3.6
7.8
2.4
Real GDP
% change
2
Private consumption
% change
3
Government consumption expenditure
% change
4
Gross fixed capital formation
% change
5
Exports of goods and services
% change
6
Imports of goods and services
% change
Contributions to real GDP growth
7
- Final domestic demand
pps
-1.2
8
- Change in inventories
pps
1.2
9
- Net exports
pps
0.6
10
Output gap
% pot GDP
-1.0
11
Employment
% change
0.1
12
Unemployment rate
%
4.5
13
Labour productivity
% change
0.4
14
HICP
% change
3.7
15
GDP deflator
% change
7.3
16
Compensation of employees per head
% change
12.6
Net lending/borrowing vis-à-vis the rest of the
17
% GDP
2.8
world
Source:
Commission Spring 2025 Forecast (COM), Annual Progress Report (APR)
Table A1.6:
General government budgetary position
Variables (% GDP)
1=2+3+4+5
2
3
4
5
8=9+16
9
10
11
12
13
14
15
16
18=1-8
19=1-9
20
21
22=20-21
23=22+16
2024
Outturn
42.0
17.1
7.6
10.4
6.9
46.9
41.9
10.3
8.2
12.0
2.1
4.2
5.1
5.0
-4.9
0.0
-4.5
0.0
-4.5
0.5
APR
42.7
17.2
7.6
10.5
7.4
46.8
42.9
10.4
8.6
11.9
1.9
3.9
6.2
3.9
-4.1
-0.2
n.a.
0.0
-2.4
1.5
2025
COM
42.5
17.2
7.5
10.7
7.2
47.1
42.9
10.8
8.4
11.9
1.7
4.2
5.9
4.2
-4.6
-0.4
-4.0
0.0
-4.0
0.2
APR
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
2026
COM
42.1
16.8
6.8
10.9
7.5
46.8
42.8
11.1
8.4
11.6
1.7
4.2
5.9
4.0
-4.7
-0.7
-4.7
0.0
-4.7
-0.7
Revenue
of which:
- Taxes on production and imports
- Current taxes on income, wealth, etc.
- Social contributions
- Other (residual)
Expenditure
of which:
- Primary expenditure
of which:
- Compensation of employees
- Intermediate consumption
- Social payments
- Subsidies
- Gross fixed capital formation
- Other
- Interest expenditure
General government balance
Primary balance
Cyclically adjusted balance
One-offs
Structural balance
Structural primary balance
Source:
Commission Spring 2025 Forecast (COM), Annual Progress Report (APR)
35
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Table A1.7:
Debt developments
Variables
1
2=3+4+8
3
4≈5+6+7
5
6
7
8
Gross debt ratio* (% of GDP)
Change in the ratio (pps. of GDP)
Contributions**
Primary balance
'Snow-ball' effect
of which:
- Interest expenditure
- Real growth effect
- Inflation effect
'Stock-flow' adjustment
2024
Outturn
73.5
0.5
0.0
-0.4
5.0
-0.3
-5.0
0.9
2025
APR
73.1
-0.3
0.2
-1.4
3.9
-1.7
-3.6
0.9
COM
74.5
1.0
0.4
0.2
4.2
-0.6
-3.4
0.4
APR
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
2026
COM
74.3
-0.2
0.7
-0.3
4.0
-1.8
-2.6
-0.6
* End of period.
** The 'snow-ball' effect captures the impact of interest expenditure on accumulated general government debt, as well as the
impact of real GDP growth and inflation on the general government debt-to-GDP ratio (through the denominator). The stock-flow
adjustment includes differences in cash and accrual accounting (including leads and lags in Recovery and Resilience Facility grant
disbursements), accumulation of financial assets, and valuation and other residual effects.
Source:
Commission Spring 2025 Forecast and Commission’s calculation (COM), Annual Progress
Report (APR)
Table A1.8:
RRF
–
Grants
Revenue from RRF grants (% of GDP)
1
2
RRF grants as included in the revenue projections
Cash disbursements of RRF grants from EU
2020
n.a.
n.a.
2021
0.0
0.0
2022
0.2
0.0
2023
0.3
0.0
2024
0.2
0.1
2025
0.4
0.0
2026
n.a.
n.a.
Expenditure financed by RRF grants (% of GDP)
3
4
5
6=4+5
Total current expenditure
Gross fixed capital formation
Capital transfers
Total capital expenditure
2020
0.0
0.0
0.0
0.0
2021
0.0
0.0
0.0
0.0
2022
0.0
0.1
0.2
0.2
2023
0.0
0.1
0.2
0.3
2024
0.0
0.1
0.1
0.2
2025
0.0
0.2
0.2
0.3
2026
n.a.
n.a.
n.a.
n.a.
Other costs financed by RRF grants (% of GDP)
7
8
9
Reduction in tax revenue
Other costs with impact on revenue
Financial transactions
2020
0.0
0.0
0.0
2021
0.0
0.0
0.0
2022
0.0
0.0
0.0
2023
0.0
0.0
0.0
2024
0.0
0.0
0.0
2025
0.0
0.0
0.0
2026
n.a.
n.a.
n.a.
Source:
Annual Progress Report
36
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Table A1.9:
RRF - Loans
Cash flow from RRF loans projected in the Plan (% of GDP)
1
2
Disbursements of RRF loans from EU
Repayments of RRF loans to EU
2020
n.a.
n.a.
2021
0.0
0.0
2022
0.0
0.0
2023
0.4
0.0
2024
0.0
0.0
2025
0.0
0.0
2026
n.a.
n.a.
Expenditure financed by RRF loans (% of GDP)
3
4
5
6=4+5
Total current expenditure
Gross fixed capital formation
Capital transfers
Total capital expenditure
2020
0.0
0.0
0.0
0.0
2021
0.0
0.0
0.0
0.0
2022
0.0
0.0
0.0
0.0
2023
0.0
0.0
0.0
0.0
2024
0.0
0.0
0.0
0.0
2025
0.0
0.0
0.0
0.0
2026
n.a.
n.a.
n.a.
n.a.
Other costs financed by RRF loans (% of GDP)
7
8
9
Reduction in tax revenue
Other costs with impact on revenue
Financial transactions
2020
0.0
0.0
0.0
2021
0.0
0.0
0.0
2022
0.0
0.0
0.0
2023
0.0
0.0
0.0
2024
0.0
0.0
0.0
2025
0.0
0.0
0.1
2026
n.a.
n.a.
n.a.
Source:
Annual Progress Report
Cost of ageing
Total age-related spending in Hungary is projected to rise from about 16% of GDP in 2024 to
about 18% in 2040 and 21% in 2070 (see Table
A1.10). The overall increase is driven mainly by the
projected rise in pension spending with a lower impact from rising healthcare, long-term care and
education expenditure.
Public pension spending is projected to increase continuously over the next decades.
The
pension expenditure-to-GDP ratio would rise by 4.1 pps by 2070, the third highest projected increase of all
EU Member States for 2024-2070. 1.2 pps of this increase is expected to occur by 2040.
Public healthcare (
24
) expenditure is projected at 4.3% of GDP in 2024 (below the EU average
of 6.6%) and is expected to increase by 0.3 pps by 2040 and by a further 0.2 pps by 2070.
Public expenditure on long-term care (
25
) is projected at 0.6% of GDP in 2024 (below the EU
average of 1.7%) and is expected to increase by 0.1 pp of GDP by 2040 and by a further
0.2 pps of GDP by 2070.
Table A1.10:Projected
change in age-related expenditure in 2024-2040 and 2024-2070
age-related
expenditure
2024 (% GDP)
HU
EU
16.1
24.3
age-related
expenditure
2024 (% GDP)
HU
EU
16.1
24.3
change in 2024-2040 (pps GDP) due to:
pensions
1.2
0.5
healthcare
0.3
0.3
long-term care
0.1
0.4
education
0.0
-0.3
total
1.6
0.9
age-related
expenditure
2040 (%GDP)
17.7
25.2
age-related
expenditure
2070 (%GDP)
5.1
1.3
21.3
25.6
HU
EU
HU
EU
change in 2024-2070 (pps GDP) due to:
pensions
4.1
0.2
healthcare
0.5
0.6
long-term care
0.3
0.8
education
0.2
-0.4
total
Source:
2024 Ageing Report (EC/EPC).
(
24
)
Key performance characteristics, recent reforms and investments are discussed in Annex 11 ‘Health and health systems’.
(
25
) The quality and the accessibility of the long-term
care system are covered in Annex 9 ‘Social policies’.
37
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National fiscal framework
The relatively small Hungarian Fiscal Council (HFC) has a narrow mandate and relies on
support from other institutions.
Two of three Board members head other institutions in parallel (the
Central Bank and the Audit Office), which could affect the Council’s independence, especially since it also
draws on analytical support from these institutions. Members are also required to be Hungarian citizens,
which limits the recruitment pool. While the HFC is free to communicate at any time and reports regular
appearances in mainstream national TV/radio/daily papers, it has issued no press releases nor given any
press conferences in recent years, and the English version of its website could be further developed.
Table A1.11:Fiscal
Governance Database Indicators
2023
Country Fiscal Rule Strength Index (C-FRSI)
Medium-Term Budgetary Framework Index (MTBFI)
Hungary
10.39
0.40
EU Average
14.52
0.73
The Country Fiscal Rule Strength Index (C-FRSI) shows the strength of national fiscal rules aggregated at the country level based
on i) the legal base, ii) how binding the rule is, iii) monitoring bodies, iv) correction mechanisms, and v) resilience to shocks. The
Medium-Term Budgetary Framework Index (MTBFI) shows the strength of the national MTBF based on i) coverage of the
targets/ceilings included in the national medium-term fiscal plans; ii) connectedness between these targets/ceilings and the
annual budgets; iii) involvement of the national parliament in the preparation of the plans; iv) involvement of independent fiscal
institutions in their preparation; and v) their level of detail. A higher score is associated with higher rule and MTBF strength.
Source:
Fiscal Governance Database
38
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ANNEX 2: TAXATION
This annex provides an indicator-based
overview of Hungary’s tax system.
It includes
information on: (i) the tax mix; (ii) competitiveness
and fairness aspects of the tax system; and (iii)
tax collection and compliance. While some
measures have been adopted, tackling aggressive
tax planning (ATP) remains a challenge.
Hungary’s tax revenues as a
percentage of
GDP are below the EU average, with a
relatively heavy reliance on consumption
taxes and a relatively low reliance on labour
taxes.
Table A2.1
shows that Hungary’s annual
tax revenues as a percentage of GDP increased
from 35.0% in 2022 to 35.1% in 2023 but
remained below the EU average of 39.0%. Labour
taxation (14.8% of GDP in 2023) is the largest tax
base, although its relative importance has declined
since 2010. The tax system also relies heavily on
consumption taxes (13.5% of GDP in 2023, above
the EU average of 10.5%). Capital taxation in
relation to GDP was 6.8% in 2023 (against an EU
average of 8.5%). Revenue from environmental
taxation is close to the EU average (2.2% of GDP
in 2023 as compared with 2% in the EU), but
recurrent property taxation remains relatively low
(0.3% of GDP in 2023 compared with the EU
average of 0.9%). Revenues from property taxes
were relatively low (0.8% GDP), remaining below
Table A2.1:
Taxation indicators
HU
Median (EU-27)
Tax structure
EU average (1.9%).
Hungary has the lowest corporate income tax
(CIT) rate in the EU (9%) but levies a number
of sector-specific taxes on companies, not
always based on profits.
In addition to CIT,
Hungarian resident companies are subject to
municipal tax (which is deductible for CIT purposes
and is not treated as ‘income tax’
for tax treaty
purposes) and activity-based taxes, some of which
are not levied on profits. The top statutory CIT rate
has more than halved over the past ten years,
from 20.6% in 2014. The forward-looking average
effective tax rate was 11.1% in 2022, the third-
lowest among EU Member States, with the EU
average around 19%. Hungary has enacted the
global minimum tax directive (‘Pillar 2’), which
ensures a minimum tax rate of 15% for large
companies. As Hungary’s nominal
and effective tax
rates are both below 15%, an increase in tax
revenues due to the
‘top-up
tax’ is likely.
There are several tax incentives available in
the Hungarian tax system, including areas
such as R&D, green investment and
investments in start-ups.
R&D is supported
through a tax credit and a tax base reduction
option. Since 1 January 2024, a tax incentive
qualifying as a refundable incentive under the
Hungary
2010 2021 2022
Total taxes (including compulsory actual social contributions) (% of
GDP)
Taxes on labour (% of GDP)
of which, social security contributions (SSC, % of GDP)
Taxes on consumption (% of GDP)
of which, value added taxes (VAT, % of GDP)
Taxes on capital (% of GDP)
Personal income taxes (PIT, % of GDP)
Corporate income taxes (CIT, % of GDP)
Total property taxes (% of GDP)
Recurrent taxes on immovable property (% of GDP)
Environmental taxes (% of GDP)
Effective carbon rate in EUR per tonne of CO
2
equivalents
Tax wedge at 50% of average wage (single person) (*)
Tax wedge at 100% of average wage (single person) (*)
Corporate income tax - effective average tax rates (1) (*)
Difference in Gini coefficient before and after taxes and cash social
transfers (pensions excluded from social transfers) (2) (*)
Outstanding tax arrears: total year-end tax debt (including debt
VAT gap (% of VAT total tax liability, VTTL) (**)
36.9
17.3
11.7
12.4
8.5
7.2
6.3
1.1
1.1
0.3
2.6
NA
41.0
46.6
18.1
12.6
33.6
14.4
10.4
13.8
9.8
5.4
4.1
1.2
0.9
0.4
2.0
59.6
43.2
43.2
10.2
4.6
12.0
4.7
35.0
14.6
9.8
14.1
10.1
6.3
5.3
1.3
1.0
0.3
1.9
NA
41.2
41.2
10.2
5.6
10.6
2.3
2023
35.1
14.8
9.9
13.5
9.4
6.8
5.4
1.7
0.8
0.3
2.2
50.6
41.2
41.2
10.2
4.6
2024
2010
37.8
19.8
12.9
10.9
6.8
7.1
8.6
2.2
1.9
1.1
2.5
NA
33.9
40.9
21.3
8.6
EU-27
2021 2022 2023
40.2
20.5
13.0
11.2
7.3
8.5
9.6
2.9
2.2
1.1
2.4
86.0
31.8
39.9
19.3
8.2
35.5
6.6
39.7
20.1
12.7
10.9
7.4
8.7
9.4
3.2
2.1
1.0
2.1
NA
31.5
39.9
19.1
7.9
32.6
7.0
39.0
20.0
12.7
10.5
7.1
8.5
9.3
3.2
1.9
0.9
2.0
84.8
31.5
40.2
18.9
7.7
2024
By tax base
Some tax types
Progressivity &
fairness
41.2
41.2
31.8
40.3
Tax administration &
considered not collectable) / total revenue (in %) (*)
compliance
(1) Forward-looking effective tax rate (KPMG).
(2) A higher value indicates a stronger redistributive impact of taxation.
(*) EU-27 simple average.
(**) For more details on the VAT gap, see European Commission, Directorate-General for Taxation and Customs Union, VAT gap in
the EU - 2024 report,
https://data.europa.eu/doi/10.2778/2476549
For more data on tax revenues as well as the methodology applied, see the Data on Taxation webpage,
https://ec.europa.eu/taxation_customs/taxation-1/economic-analysis-taxation/data-taxation_en.
Source:
European Commission, OECD
39
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global minimum taxation (Pillar 2) rules, has been
available for eligible R&D costs. A tax credit is also
available for investments of strategic importance
for the transition to a zero net emissions economy.
For companies investing in start-ups, the taxable
profits may be reduced by three times the cost of
shareholdings acquired (subject to certain
requirements).
Graph A2.1:
Tax revenue shares in 2023
Tax revenue shares in 2023, Hungary (outer ring)
and EU (inner ring)
19.4
which is higher than the EU average for single
people earning 50% of the average wage (31.8%),
but close to the EU average for people earning the
average wage or more (40.3%). This means that
the tax system places a disproportionate burden
on lower-paid workers through a high income-tax
rate. In addition, they are also disproportionately
burdened by high consumption taxes, as poorer
households consume a higher proportion of their
income than richer ones. The effectiveness of the
tax and benefit system in reducing inequality (as
measured by its ability to reduce the Gini
coefficient) has declined over time (from -12.6 in
2010 to -4.6 in 2023), falling below the EU
average (-7.7 in 2023).
Graph A2.2:
Tax wedge for single and second
earners, % of total labour costs, 2024
Tax wedge, % of total labour costs
50
21.9
51.2
26.9
38.5
42.1
45
40
35
30
25
Taxes on labour
Taxes on consumption
Taxes on capital
41.2
41.2
41.2
41.2
41.2
Source:
Taxation Trends Data, DG TAXUD
Hungary has made a commitment to simplify
its tax system as part of the implementation
of its recovery and resilience plan (RRP).
Hungary’s RRP includes commitments to introduce
tax simplification measures by reducing the
number of taxes to lower tax-related
administrative costs and thereby contribute to a
more competitive and fairer economy and a better
business environment. One of the deliverables of
the RRP is the phasing-out of six temporary
sector-specific tax measures. While Hungary has
made progress in this area, several sector-specific
taxes remain in place (including those on financial
institutions, energy and retail sales).
Hungary’s labour tax burden is significantly
higher than the EU average for low-wage
earners.
Hungary has a flat personal income tax
(PIT) rate of 15%, one of the lowest in the EU. As a
result, the tax wedge (
26
) is the same across
different income levels, meaning it is relatively
high for low-income earners and relatively low for
high-income earners. As shown in Table A2.1,
Hungary’s labour tax wedge was 41.2% in 2024,
(
26
) The tax wedge is defined as the sum of personal income
taxes and employee and employer social-security
contributions net of family allowances, expressed as a
percentage of total labour costs (the sum of the gross wage
and social-security contributions paid by the employer).
20
50
100
150
Earnings as % of the average wage
Single earner - HU
Second earner - HU
Single earner - EU average
Second earner - EU average
The tax wedge for second earners assumes a first earner at
100% of the average wage and no children. For the full
methodology, see OECD, 2016, Taxing Wages 2014-2015.
Source:
European Commission
Hungary has added a substantial REPowerEU
chapter to its RRP but challenges remain in
the area of environmental taxation.
Hungary’s
plan includes 13 reforms and 16 investments to
reduce its reliance on fossil fuels. However, the
nominal marginal tax rates on diesel and unleaded
petrol remain below the EU average. The price of
diesel for private road use is lower than that of
unleaded petrol, even though diesel has a higher
carbon content and a greater negative impact on
air quality. This is true for both the tax per litre
and the tax per tonne of CO
2
emissions. In 2024,
the diesel-to-petrol ratio for the tax per litre stood
at 0.94, with the petrol rate set at EUR 392 per
1 000 litres.(
27
)
(
27
) European Commission Taxes in Europe database
(https://ec.europa.eu/taxation_customs/tedb/#/home)
40
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Hungary continues to perform comparatively
well
on
tax
compliance
and
tax
administration,
demonstrating
both
effectiveness and efficiency in tax collection.
This performance is expected to improve further
with the ongoing digitalisation of relevant
procedures and processes. These efforts are part
of Hungary’s RRP measures to digitally transform
tax compliance procedures to make tax reporting
easier, simpler and faster. Hungary is currently
enhancing the functionality of the recently
launched eVAT platform to streamline and
automate the preparation of VAT returns. The
introduction of the eReceipt system has been
postponed to 1 July 2025, while preparations for
the multi-phase roll-out of the ePayroll platform in
2026 appear to be on track. As part of an ongoing
technical support instrument (TSI) project, the
Hungarian tax administration (NTCA) is working on
a comprehensive digital transformation, including
a new IT strategy and improved data asset
management.
The VAT gap is still well below the EU
average of 7%.
In 2022, Hungary's VAT gap was
2.3% of the VAT total tax liability. While the EU-
wide gap increased slightly between 2021 and
2022, Hungary's VAT gap decreased by 2.4 pps.
This improvement could be attributed to various
policy and digital instruments implemented over
the years, such as the dedicated use of the reverse
charge mechanism and the adaptation of
electronic monitoring systems, as outlined in
previous country report annexes(
28
). Tax arrears in
2022 accounted for 10.6% of total net revenue.
This was significantly below the EU average of
32.6%, although that average was distorted by
very large values in a few Member States.
The cost of compliance and relevant
facilitation measures present a relatively
positive picture.
In 2021, the total cost of
compliance for SMEs was the second-lowest in the
EU. The NTCA has also started providing pre-filled
tax returns for PIT and VAT. (
29
) Hungary scored
(
28
) In this context, it is also welcomed that Hungary is currently
implementing a TSI project to align its current real-time
reporting system to the digital VAT reporting requirements
under the recently adopted ‘VAT in the digital age’ (ViDA)
package and to prepare the framework for mandatory B2B
e-invoicing.
(
29
) OECD, 2022
https://www.oecd.org/tax/forum-on-tax-
administration/tax-technology-tools-and-digital-
solutions/strategy-governanceand-new-skills.htm.
highly in 2021 on electronic filing, with 99.8% of
CIT returns and 95.9% of PIT returns submitted
electronically. Electronic filing for VAT reached
100% in 2021 (
30
). As for the effectiveness of
dispute resolution, the average time taken to
complete a mutual agreement procedure (MAP)
case is considerably shorter than the EU
average(
31
).
Hungary’s RRP includes a commitment to
strengthen the tax system against the risk of
aggressive tax planning (ATP).
This includes
measures like introducing minimum substance
requirements for corporate income tax for shell
companies,
strengthening
transfer
pricing
regulations and broadening the scope of non-
deductibility for outbound payments. Hungary has
taken action to improve the effectiveness of tax
avoidance rules. The country has adopted
measures to implement non-deductibility of
interest and royalty payments to listed and low-
tax jurisdictions starting January 2024. In addition,
Hungary has strengthened its transfer pricing rules
and
improved
compliance
through
the
digitalisation of its tax system (ePayroll, eReceipt,
eVat) as described above.
Whereas it is still early to assess the
effectiveness of the changes introduced,
tackling ATP remains a challenge.
Foreign
direct investment (FDI) inward flows, as a
percentage of GDP, are almost three times higher
than the EU average (194% of GDP vs 84% of
GDP in the EU in 2023). In addition, the share of
inward FDI stocks held through special purpose
entities relative to GDP (65%) is higher in Hungary
than at EU level (25%) (see Graph A2.3). These
figures suggest that Hungary may be used in ATP
structures. Hungary does not leavy a withholding
tax on interest, dividend or royalty payments,
which facilitates low-tax-cost repatriation of
invested funds. However, Hungary has introduced
withholding tax on payments to low-tax
jurisdictions. The Hungary-USA double tax treaty
was terminated with effect from 2024.
(
30
) OECD Tax Administration 2023-© OECD 2023.
(
31
) All data derived from the
Statistics on APAs and MAPs in the
EU - European Commission (europa.eu).
41
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Graph A2.3:
FDI and use of SPEs in Hungary and
the rest of the EU* as % of GDP, 2023
FDI and use of SPEs in Hungary and res of the EU* as
% of GDP, 2023
250%
200%
150%
100%
50%
0%
HU
Inward FDI stock
Total FDI
SPEs
EU26
HU
EU26
Outward FDI stock
*Aggregate data for 26 Member States. Data for Austria are
confidential.
Source:
European Commission
42
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PRODUCTIVITY
ANNEX 3: INNOVATION TO BUSINESS
Stagnating
R&D
investment
hinders
Hungary’s
scientific
and
innovation
performance.
The 2024 European Innovation
Scoreboard (
32
) shows that Hungary's innovation
performance has improved over the years;
however, the country is still performing poorly in
comparison to the EU average. Hungary’s R&D
intensity did not increase over the past decade and
remains well below the EU average (1.38% vs
2.24% of GDP in 2023). Low public spending on
R&D affects the quality of the science base,
undermining Hungary’s innovative potential.
Science-business linkages are underexploited, and
innovation activities are concentrated in a small
group of foreign companies, calling for decisive
action to strengthen and broaden Hungary’s
domestic innovation base.
in 2021). To tackle this issue, the national research
excellence programme (
35
) aims to promote
internationally competitive academic excellence
based on international standards. However, this
will not be enough to overcome the chronic
underfunding of the public science base, which,
combined with a lack of monitoring and evaluation
of science policies, undermines the quality of the
public research system.
Graph A3.1:
Public expenditure on R&D (GOVERD +
HERD) as a percentage of GDP in 2023
1
0.8
0.6
0.4
0.2
Science and innovative ecosystems
Low public spending on R&D holds back the
quality and performance of the public
science base and Hungary’s transition
towards a more knowledge-based economy.
Public R&D expenditure has remained stagnant
over the past years, and in 2023 was both well
below the EU average (at 0.37% of GDP vs 0.72%)
and lower than in other Central and Eastern
European countries (
33
). Due to this significant
underinvestment in public R&D, Hungary will
struggle to reach its national target of spending
3% of GDP in total (public and private spending)
on R&D by 2030 (
34
). This lack of public investment
holds back scientific excellence, as evidenced by
the share of Hungarian scientific publications as a
percentage of its total publications within the top
10% most-cited scientific publications worldwide,
which has not improved over the years and
remains well below the EU average (5.9% vs 9.6%
(
32
) 2024 European Innovation Scoreboard (EIS), country profile
Hungary,
country profile Hungary.
The EIS provides a
comparative analysis of innovation performance in EU
countries, including the relative strengths and weaknesses of
their national innovation systems (also compared to the EU
average).
(
33
) For example, public R&D investment accounts for 0.63% of
GDP in Czechia, 0.55% in Poland, and 0.64% in Slovenia.
(
34
) National research, development and innovation strategy
2021-2030.
0
AT
CZ
SI
PL
SK
HU
EU
average
Source:
Eurostat
Underfunding and instability in the research
landscape,
along
with
suboptimal
institutional funding, hinder the efficiency of
the public research system and create
uncertainties for researchers.
When it comes
to the allocation of public funding, the government
appears to favour institutions governed by public
trust funds over state-owned universities, which
affects scientific excellence (
36
). The ongoing
reorganisation of the research institutes of the ex-
Academy of Sciences since 2019, as well as
unclear internal evaluation mechanisms (
37
),
contribute to uncertain working conditions for
(
35
)
Nemzeti Kutatási Kiválósági Program (NKKP)
(
36
) While public universities that have not changed based on the
model receive basic funding for maintenance and by head
count, the institutions that have changed receive extra
funding for example for salaries or R&I activities from the
government. with emphasis on quantitative rather than
qualitative output.
(
37
) In 2023 HUN-REN set up a new indicator-based evaluation
system, with retroactive performance requirements for 2022,
fixing the financial allocations for research centres in 2024.
At the request of HUN-REN, an international peer review of
the research network was carried out in 2024. The fact that
the methodology and results were not made public was
strongly criticised by the research community and by the two
biggest trade unions.
43
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researchers. This uncertain environment, coupled
with low salaries and the absence of predictable
career prospects, significantly affects the
attractiveness of academic research careers. This
further weakens the skills supply that is key for
knowledge diffusion as well as society and market
uptake of innovation. The roll out of the new bill
on reforming HUN-REN (
38
) and the introduction of
multiannual performance-based funding will
require close attention and that it preserves
academic freedom and leads to better research
conditions. On a more positive note, the John von
Neumann programme (
39
) has been rolled out with
the goal of strengthening Hungary’s
knowledge-
based economy and for it to become one of the
top innovators in Europe by 2030. The mission-
oriented approach of the programme is a key step
towards directing R&I efforts towards strategic
goals, but it would benefit from more strategic
cross-cutting management in the form of a whole-
of-government approach (
40
).
proportion of small and medium-sized enterprises
do not engage in innovation activities (
43
), nor do
they perceive a need to do so, while there is a high
share of non-innovators with a potential to
innovate (
44
).
Hungary’s
narrow
(domestic)
innovation base and overreliance on FDI may also
explain why Hungary has only one company
among the top 800 EU R&D spenders (
45
).
The comparatively high level of public
support to business R&D in Hungary has not
yielded the expected results.
The government
applies a number of stimuli measures to foster
business R&D, including indirect support measures
through tax incentive schemes (
46
). Direct support
to business R&D amounts to 0.15% of GDP, which
is one of the highest share in the EU. However, the
measures have been taken up by a smaller than
expected number of enterprises (
47
), and the high
level of support has not translated into an increase
in innovation output, as measured by patents.
Rather, the number of patent applications filed
under the Patent Cooperation Treaty per billion
GDP (in PPS €) has been on a downward trend
over the last decade and fell to 1.1, well below the
EU average of 3.2, in 2021. Hungary would benefit
from participating in the unitary patent system,
which offers key advantages in terms of
promoting
innovation
and
enhancing
48
competitiveness ( ). Hungary was ranked 36
th
in
the 2024 global innovation index, which is lower
than the previous year, and policy stability for
doing business was highlighted as one of its
weaknesses.
Business innovation
Hungary’s innovation capacity remains
limited to a small group of big, foreign-
owned enterprises and a handful of large
domestic companies in the manufacturing
sector.
Business enterprise expenditure on R&D
as a percentage of GDP peaked at 1.23 in 2021
and since then has stagnated at 1.00, well below
the EU average of 1.49. The Hungarian economy
largely relies on large foreign direct investment
(FDI) net flows (
41
) from big medium-high-tech and
high-tech manufacturing companies. Domestic
companies mainly contribute to international
production chains through assembly-type activities
with low added value, and only a few large
multinational companies have relocated their
innovative activities to Hungary (
42
). A considerable
(
38
)
Nyitólap -
Országgyűlés.
(
39
)
https://kormany.hu/dokumentumtar/neumann-janos-program.
(
40
) Whole-of-government approach is the notion of ensuring
policy coherence by applying a systemic, holistic, or cross-
sectoral approach to both policy challenges and solutions to
meet an overarching objective.
(
41
) 39.4% of GDP is outstanding, against the EU average of
1.9% (Source: EIS, Hungary’s country profile).
(
42
)
Enhancing labour market relevance and outcomes of
doctoral education: Country note Hungary | OECD.
(
43
) Business enterprise expenditure on R&D (BERD) performed
by SMEs as % of GDP has been decreasing since 2018 and
was 0.38 vs the EU average 0.40 in 2022.
(
44
) Non-innovators with a potential to innovate account for
39.6%, against the EU average of 17.8% (source: EIS,
Hungary country profile).
(
45
)
The 2024 EU Industrial R&D Investment Scoreboard | IRI.
(
46
)
Hungary - Details | INNOTAX Portal.
(
47
)
Enhancing labour market relevance and outcomes of
doctoral education: Country note Hungary | OECD.
(
48
) Hungary is expected to join the Unified Patent Court
Agreement, which it has signed but not yet ratified.
44
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Graph A3.2:
Patent applications to the EPO by
country of applicants and inventors in 2023
600.
500.
400.
300.
200.
100.
0.
Source:
Eurostat
In response to this, and in addition to a number of
funding schemes, the newly created Hungarian
Innovation Agency (NIÜ) (
49
) has launched several
non-financial programmes to help companies gain
knowledge of project development and industrial
property rights. For example, the XPAND
programme provides tailor-made training to help
start-ups, scale-ups and innovative small and
medium-sized enterprises (SMEs) to enter the
international market. Going forward, assessment
and monitoring
–
on a regular basis and based on
international best practice
–
of the policy mix used
to foster business R&D, including R&D tax
incentives (
50
), is crucial to make public spending
more efficient and encourage SMEs and a broader
range of economic players to innovate and be
involved in the innovation value chain. This,
combined with the creation of an environment
helping new and innovative firms, in particular
SMEs, to enter the market, will help broaden
Hungary’s innovation base and boost its
productivity growth and competitiveness.
Businesses do not systematically seek
public-private collaboration, and the lack of
policies and a culture of entrepreneurship
affects the commercialisation of innovation.
Cooperation between academia and businesses is
mainly limited to incumbent firms with links to
universities. While public-private scientific co-
publications, as a percentage of the total number
of publications, are above the EU average, public
expenditure on R&D financed by businesses as a
(
49
)
Home | Nemzeti Innovációs Ügynökség.
(
50
) The
peer review of the country’s R&I system carried out in
2016 already recommended systematising the evaluation of
R&I support programmes and instruments based on
international standards,
Peer Review of the Hungarian R&I
system | Research and Innovation.
of GDP decreased sharply over the past decade. In
2022, at 0.011%, it was well below the EU
average of 0.050. Technology transfer offices are
not yet sufficiently embedded in and accepted by
academic circles, and spin-off channels are not yet
well developed (
51
). As a response, the John von
Neumann Program launched the renewal of the
university technology transfer procedures. While
cooperation between innovative SMEs has
improved, also due to support programmes such
as Széchenyi 2020 (financed by the 2014-2020
ERDF), in 2024 it was 73.1% below the EU
average, having deteriorated by 7% since 2023.
The Hungarian start-up university programme
(HSUP) (
52
) aims to improve the commercialisation
of R&D results from higher education institutions
by raising students’ interest in innovation and
entrepreneurship. The planned science and
innovation parks (
53
) are also expected to foster
knowledge valorisation. Going forward, properly
implementing and monitoring these recently
launched measures will be key, while at the same
time carefully assessing the effectiveness of
existing schemes to support science-industry
collaboration to maximise their impact.
The adoption of digital technologies by
enterprises is steadily improving, supported
by national measures and EU funding.
While
Hungary has made significant progress in the
digitisation of SMEs, with 57.4% of SMEs at a
basic level of digital intensity, it remains far below
the EU average of 72.9%. SMEs do not fully
absorb digital technologies due to a lack of digital
skills. Only 7.4% of Hungarian enterprises have
adopted AI technologies, while the EU average is
13.9%.
LU
SE
DK
FI
NL
DE
AT
BE
IE
FR
EU average
MT
IT
SI
CY
EE
LT
ES
PT
CZ
PL
EL
LV
HR
HU
SK
BG
RO
Financing innovation
Venture capital availability in Hungary
remains unstable.
Based on market statistics
Venture capital investment as a percentage of
GDP progressed well until 2020, but then almost
halved from 0.092 of GDP in 2021 to 0.052 in
2023 (vs the EU average of 0.078). Financing at
the start-up stage dominates the Hungarian
(
51
)
Hungarian Startup Report 2023.
(
52
)
Hungarian Startup University Program.
(
53
)
Neumann János Program.
45
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3035349_0047.png
venture capital market, while incubation financing
has almost disappeared. The number of companies
receiving venture capital and equity funding has
been decreasing since 2022. As regards the
invested amount, the reported value of
transactions was 183.7% higher in the first half of
2024 than in the first half of 2023, and 21.6%
lower than in the first half of 2022 (
54
). Venture
capital funding in Hungary is concentrated on
start-ups (53.1% of the total), with a much
smaller share going to seed financing (15%) and
later stage ventures (32%), where capital
requirements are usually greater. Public co-
funding programmes for early-stage start-ups
could be one reason for this. As new technology-
based firms are likely to need more capital for
growth also in later stages, more work is needed
to support scale-ups at the development stage
(see also the annex on access to finance).
new graduates in science and engineering per
thousand population aged 25-34 has been
decreasing over the past years and in 2022 was
well below the EU average, at 8.4 vs 17.6. As a
result, in 2020 27% of Hungarian enterprises
reported a skills gap, and more than 30% (mostly
large firms) reported difficulties in the
manufacturing sector (
57
). Structural reforms will
be key to address labour market needs, as science,
technology,
engineering
and
mathematics
graduates and an up-skilled workforce are
tomorrow’s specialists in technology-based
industries and emerging areas such as artificial
intelligence.
Innovative talent
Entrepreneurship education is very limited in
Hungary and systemic changes would be
needed to strengthen it.
While there are several
state and private initiatives supporting the
development of entrepreneurial skills, Hungary has
no national strategy for entrepreneurship
education. Entrepreneurship education is used in a
narrow sense in the national school curriculum,
which only relates it to economic and financial
literacy (
55
). According to the 2023 Global
Entrepreneurship Monitor (
56
), 36% of respondents
feel they have the skills and knowledge to start a
business, which is very low by international
standards. Entrepreneurial activity is moderate,
with early-stage entrepreneurial rates below the
global average.
Tackling labour and skill shortages remains
critical
to
fostering
innovation
and
maintaining competitiveness.
The share of the
population aged 25-34 who have successfully
completed tertiary education has been stagnating
over the past decade and stood at 32.3% in 2023,
among the lowest rates in the EU. The number of
(
54
)
Venture Capital and Private Equity update Hungary H1 2024.
(
55
)
Government decree 110/2012. (VI. 4.) on the publication,
introduction and application of the National core curriculum.
(
56
) Global Entrepreneurship Monitor 2023.
(
57
)
Understanding Skill Gaps in Firms | OECD.
46
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Table A3.1:
Key innovation indicators
Hungary
Headline indicator
R&D intensity (gross domestic expenditure on R&D as % of GDP)
Science and innovative ecosystems
Public expenditure on R&D as % of GDP
Scientific publications of the country within the top 10% most cited
publications worldwide as % of total publications of the country
Researchers (FTEs) employed by public sector (Gov+HEI) per thousand
active population
International co-publications as % of total number of publications
R&D investment & researchers employed in businesses
Business enterprise expenditure on R&D (BERD) as % of GDP
Business enterprise expenditure on R&D (BERD) performed by SMEs as %
of GDP
Researchers employed by business per thousand active population
Innovation outputs
Patent applications filed under the Patent Cooperation Treaty per billion
GDP (in PPS €)
Employment share of high-growth enterprises measured in employment
(%)
Digitalisation of businesses
SMEs with at least a basic level of digital intensity
% SMEs (EU Digital Decade target by 2030: 90%)
Data analytics adoption
% enterprises (EU Digital Decade target by 2030: 75%)
Cloud adoption
% enterprises (EU Digital Decade target by 2030: 75%)
Artificial intelligence adoption
% enterprises (EU Digital Decade target by 2030: 75%)
Academia-business collaboration
Public-private scientific co-publications as % of total number of
publications
Public expenditure on R&D financed by business enterprise (national) as %
of GDP
Public support for business innovation
Total public sector support for BERD as % of GDP
R&D tax incentives: foregone revenues as % of GDP
BERD financed by the public sector (national and abroad) as % of GDP
Financing innovation
Venture capital (market statistics) as % of GDP, total (calculated as a 3-
year moving average)
Seed stage funding share (% of total venture capital)
Start-up stage funding share (% of of total venture capital)
Later stage funding share (% of total venture capital)
Innovative talent
New graduates in science and engineering per thousand population aged
25-34
8.6
9.7
17.7
9.2
8.4
:
:
17.6
:
0.03
4.06
62.26
33.68
0.04
20.49
67.88
11.62
0.08
27.18
54.18
18.65
0.09
22.84
46.68
30.48
0.08
21.89
46.33
31.78
0.05
14.97
53.07
31.96
:
:
:
:
0.08
7.29
44.02
48.69
:
:
:
:
8.7
0.04
10.4
0.019
10.7
0.008
11.4
0.011
10.7
0.011
10.5
:
:
:
7.7
0.05
8.9
0.02
:
:
:
:
:
:
:
:
:
:
:
:
:
:
20.6
2.98
51.73
:
:
:
:
53.21
37.12
3.68
57.44
:
39.8
7.41
72.91
33.17
38.86
13.48
:
:
:
:
1.4
16.82
1.2
20.43
1.2
:
1.1
:
1
:
:
:
:
:
2.8
12.51
:
:
0.83
0.37
2.8
0.96
0.35
3.7
1.21
0.47
5.2
1.23
0.42
5.6
1
0.38
5.8
1
:
5.8
:
:
:
1.49
0.4
5.7
2.7
0.3
:
0.41
5.9
2.4
46.5
0.34
5.1
2.3
49.7
0.36
5.9
3.7
50.8
0.4
5.9
3.6
52.1
0.38
:
3.8
50.7
0.37
:
3.5
51.3
:
:
:
:
0.72
9.6
4.2
55.9
0.64
12.3
:
39.3
1.26
1.31.
1.58
1.63
1.39
1.38
:
2.24
3.45
2012
2017
2020
2021
2022
2023
2024 EU average (1)
USA
0.26
0.12
0.142
0.21
0.06
0.141
0.24
0.038
0.200
0.26
0.035
0.225
0.191
0.041
0.150
:
0.039
:
:
:
:
0.204
0.102
0.100
0.251
0.141
0.110
EU average for the last available year or the year with the highest number of country data.
Source:
Eurostat, DG JRC, OECD, Science-Metrix (Scopus database), Invest Europe, European Innovation Scoreboard.
47
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ANNEX 4: MAKING BUSINESS EASIER
In an increasingly difficult economic climate,
with weak investment, high prices and
contracting growth, establishing a safe,
predictable business environment is ever
more critical and Hungary’s key challenge.
capacity network) coverage above the EU
average and 5G coverage close to the EU
average.
FTTP (fibre to the premises) coverage is
high (76.2%; EU average 64.0%). In 2023, Hungary
continued to progress towards the 2030 Digital
Decade connectivity targets, as coverage of fixed
VHCN increased to 84.1% (4 percentage points
higher than 2022). This corresponds to a similar
increase in take-up by consumers, with the share
of at least 1Gbps broadband lines reaching 37.2%,
the second highest in the EU. Hungary has made
considerable progress with its 5G network, with
coverage increasing to 83.7% in 2023 (up by 45%
from the previous year), now just below the EU
average (89.3%).
The risk of cybersecurity incidents is
increasing, given companies' reliance on
digital technologies.
In 2022, 13.4% of
businesses registered ICT security incidents
leading to the unavailability of ICT services,
destruction or corruption of data or disclosure of
confidential data, which is below the EU average
(22.2%). However, businesses seem less prepared
than EU peers as only 5.3% reported being insured
against ICT security incidents (EU average 25.0%)
and 79.0% reported using ICT security measures
(EU average 91.8%).
Economic framework conditions
The investment outlook is weak.
Real GDP was
expected to grow by 0.6% in 2024, and strengthen
by 2025, but investment remains sluggish, due to
the postponement of public investments and a fall
in business optimism. Uncertainties around the
outlook for the automotive industry is expected to
affect investment. A late 2024 survey by the
German-Hungarian Chamber of Industry and
Commerce
indicated
negative
investment
sentiment, with more firms planning to cut
spending than increase (
58
). Public net fixed capital
formation has fallen considerably (0.48% of GDP
in 2020 to 0.1% in 2024). According to the 2024
EIB Investment Survey (
59
), the most frequently
mentioned long-term barriers to investment are
uncertainty about the future (72%); energy costs
(60%); and availability of skilled staff (51%).
Investment in Hungary is heavily oriented
towards machinery and equipment, with
limited focus on intangibles.
Firms allocate a
much smaller share of investment to R&D than
their EU counterparts. In 2023, the share of R&D
investment was 2.8% of the total, significantly
below the EU average of 7.7%.
Availability of finance is an obstacle to
investment.
According to the 2024 EIB
Investment Survey (
60
), the share of finance-
constrained companies is higher in Hungary than
the EU overall. In 2024 the average business-to-
business payment delay increased from 2023 and
is now at 14.6 days (EU average: 15.5 days) (
8
). By
contrast, the delay in payments from public
entities to business has been decreasing and is
below the EU average (10.9 days vs 15.2 days).
Hungary is equipped with strong digital
infrastructure and is making good progress
on deployment, with VHCN (very high-
(
58
)
Német-Magyar Ipari és Kereskedelmi Kamara
(
59
)
EIB Investment Survey Country Overview 2024-Hungary
(
60
)
EIB Investment Survey 2024: European Union overview
Regulatory and administrative
barriers
Excessive regulation, ad hoc taxation, and an
unstable business climate continue to hinder
market entry, competition, and innovation.
In
the retail, energy, transportation, and professional
services
sectors,
strict
regulations
limit
competition and affect productivity. Hungary has
the highest number of regulated professions in the
EU with professions like tourist guides, patent
trademark agents, and lawyers all having levels of
restrictiveness above the EU average.
48
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Graph A4.1:
Making Business Easier: selected
indicators.
(1) Regulatory
burden
influenced by the strong presence of a few state-
owned enterprises limiting competition, innovation,
and research.
State-friendly
domestic
ownership
is
increasing across sectors like banking,
telecommunications, utilities, media, and
broadcasting.
The diminishing presence of
foreign capital (private net fixed capital formation
as a percentage of GDP has more than halved
since 2020) and a lack of expertise in high-value
industries like banking and telecommunications
poses a risk to productivity growth and innovation.
Recent years have seen various cases of market
interference in sectors like construction and retail
(see below) that were detrimental to the business
environment, discouraging investment from the EU
and abroad, and which resulted in the acquisition
of companies by less efficient state-owned
enterprises or private firms with government ties.
Certain firms and industries experience
discriminatory treatment through tailor-
made taxes, price caps, and regulations
imposed at short notice, implemented with
little notice and no prior consultation.
For
example, there are price caps and profit taxes
affecting the production of cement and ceramic
products, as well as increased taxes for insurance
and pharmaceutical companies.
The retail sector has faced a chronically
unstable business environment with many
regulations affecting its functioning, while
also putting a disproportionate burden on
foreign companies.
The tax burden in this sector
disproportionately impacts larger, often foreign-
owned companies, and legislation prevents
European operators from adopting a franchised
structure, akin to that of larger Hungarian retail
businesses. Conditions for establishing or making
changes to stores larger than 400 m² are
unpredictable and lack transparency. Rules
regulating the price of products, their promotion
and retailer margins affect the viability of foreign
retailers. On 12 September 2024, the Court of
Justice of the European Union ruled in case C-
557/23 that Hungarian measures fixing a
maximum price for the sale of certain agricultural
products and the obligation to offer for sale a
specific quantity of such products violated
Regulation (EU) No 1308/2013 establishing a
common organisation of the markets in
agricultural
products,
as
amended
by
Regulation as a major
obstacle to investment
24.5
8.5
(2) Single
Market
41.6
EU Trade Integration
52.7
(3) Shortages
Material shortages as a
factor limiting production
10
7.1
16.6
(4) Late payments
from public entities
17.6
47.9
from private entities
45.4
0
10
20
30
40
Share (%)
50
60
EU27
HU
Share of (1) enterprises, (2) average intra-EU exports and
imports in GDP, (3) firms, (4) SMEs.
Sources:
(1) EIB IS, (2) Eurostat, (3) ECFIN BCS, (4) SAFE
survey.
According to the OECD’s product market
regulation indicators, Hungary exhibits
significantly more regulation than the
average OECD country, indicating an
opportunity to develop a regulatory
framework more supportive of competition.
Areas needing to improve include simplifying
administrative processes for starting new
businesses, enhancing methods for assessing the
impacts of new and existing regulations on
competition,
and
increasing
stakeholder
involvement in the regulatory consultation process.
Reducing regulatory barriers in the professional
and retail sectors, as well as non-tariff trade
barriers, would help productivity.
Business entry rates are low, especially in
sectors dominated by public ownership.
The
business registrations index for 2024 and its five-
year average are below the EU average.
Bankruptcy declarations in 2024 were over three
times higher than in 2021, the highest rate in the
EU. The lower-than-average entry rates are
exacerbated by below-average survival rates for
new businesses over the first five years,
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Regulation (EU) 2021/2117.
The
proposed
legislation on combating food waste contains a
prohibition on retailers selling food products 48
hours before their expiry date, depriving
predominantly foreign retailers of the possibility of
managing their stocks effectively.
The government uses its powers to exempt
deals from merger scrutiny, meaning the
impact of these transactions on the
economy, competition, and the Single Market
go unexamined.
The criteria for exemptions are
vague, and there is no process for challenging
these criteria or the decisions made.
The government recently unveiled welcome
plans to assist SMEs in scaling up.
The Demjan
Sandor Programme, which is co-funded by the EU,
aims to provide financing to SMEs to strengthen
competitiveness
and
investment,
promote
digitalisation, and lessen administrative burdens.
Public procurement
Competition
in
public
procurement
procedures is improving.
However, nearly one
third of Hungarian public procurement contracts
above the EU threshold fail to attract multiple bids
(32% vs EU average of 29%), impacting the
efficiency and cost-effectiveness of procurement
procedures; nevertheless, some improvements
have been observed in recent years.
Hungary initiated targeted reforms in some
sectors
that
brought
in
mandatory
preliminary market consultations and issued
new guidelines for contract structuring to
attract more bidders.
Sectors, such as IT
services, medical equipment, pharmaceuticals, and
construction materials, show high levels of market
concentration, reducing competitive pressure. To
more broadly address the competition issue, in
2024 Hungary revised its action plan for
increasing competition in public procurement,
incorporating fourteen new measures based on
OECD recommendations (
62
), with a focus on
improving the e-Procurement system (EKR),
enhancing capacity-building programmes, and
fostering SME participation. By 2024 Hungary had
fully operationalised the Single-Bid Reporting Tool
for tracking procurement outcomes and identifying
sectors with persistently low competition. In late
2023, Hungary also revised its public procurement
performance measurement framework to include
new indicators based on OECD input, with the
2024 report providing the first comprehensive
assessment under these enhanced metrics.
Removing barriers in the procurement
market would aid competition.
Existing barriers
to entry might be removed by reducing red tape,
streamlining procurement
procedures (e.g.
speeding-up of the decision-making for bid
evaluation) and harmonising legal interpretations
across different supervisory bodies to reduce
administrative complexity. Putting in place regular
public-private
dialogues
and
continuously
evaluating the impact of reforms is crucial for
increasing suppliers’ participation and achieving
(
62
)
OECD (2024), Improving Competitive Practices in Hungary’s
Public Procurement: Reducing Single-bids and Enhancing
Supplier Participation, OECD Public Governance Reviews,
OECD Publishing, Paris,
https://doi.org/10.1787/5d1c1ec1-en
.
Single Market
Hungary is an open economy, highly
integrated into the Single Market.
It relies
heavily on EU sources (27.3% of value added is
sourced from the rest of the EU compared to an
EU average of 19.7%).
Hungary experienced a sharp deterioration in
conformity with EU law and is the worst
performer in the EU.
The conformity deficit (the
percentage of all directives transposed incorrectly)
stood at 3% at the end of 2024 (EU average of
0.9%) compared with 2.3% in 2022. This figure
has deteriorated year-on-year over the past five
years. There are forty-one ongoing infringement
procedures, above the EU average of 26 and a
figure that has considerably increased since
2020 (
61
). Hungary solved 78% of the SOLVIT (the
system for resolving EU-rights issues) cases it
managed as lead centre, which is below the EU
average of 85%. Hungary does not actively take
part in EU tools such as the Single Market
Enforcement Taskforce, designed to improve the
functioning of the single market.
(
61
) Single Market Scoreboard 2024
.
50
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Hungary’s goal of reducing further
single-bid
procedures.
Hungary is taking steps to advance the use
of socially responsible public procurement
(SRPP).
The Public Procurement Authority has a
dedicated website for SRPP, which includes
resources such as guidelines and studies. It also
provides a database on the use of reserved
contracts with the registered ‘sheltered place of
employment.’ Data collection efforts provide
valuable information on the inclusion of social
considerations in public procurement. In 2023,
social aspects were incorporated into 4.2% of
public procurement procedures conducted below
EU thresholds, with these procedures accounting
for 6.7% of the total value (approximately 1.5
times higher than in 2022) (
63
).
(
63
)
kozbeszerzes.hu/media/documents/annual-report-2023.pdf
51
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Table A4.1:
Making Business Easier: indicators.
Hungary
POLICY AREA
INDICATOR NAME
2020
Investment climate
Material shortage, firms facing constraints, %
1
Shortages
Labour shortage, firms facing constraints, %
1
Vacancy rate, vacant posts as a % of all
available ones (vacant + occupied)
2
Transport infrastructure as an obstacle to
investment, % of firms reporting it as a major
obstacle
3
Infrastructure
VHCN coverage, %
4
FTTP coverage, %
4
5G coverage, %
4
8.8
24.4
1.8
23.4
38.5
2.3
22.2
39.0
2.7
10.8
28.6
2.3
7.1
23.1
1.9
10.0
20.2
2.3
2021
2022
2023
2024
EU-27
average
4.7
-
-
-
4.4
71.8
64.2
17.6
3.9
80.3
70.1
57.9
3.6
84.1
76.2
83.7
4.9
-
-
-
13.4
78.8
64.0
89.3
Reduction of regulatory and administrative barriers
Impact of regulation on long-term investment,
Regulatory environment
% firms reporting business regulation as a
10.8
7.6
7.9
3
major obstacle
Payment gap - corporates B2B, difference in
18.0
11.9
10.9
days between offered and actual payment
5
Payment gap - public sector, difference in days
18.9
8.7
14.0
between offered and actual payment
5
Late payments
Share of SMEs
experiencing late
payments, %*
6
from public or private
entities in the last 6
months
from private entities
in the previous or
current quarter
from public entities in
the previous or
current quarter
10.9
8.5
24.5
14.8
14.0
43.6
14.6
10.9
-
15.6
15.1
-
43.9
34.6
40.6
-
-
-
-
45.4
47.9
-
-
-
-
17.6
16.6
Integration
Single Market
EU trade integration, % (Average intra-EU
57.0
imports + average intra EU exports)/GDP
2
EEA Services Trade Restrictiveness Index
7
Transposition deficit, % of all directives not
transposed
8
Conformity deficit, % of all directives
transposed incorrectly
8
SOLVIT, % resolution rate per country
8
Number of pending infringement proceedings
8
0.045
1.0
1.6
95.0
32.0
57.7
0.044
0.7
1.8
91.2
30.0
65.9
0.044
1.5
1.9
93.5
32.0
57.0
0.044
0.2
2.3
75.0
41.0
52.7
0.051
0.5
3.0
78.3
41.0
41.6
0.050
0.8
0.9
84.9
24.4
Compliance
Public procurement
Single bids, % of total contractors**
8
Competition and
transparency in public
procurement
Direct awards, %**
8
39
6
40
5
33
5
32
4
23
5
-
7.0
*Change in methodology in 2024: reporting late payments from public and private entities separately.
**The 2024 data on single bids is provisional and subject to revision.
Sources:
(1) ECFIN BCS, (2) Eurostat, (3) EIB IS, (4) Digital Decade Country reports, (5) Interim Payment Report, (6) SAFE survey,
(7) OECD, (8) up to 2023: Single Market and Competitiveness Scoreboard, 2024: Public procurement data space (PPDS).
52
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ANNEX 5: CAPITAL MARKETS, FINANCIAL STABILITY AND ACCESS TO FINANCE
Hungary has a negative net international
investment position (NIIP) however it has
declined throughout the last years.
Banks,
which dominate the financial sector, are robust,
both in terms of capital and liquidity. Capital
markets remain underdeveloped and do not
contribute sufficiently to the financing of
Hungarian companies. Retail participation has
been improving when looking at the level of direct
and indirect household investments. At the same
time, the investment policies of domestic
institutional investors are quite conservative. The
issuance of tax-free government bonds (while
raising the withholding tax on funds and deposits
from 15% to 28%), does not create the
appropriate incentives to foster the development
of capital markets. Plans to enable the use of
private pension savings for housing purposes in
2025 also reinforces this trend. This leaves
internal financing as the main alternative to bank
funding for Hungarian firms, which is a limiting
factor for the set-up and subsequent scale-up of
innovative start-ups with no or limited profitability.
Moreover, the less-developed capital markets
reduce the exit options for private equity and
venture capital investors and contribute to a less-
developed domestic venture and growth capital
market, further compounding the lack of funding
sources for innovation, a key element for
competitiveness.
Graph A5.1:
Net savings-investment balance in
Hungary
30 % of GDP
25
20
15
10
5
0
-5
2017
2018
2019
2020
2021
2022
2023
Private investment, net
Private saving, net
Borrowing from the rest of the world
Lending to the government
Private saving, gross
Source:
AMECO
Net external liabilities declined to 32% of
GDP, suggesting that Hungary is a net capital
importer.
As of Q3 2024,
Hungary’s
net
international investment position (NIIP) was
equivalent to -31.8% of GDP (see Graph A3.2). Net
foreign direct investment stock, which reached -
32% of GDP as of Q3 2024, accounted for most of
the NIIP. The significant stock of foreign reserves,
which amounted to 22.4% of GDP, decreases net
external liabilities. The net portfolio investments,
which are directly affected by the price volatility of
equity valuations abroad (assets) and in Hungary
(liabilities), were negative to the tune of -20.7% of
GDP as of Q3 2024. They were in line with the net
stock of other investments, which amounted to -
1.5% of GDP at the same time.
Graph A5.2:
International investment position of
Hungary
400
% of GDP
300
Availability and use of domestic
savings
The growing net private savings of the
Hungarian economy have helped to mitigate
vulnerabilities related to external financing.
Throughout 2014 to 2023, the private savings
ratio fluctuated around its ten-year average of
10.7% of GDP, rising to 11.7% in 2023 (see Graph
A3.1). The net private investment ratio, which
measures the private sector's net contribution to
capital accumulation in the country, averaged
5.1% of GDP over the decade but dropped to 3.1%
in 2023. During this period, lending to the
government showed an average deficit equivalent
to 4.1% of GDP. The substantial positive balance
between net domestic savings and net investment,
coupled with a significant government deficit, led
to net lending of, on average, 1.5% of GDP to the
rest of the world between 2014 and 2023.
200
100
0
-100
-200
-300
-400
-500
2017
2018
2019
2020
2021
2022
2023
2024-Q3
Foreign Direct Investment, Assets
Other investment, Assets
Foreign Direct Investment, Liabilities
Other investment, Liabilities
Portfolio Investment, Assets
Official reserve assets
Portfolio Investment, Liabilities
NIIP
Source:
ECB
53
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Structure of the capital markets and
size of the financial sector
The Hungarian economy has a small domestic
equity market.
The market capitalisation of listed
equity reached 17.5% of GDP at end-2023 (see
Graph A3.3). Characteristically, non-financial
corporations (NFCs) accounted for 46% of that
capitalisation, which reflects the extent to which
the stock market is geared towards funding the
non-financial segment of the real economy. The
outstanding volume of debt securities reached
77.2% of GDP at end-2023. Bonds issued by the
government accounted for almost 78.5% of the
total bonds at end-2023.
Graph A5.3:
Capital markets and financial
intermediaries in Hungary
120
100
80
Non-financial corporations
Insurance and pension funds
Financial corporations
Government
insurance market based on gross written premium
income in 2023 (
64
). At this stage, ECB/EIOPA data
were not available on assets of the pension fund
sector, while the OECD reported the total assets of
Hungary’s pension funds equate to around 4.5% of
GDP at end-2023 (
65
). The total assets of
investment funds accounted for 25% of GDP in
2023 (see section on institutional investors).
Resilience of the banking sector
The Hungarian banking system is stable and
resilient.
Hungarian banks remain well
capitalised, with the total capital ratio at 21% in
Q3-2024 (EU average: 20.1%). The common
equity tier 1 (CET1) stood at 18.8% in Q3-2024
(EU average: 16.6%) (see Table A3.1). The banking
sector was exceptionally profitable in 2024 with a
return on equity (ROE) at 21.3% (EU average:
10%), due to volatile and one-off items (an
increase in dividend income and reduction of the
windfall tax) (
66
). The government announced that
windfall tax was still due in 2024, but the amount
payable could be reduced in line with an increase
in banks' holdings of government securities. As of
1 July 2024, the MNB has increased the
countercyclical capital buffer (CCyB) rate
applicable to domestic exposures from 0 to 0.5%.
The MNB has also decided to apply a 1% positive
neutral CCyB rate to domestic exposures in a
neutral risk environment, starting from 1 July
2025 (
67
). Due to rising commercial real estate
(CRE) market risks, the MNB also decided to
reactivate the systemic risk buffer (SyRB) as of 1
July 2024 as a precautionary measure. Hungarian
banks’ aggregate Minimum Requirement for Own
Funds and Eligible Liabilities (MREL) rate stood at
24.6% of risk weighted assets at end-2023 (
68
). As
of 1 January 2024, all banks in Hungary meet
their final MREL targets against an average MREL
binding target (including CBR) of 23.9% TREA
(
64
) MNB, 2024,
Report on Insurance, funds, capital market risks
and consumer protection,
p. 21.
(
65
) OECD, 2024,
Pension Markets in Focus-2024,
p. 11.
(
66
) MNB, 2024,
Financial Stability Report, Nov. 2024,
p.5. The
government announced that tax was still due in 2024, but
the amount payable could be reduced in line with an
increase in banks’ holdings of government securities.
(
67
) MNB,
Countercyclical capital buffer (CCyB)
(
68
) EBA
MREL Dashboard - Q4 2023,
p.13.
% of GDP
MFIs
20
0
Other financials
40
Listed equity
Bonds
Assets by sector
Source:
ECB, EIOPA, AMECO.
Even though the financial sector in Hungary
remains dominated by banks, non-bank
financial intermediaries are growing as well.
The banking sector is the largest segment of the
financial services, total assets of banks
accountedfor 100.2% of GDP in 2023, which
remains however significantly below the EU
average of 253.4%. The domestically owned banks
accounted for 63.7% of total banking sector
assets in 2023. The banking sector also has a very
high level of concentration with the top five MFIs
representing 60% the sector in 2023 (EU average:
51.1%). The insurance sector assets accounted for
only 4.8% of GDP at end-2023. In 2023, insurance
sector was composed of 26 institutions. However,
the top five market participants held 63% of the
​
Insurance corporations
60
Non-financial corporations
MFIs
Investment funds
54
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(including CBR) (
69
). Based on the stress test
results, domestic credit institutions would meet
the regulatory requirements on liquidity and
capital adequacy even in the event of a severe
shock (
70
). Hungary has published information on
its national bail-in mechanic in line with EBA
guidelines (
71
).
Banks’ liquidity is stable at a high level, with
minor fluctuations.
Banks met the LCR
requirement with considerable surplus of liquid
assets at 177% (the expected level was 100%) in
August 2024 (
72
). The net stable funding ratio
(NSFR) is also met by banks, with a systemic
average above 130% (the expected level was
100%) (
73
).
Hungarian banks continue to reduce their
non-performing loans (NPLs).
The NPL ratio
stood at 2.3% in Q3-2024 (EU average: 1.9%). The
NPL ratio of corporate loans stagnated at a
historically low level of 3.3% in Q3-2024 (EU
average: 3.5%). The NPL ratio of household loans
has fallen to 3.4% in Q3-2024 (EU average: 2.2%).
Similarly, the NPL coverage ratio was 60% in Q3-
2024 (EU average:
42.1%), which reflects banks’
ability to absorb any future losses.
non-life segment is larger than the life segment.
The sectoral solvency ratio was 197.5% in 2023.
According to EIOPA’s 2024 dashboard, Hungary
had a comparatively low aggregated insurance
protection gap score for natural catastrophes (
75
).
The pension fund market remains stable with
profits, but the declining membership is a
major risk.
Hungary’s public pension system is
pay-as-you-go (PAYG), a defined benefit (DB)
scheme covering all employees, while mandatory
private pension funds were eliminated in 2010.
Third-pillar voluntary private pension funds are
categorised into (i) voluntary pension funds, (ii)
private pension funds, and (iii) voluntary
health/mutual aid funds, where the voluntary
pension funds account for around 90% of the
assets. The voluntary pension fund sector had 28
institutions with an operating profit of HUF 1.7
billion (EUR 4.4 million) in 2023, an improvement
compared to the previous year (
76
). The number of
voluntary pension fund members has been
steadily decreasing for 15 years. At the end of
2023, 1.1 million members had voluntary pension
savings (0.3 million fewer than in 2008) due to the
difficulty to appeal to the younger generation (
77
).
The health and mutual aid funds had 16
institutions and is also profitable. The number of
members in the health and mutual aid fund sector
increased to 1.1 million, while the operating profit
was also positive at HUF 1.4 billion (EUR 3.6
million) in 2023 (
78
).
Resilience of the non-bank financial
intermediaries
Hungary’s insurance sector is rather
concentrated, with declining profits, and well
capitalised.
The sector-wide return on equity
(ROE) fell from 9.5% in 2022 to 5.4% in 2023 (
74
).
The profitability of the insurance sector
deteriorated further in 2023, mainly due to the
impact of the extra tax levied by the government
on the insurance sector (based on annual premium
income). Based on gross written premiums, the
(
69
) EBA
MREL Dashboard - Q4 2023,
p.13. CBR (Combined
Buffer Requirement) and TREA (Total Risk Exposure Amount)
(
70
) MNB, 2024,
Financial Stability Report, Nov. 2024,
p.5.
(
71
) ) EBA,
Guidelines to resolution authorities on the publication
of their approach to implementing the bail-in tool.
(
72
) MNB, 2024,
Financial Stability Report, Nov. 2024,
p.55.
( ) MNB, 2024,
Financial Stability Report, Nov. 2024,
p.55.
73
Sources of business funding and the
role of banks
Firms in Hungary rely slightly more than the
EU average on funding from banks and far
less than the EU average on capital markets.
More specifically, at the end of 2023, bank finance
through loans constituted 31.2% of all funding
sources for Hungarian non-financial corporations
(
75
) EIOPA, 2024.
Dashboard on Insurance Protection for Natural
Catastrophes in a Nutshell.
(
76
) MNB, 2024,
Report on Insurance, Funds, Capital Market Risks,
and Consumer Protection,
p.48.
(
77
) MNB, 2024,
Report on Insurance, Funds, Capital Market Risks,
and Consumer Protection,
p.47.
(
78
) MNB, 2024,
Report on Insurance, Funds, Capital Market Risks,
and Consumer Protection,
p.49.
(
74
) MNB, 2024,
Report on Insurance, funds, capital market risks
and consumer protection,
p. 7.
55
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(NFCs) (EU average: 27.2%), while listed shares
and bonds represented only 6.7% of funding
sources (EU average: 23.8%). The overall level of
NFC funding in Hungary was equivalent to 164.9%
of GDP, which is substantially lower than the EU
average of 230.3% of GDP (see Graph A3.4).
Hungarian firms rely mostly on internal
financing like their European peers.
According
to the 2024 EIB Investment Survey, the
investment needs of 67% of Hungarian firms are
covered by internal funding, compared to an EU
average of 66% (
79
). At the same time, 73% of
Hungarian firms believe that their investment
activities over the last three years were about the
right amount (below the EU average of 80%),
while 18% of Hungarian firms believe that their
investment activities were too little (above the EU
average of 14%). Overall, this suggests that most
Hungarian firms do not perceive major investment
gaps (
80
).
Graph A5.4:
Composition of NFC funding as % of
GDP
250
in the retail segment the demand for unsecured
loans is not expected to continue to rise while
demand for housing loans may pick up again over
the next six months (
82
).
Lending to corporates slowed down while the
outlook also remains subdued.
For NFCs, the
annual credit growth rate fell from 6.2% in 2023
to 3.1% in Q3-2024, due to insufficient demand
(in particular from small and medium-sized
enterprises (SMEs)) (
83
).
According to the MNB’s
October 2024 bank lending survey, the investment
activity of domestic companies is dampened
mainly by subdued consumer demand, the
lingering effects of inflation and uncertainty.
Looking ahead to the next six months, banks do
not expect demand for long-term loans (typically
investment loans) to pick up (
84
).
Capital markets and the participation
of retail investors
Hungarian capital markets remain under-
developed.
The main stock exchange in Hungary
is the Budapest Stock Exchange (BSE), which is
home to around 155 listed companies (
85
). The
MNB has the controlling ownership of the BSE. The
BSE total annual revenue for H1-2024 was 23%
lower than H1-2023 (
86
). The equity market is the
most important segment of the BSE, accounting
for around 90% of trading revenue in H1 2024,
while the second largest trading revenue is
generated by derivatives (
87
). The BSE also
operates a multilateral trading facility (MTF) for
SMEs called
BSE Xtend;
and a new market
segment for secondary bond trading called BSE
Xbond. The use of equity by SMEs is very low, as
only 3% of SMEs indicated in the 2024 SAFE
survey that equity was relevant to them, compared
to an EU average of 12% (
88
).
(
82
) MNB, 2024,
Trends in Lending, Nov. 2024.
(
83
) MNB, 2024,
Financial Stability Report, Nov. 2024,
p. 22.
(
84
) MNB, 2024,
Trends in Lending, Nov. 2024.
(
85
) BSE, 2024,
Semi-Annual Report, June 2024,
p. 2.
(
86
) BSE, 2024,
Semi-Annual Report, June 2024,
p. 3.
(
87
) BSE, 2024,
Semi-Annual Report, June 2024,
p. 7
(
88
) European Commission, 2024,
Data and Surveys-SAFE,
Results by country, T27.
200
% of GDP
150
100
50
0
HU
Loans
Trade credit and advances
EU
Bonds
Listed shares
Unlisted shares
Other equity
(1) Reference period 2023.
Source:
Eurostat
Lending to households picked up and this is
expected to continue.
For households, the
annual credit growth rate for adjusted loans has
edged up from 2.7% in 2023 to 7.9% in Q3-2024.
This growth is due to improvements in
macroeconomic fundamentals, the reformed
family subsidy programme (HPS Plus programme),
and an increase in consumer loans (
81
). According
to the October 2024 bank lending survey
conducted by the Hungarian National Bank (MNB),
( ) EIB, 2024,
2024 EIB Investment Survey,
p. 29.
79
80
( ) Ibid., p. 7.
(
81
) MNB, 2024,
Financial Stability Report, Nov. 2024,
p. 28.
56
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While there is no comprehensive government
strategy on promoting capital markets, some
sector-specific strategies were introduced by
important national players in the financial
sector.
Building on the former 2016-2020
strategy (
89
), the BSE developed a new strategy for
2021-2025 to further increase the role of capital
markets (e.g. promoting the ESG aspect in both
equity and bond asset classes, exploring
cooperation opportunities in the CEE region, and
improving IT innovation and security) (
90
). In 2018,
the MNB adopted a seven-point strategy report to
promote the insurance sector in Hungary. The
seven points and targets are: (i) widespread self-
care (e.g. increasing coverage of life insurance and
voluntary pension fund contracts, the number of
contracts); (ii) converting market size (e.g.
penetration of gross written premium/GDP); (iii)
increasing the competitive market; (iv) efficient
sales (e.g. use of innovative channels through
online sales); (v) economies of scale; (vi) fair and
competitive profitability; and (vii) well-capitalised
insurers (
91
). The MNB carefully monitors the
development of these seven targets on an annual
basis.
Hungarian households have a high saving
rate, with the majority of their financial
assets held in government bonds and
investment funds, but more can be done.
Encouraging the build-up of universal funded
supplementary pension schemes would positively
contribute to (i) the sustainability and adequacy of
pension benefits; (ii) investment in equity; (iii)
access to finance; (iv) growth; and (v) innovation.
In 2023, Hungarian households had a lower-than-
average holding of cash and deposits, representing
nearly a quarter (21.4%) of household assets
compared to the EU average of 32.3% (part of the
deposits seem to be replaced by domestic
government bonds, very likely due to tax
exemptions on these bonds). In 2023, 37.1% of
household financial assets were held in three
asset categories: (i) pension funds; (ii) investment
funds; and (iii), directly held in financial investment
instruments (
92
). This is still short of the EU
(
89
) BSE, 2015,
BSE Strategy 2016-2020.
(
90
) BSE, 2020.
BSE Strategy 2021-2025.
(
91
) MNB, 2018,
The 10-year vision of the insurance sector in 7
points;
also MNB, 2024,
Report on Insurance, funds, capital
market risks and consumer protection,
p. 19.
(
92
) The breakdown is: bonds 15.5%, investment funds: 11.7%,
insurance and pension products 6.4%, listed shares: 2.8%.
average of 45.4% (see Graph A3.5). In Hungary,
direct and intermediated retail investment by
households was 52% in 2022 (EU average:
56.2%), which is rather high.
Financial
taxation
favours
certain
investments,
hindering
the
broader
development of capital markets.
In 2022, the
Hungarian government started issuing long-term
bonds for retail investors, which were tax free,
while raising the withholding tax on funds and
deposits from 15% to 28% (starting in July
2023) (
93
). Long-term savings (deposits, fund units
and other securities held in a special savings
account for at least five years) were also exempt
from tax. Moreover, under a new regulation, as
from October 2023, banks must inform their
clients about the potential loss they may suffer
from holding their money in cash instead of
investing in government bonds (
94
). 0verall, it is
difficult to incentivise retail clients towards
insurance products (which also have a large
majority of government bonds) or investment
funds, if direct access to government bonds is tax
free. A wider review of the incentives in place to
promote retail participation in financial markets
may also be warranted.
Graph A5.5:
Composition of household financial
assets per capita and as % of GDP
90
80
70
60
50
40
200
150
100
250
30
20
10
0
HU
EU
HU
EU
per capita (000 EUR) (lhs)
% of GDP GDP (rhs)
50
0
Currency and deposits
Investment funds
Listed shares
Other equity
Insurance and pension funds
Bonds
Unlisted shares
HH Debt (liability)
(1) Reference period 2023.
Source:
Eurostat
(
93
) EFAMA, 2024,
Household Participation in Capital Markets,
Jan. 2024,
p. 42.
(
94
) EFAMA, 2024,
Household Participation in Capital Markets,
Jan. 2024,
p. 42.
57
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The role of domestic institutional
investors
The Hungarian fund management industry is
quite small, with conservative investment
strategies.
In Q3-2024, the net asset value of
investment funds in Hungary amounted to
HUF 19 611.4 billion (EUR 49.6 billion) (
95
). In Q3-
2024, the largest proportion of investment fund
assets was allocated to bonds (29.9%), followed
by real estate funds (17.4%), private equity funds
(12.1%), absolute return funds (9.4%), mixed
securities funds (8%), equity funds (5.7%), money
market funds (2.4%), and venture capital funds
(0.1%) (
96
). In 2023 and 2024, the Hungarian
government introduced new asset allocation rules
for investment funds, including a mandatory quota
for investment funds to allocate at least 5% of
their portfolio (and an additional 3% in short term
securities for certain funds) to Hungarian
government bonds (
97
).
The Hungarian insurance sector is small and
has conservative investment strategies.
It
mainly invests in government bonds at 43.4% of
total assets by Q2-2024 (compared to 19% for
the European Economic Area as a whole) (
98
), while
cash and deposits accounted for 4.7%. Investment
funds accounted for 42.1% (of which 63.1% was
in equity funds and 0.1% in private equity
funds) (
99
). Equities accounted for 4.7% of insurers’
investment portfolio, corporate bonds for 3.2%,
and property for 1.5%. Domestic assets accounted
for 79% of total investments (
100
).
The domestic pension fund industry has a
conservative investment profile, with a
(
95
) MNB, 2024,
Time series of investment funds, Q3-2024.
( ) MNB, 2024,
Time series of investment funds, Q3-2024;
Government Decree
No 55/2024
entered into force on 1 July
2024, laying down that there would be four main types of
funds based on their primary asset categories: securities
funds, real estate funds, venture capital funds and mixed
funds (there are a total of fourteen categories of investment
funds within the four types).
96
greater focus on bonds.
As mentioned earlier,
Hungary’s public pension system is pay as you go
(PAYG) covering all employees, while mandatory
private pension funds were practically eliminated
in 2010. As regards voluntary pension funds, debt
securities accounted for 54.3% (nearly half
domestic) of the total assets held by pension
funds, while investment funds accounted for
32.7% (including venture capital funds), shares for
9.7%, and bank deposits for 1.6% (
101
). Overall, a
better developed pensions sector could help
develop the domestic capital market.
The participation of pension fund investors in
providing funding for start-ups and venture
capital investors is very low.
A 2024 paper by
the think tank CEPS showed that Hungarian
pension fund participation in private equity and
venture capital funds between 2007-2023 was
close to 0% and one of the two lowest levels in
the EU (substantially short of the 19% for the
Baltic states or +20% shares for the Nordic
Member States) (
102
).
Recent government plans on voluntary
private pension funds may hinder capital
market growth.
In October 2024, the Hungarian
government announced its plans to propose
allowing the tax-free use of private pension
savings for housing purposes as a one-off
measure in 2025. According to a recent draft
proposal, it will be possible to use the full amount
of savings from voluntary pension funds for
renovations, equity for new mortgages or
repayments for existing mortgages (
103
). This plan
may trigger an outflow of pension funds (money
saved for retirement) to housing renovation or the
purchase of housing.
The depth of available venture and
growth capital
The domestic venture and growth capital
market is not developed enough to meet the
(
101
) MNB, 2024,
Time series of pension funds, Q3-2024.
(
102
) CEPS, 2024,
Closing the gaping hole in the capital market for
EU start-ups
–
the role of pension funds,
p. 2.
(
103
) Reuters, 2024.
Hungary seeks housing boost from pensions
ahead of 2026 election
(
97
) Government Decree No
208/2023 on investment rules for
each investment fund
and Government Decree
No 55/2024.
(
98
) EIOPA, 2024,
Insurance Statistics.
( ) EIOPA, 2024,
Insurance Statistics.
99
(
100
) MNB, 2024,
Report on Insurance, funds, capital market risks
and consumer protection,
p. 22.
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Table A5.1:
Financial indicators
2017
Total assets of MFIs (% of GDP)
Common Equity Tier 1 ratio
Total capital adequacy ratio
Overall NPL ratio (% of all loans)
NPL (% loans to NFC-Non financial corporations)
NPL (% loans to HH-Households)
NPL-Non performing loans coverage ratio
Return on Equity
1
2018
92,3
16,7
18,5
5,4
4,4
9,8
-
14,7
17,0
14,1
13,6
7,3
-
0,00
33,1
0,25
0,05
-
12,7
1,5
9,2
8,4
6,3
2019
90,4
15,8
18,0
4,2
3,8
6,8
-
14,3
17,0
14,6
14,1
16,6
-
0,00
32,5
0,12
0,10
-
15,3
1,7
8,2
8,3
6,3
95,3
14,2
16,2
8,4
9,8
12,2
59,1
14,5
16,5
14,8
10,2
2,6
-
0,04
35,2
0,13
0,04
-
12,4
1,7
10,3
9,3
7,0
25-27
2020
106,5
15,9
18,3
3,6
4,1
6,1
-
7,6
18,5
16,1
8,9
14,3
16,4
0,01
35,7
0,17
0,09
-
15,1
1,8
7,8
7,8
6,5
2021
109,0
17,7
19,7
3,2
3,3
6,0
56,5
12,7
18,1
16,3
10,7
15,1
17,5
0,00
40,1
0,16
0,09
-
14,5
2,5
8,7
7,3
5,8
2022
108,2
16,9
18,9
3,1
3,6
5,7
55,1
12,1
17,8
14,6
15,2
8,0
13,0
0,00
39,8
0,15
0,05
-
13,6
2,5
9,3
6,2
4,5
2023
100,2
17,6
20,1
2,4
3,4
3,9
56,9
21,2
16,7
13,5
6,2
2,7
17,5
0,00
37,8
0,05
0,03
44,0
15,5
2,8
11,7
6,4
4,8
-
2024-Q3
96,7
18,8
21,0
2,3
3,3
3,4
60,0
21,3
15,6
13,3
3,1
7,9
18,1
-
-
-
-
-
-
-
-
-
5,0
-
EU
248,4
16,6
20,1
1,9
3,5
2,2
42,1
10,0
30,0
44,5
0,8
0,7
69,3
0,05
49,6
0,41
0,05
45,5
2,7
4,8
10,0
27,8
54,8
23,4
Banking sector
Non-banks sector
Loans to NFCs (% of GDP)
Loans to HHs (% of GDP)
NFC credit annual % growth
HH credit annual % growth
Stock market capitalisation (% of GDP)
Initial public offerings (% of GDP)
Market funding ratio
Private equity (% of GDP)
Venture capital (% of GDP)
Financial literacy (composite)
Bonds (as % of HH financial assets)
Listed shares (as % of HH financial assets)
Investment funds (as % of HH financial assets)
Insurance/pension funds (as % of HH financial assets)
Total assets of all insurers (% of GDP)
Pension funds assets (% of GDP)
11-17
1-3
4-10
18-24
-
-
-
-
-
-
Colours indicate performance ranking among 27 EU Member States.
(1) Annualised data.
Credit growth and pension funds EU data refers to the EA average.
Source:
ECB, ESTAT, EIOPA,
DG FISMA CMU Dashboard,
AMECO.
financing needs of innovative firms.
The value
of annual private equity relative to nominal GDP
went up to 0.25% in 2018 and dropped to 0.05%
in 2023 (EU average in 2023: 0.41%) (
104
). The
value of annual venture capital investment relative
to nominal GDP went up to 0.10% in 2019 and
then dropped to 0.03% in 2023 (EU average:
0.05%) (
105
). Given the limited venture capital (VC)
and private equity (PE) activity in Hungary, there is
a financing gap for early-stage innovative firms in
need of capital (see the Innovation to Business
Annex).
There are some initiatives in place to
promote start-up funding.
The Hungarian
Private Equity and Venture Capital Association
reported that, during H1 2024, 40 companies
received HUF 32 271 million (EUR 81.6 million)
from VC and PE funds (
106
). There was a significant
increase (183.7%) in the invested amount, even
though the number of deals in H1 2024 was
(
104
) European Commission, 2024,
Overview of CMU Indicators
–
2024 Update,
Indicator 11.
(
105
) European Commission, 2024,
Overview of CMU Indicators
–
2024 Update,
Indicator 16.
(
106
) HVCA, 2024,
Venture Capital and Private Equity, Update
Hungary, H1 2024.
21.6% lower than in H1 2023. Companies
operating in communications, real estate, and
business and industrial services sectors received
69.1% of the total capital invested in the first half
of 2024 (
107
). The MNB has set up an innovation
hub as a forum for direct and flexible contact with
innovators, and a regulatory sandbox where
innovative solutions can be tested more
easily (
108
). However, there is no comprehensive
legal framework to facilitate the creation and
growth of start-ups as in other Member States.
Financing the green transition
The financing needs of Hungary’s green
transition could pose a challenge.
Significant
investment will be required in the next decades to
achieve climate neutrality by 2050 (
109
). In the
financial sector, the MNB has taken a number of
(
107
) HVCA, 2024,
Venture Capital and Private Equity, Update
Hungary, H1 2024.
(
108
) MNB, 2023.
Fintech and Digitisation Report
(
109
) Ministry of Innovation and Technology.
National Clean
Development Strategy 2020-2050
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measures to foster the growth of green finance,
including
the
green
preferential
capital
110
requirements programme ( ), the green mortgage
bond purchase programme and funding for growth
green home programme (
111
). In Hungary, the
issuance of bonds with environmental, social, and
governance objectives as a share of total bond
issuance was higher in H1 2024 at around 13%
than its three-year average of around 8% and is
higher than that of most of its EU peers (
112
).
Hungary launched a project to develop a
domestic green capital markets strategy to
create a supportive regulatory environment.
In July 2020, Hungary launched a project to
develop a sustainable capital markets strategy
with the assistance of the European Bank for
Reconstruction and Development (EBRD) and the
European Commission. The aim was to help capital
markets finance investments in support of
environmental sustainability, and to allow ‘green’
companies to access more favourable equity or
bond funding (
113
).
average of the financial knowledge and financial
behaviour indicators) of 44% vs an EU average
score of 45.5% (
115
).
In Hungary, the government has been
involved in improving financial education
alongside initiatives taken by other state and
non-state financial market stakeholders.
In
2017, the Ministry of Finance (
116
) adopted a
strategy and an action plan (2017-2023) for
improving the population’s financial awareness.
Other public bodies (such as the MNB, as it is
required to do so) and non-public bodies (such as
the Hungarian Banking Association) operating in
the financial market are trying to improve financial
awareness through various programmes and
activities. Financial knowledge is also taught in
primary and secondary schools (
117
). More can be
done in terms of deepening practical skills, as well
as widening the scope to include SMEs in financial
literacy initiatives.
Financial literacy
Financial literacy has improved in Hungary
over the years and is now close to the EU
average.
Financial literacy is crucial to promote
retail-investor participation in capital markets but
also to familiarise SMEs with alternatives to bank
financing. The July 2023 Eurobarometer survey
showed that only 16% of Hungarians had a high
level of financial literacy, 72% a medium level,
and the remaining 12% a low level, compared to
the EU average of 18% for high financial literacy,
64% for medium, and 18% for low (
114
). This leads
to an overall financial literacy indicator (the
(
110
) This 2020 programme allows participating banks to reduce
the amount of capital they are required to set aside for
environmentally sustainable assets such as green loans.
(
111
) These two programmes are part of the 2021 MNB green
monetary policy toolkit strategy to support green housing
loans. MNB, 2024,
Green Finance Report
–
July 2023.
(
112
) AFME, 2024,
CMU Key Performance Indicators,
p. 23.
(
113
) C. Kandrács, 2023,
Financing a Sustainable Economy in
Hungary, Opportunities and Challenges.
Public Finance
Quarterly, 2023/1.
(
114
) European Commission, 2023,
Flash Eurobarometer Survey -
Monitoring the level of financial literacy in the EU - July
2023,
p. 17.
(
115
) European Commission, 2024,
Overview of CMU Indicators
–
2024 Update,
Indicator 27.
(
116
) In January 2023, the task of improving financial awareness
was transferred to the Ministry of Economic Development.
(
117
) Hergár, Kovács, Németh, (2024),
Status and development of
Financial Literacy in Hungary.
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ANNEX 6: EFFECTIVE INSTITUTIONAL FRAMEWORK
Hungary’s institutional framework influences
its competitiveness.
The country would benefit
from greater legal certainty, improved regulatory
practices, legislative simplification and fewer
administrative burdens. The competitiveness
strategy for 2024-2030 is moving in this direction.
The
digitalisation
of
Hungarian
public
administration is expanding with a focus on user-
centricity, but at a slower pace than the EU
average. Further challenges relate to the low
attractiveness of the Hungarian administration.
The Hungarian recovery and resilience plan (RRP)
contains several reforms in the areas of anti-
corruption, justice and better-lawmaking. However,
the plan’s implementation is
significantly delayed.
below the EU average (
119
). Several measures
aimed at enhancing trust and facilitating
communication with the public are ongoing: in-
person service delivery, mobile service points and
dedicated delivery in post offices. Online services
are being rolled out, such as digital citizenship
offering e-identification and e-government
services, the digital land registry and automated
VAT for businesses (eÁFA). The Act on Regional
Development (
120
) passed in 2024 aims to tackle
disparities and foster trust in regional and local
authorities.
Quality of legislation and regulatory
simplification
Hungary’s processes for developing and
evaluating legislation remains below the EU
average.
Performance in regulatory tools like
public consultation, ex-ante impact assessment
and reviews of existing regulations is broadly
similar for primary laws and subordinate
regulations, and it improved slightly over 2021-
2024. However, stakeholder engagement and ex
post evaluation of legislation both remain below
the EU average. In particular, there is potential for
improving the methodology, systematic adoption,
transparency, oversight and quality controls of
public consultations of both primary and
secondary legislation. Moreover, there is still
substantial room for increasing the transparency,
frequency, oversight and quality controls of ex
post evaluation of legislation (Graph A6.2). A
review of the methodology governing regulatory
impact assessments came into effect in 2025.
Furthermore, the median time for law adoption in
Hungary is visibly below that of the median time in
the EU-27 countries (Graph A6.3). The state of
emergency allowing the government to override
laws through decrees was extended once again for
the whole of 2024 and up to November 2025. This
limits public consultation and weakens legal
certainty.
Public perceptions
Graph A6.1:
Trust in justice, regional / local
authorities and in government
0.7
0.6
0.5
0.4
0.3
0.2
0.1
Autumn
Spring
Autumn
Autumn
Autumn
Autumn
Autumn
Autumn
Summer
Summer
Autumn
Winter
Spring
Spring
Spring
Spring
Winter
Spring
Spring
0
2014 2015
2016
2017
2018
2019 2020 2022
2023
2024
Justice, legal system EU27
Justice, legal system HU
Regional or local public authorities EU27
Regional or local public authorities HU
Government EU27
Government HU
(1) EU-27 from 2019; EU-28 before
Source:
Standard Eurobarometer surveys
Trust in public institutions remains above the
EU average, with regional and local
authorities achieving higher scores than
other institutions
(Graph A6.1). Aspects that
could increase public trust
in Hungary’s public
administration are more transparency about
decisions and the use of public money and less
bureaucracy (
118
). The perceived quality of
government has remained unchanged at values
( )
Understanding Europeans’ views on reform needs
- April
2023 - - Eurobarometer survey,
Country Fact Sheet.
118
(
119
)
Inforegio - European Quality of Government Index
(
120
)
https://vehir.hu/cikk/73829-navracsics-tibor-a-kozigazgatas-
varhato-fejleszteseirol-beszelt-veszpremben
(Accessed on
13/01/2025).
61
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Table A6.1:
Hungary. Selected indicators on administrative burden reduction and simplification
Ex ante impact assessment of legislation
When developing new legislation, regulators are
required to …
Ex post evaluation of legislation
Is required to consider the consistency of regulations
and address areas of duplication.
Is required to contain an assessment of administrative
burdens.
Is required to contain an assessment of substantive
compliance costs.
Compares the impact of the existing regulation to
alternative options.
Periodic ex post evaluation of existing regulations is
mandatory.
Government uses stock-flow linkage rules when
introducing new regulations (e.g., one-in one-out).
A standing body has published an in-depth review of
specific regulatory areas in the last 3 years.
In the last 5 years, public stocktakes have invited
businesses and citizens to assess the effectiveness,
efficiency, and burdens of legislation.
Identify and assess the impacts of the baseline or
‘do nothing’ option.
Identify and assess the impacts of alternative non-
regulatory options.
Quantify administrative burdens of new
regulations.
Quantify substantial costs of compliance of new
regulations.
Assess macroeconomic costs of new regulations.
Assess the level of compliance.
Identify and assess potential enforcement
mechanisms.
Yes / For all primary laws
For major primary laws
For some primary laws
No / Never
(1) This table presents a subset of iREG indicators focusing on regulatory costs. The indicators refer to primary legislation.
Source:
(2025), Regulatory Policy Outlook 2025 [https://doi.org/10.1787/56b60e39-en] and Better Regulation across the
European Union 2025 (forthcoming).
Graph A6.2:
Indicators of Regulatory Policy and
Governance (iREG)
4.0
3.5
3.0
2.5
2.0
Graph A6.3:
Median time for law adoption in
Parliament (days)
90
80
70
60
50
40
30
1.5
1.0
0.5
0.0
Primary laws Subordinate Primary laws Subordinate Primary laws Subordinate
regulations
regulations
regulations
HU_Stakeholder
engagement
HU_Regulatory Impact
Assessment
HU_Ex-post evaluation of
legislation
20
10
0
Methodology
Transparency
2021
Systematic adoption
Oversight and quality control
EU-27
Source:
OECD (2025), Regulatory Policy Outlook 2025 and
Better Regulation across the European Union 2025
(forthcoming).
HU
EU-27
Source:
European Commission based on national parliament’s
websites
There is room to further strengthen
mechanisms for simplifying regulations.
For
example, ex post evaluations of legislation are not
required to consider the consistency of regulations
and address areas of duplication. Moreover, the
government has not conducted recently in-depth
reviews of specific regulatory areas and public
stocktakes of legislation (see table A4.1).
The OECD product market regulation
indicator shows that
Hungary’s licensing
system is well aligned with many best
practices, but not all of them.
For example,
while the government keeps an up-to-date online
inventory of all the permits and licences
required/issued to businesses by public bodies,
there is no requirement for the government to
regularly assess whether such licences and
62
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Table A6.2:
Digital Decade targets monitored through the Digital Economy and Society Index
Hungary
2022
Digitalisation of public services
Digital public services for citizens
1
Score (0 to 100)
EU-27
2024
73
2023
2023
68
2022
2024
79
2023
Digital Decade
target by 2030
EU-27
100
2030
100
2030
100
2030
64
2021
2
3
Digital public services for businesses
Score (0 to 100)
74
2021
76
2022
75
2023
85
2023
79
2023
Access to e-health records
Score (0 to 100)
na
2021
80
2022
86
2023
Source:
State of the Digital Decade report 2024
permits are still required or should be withdrawn
(see also Annex 4). Moreover, the B-READY
indicators (
121
) show that there is much potential
for cutting the time needed to obtain a property
transfer, a construction-related permit and an
environmental licence. Unlike 19 other EU Member
States, Hungary lacks a dedicated institution for
promoting pro-productivity policies.
Digital public services
The supply of digital public services to
citizens and businesses in Hungary is below
the EU average with a larger gap for
businesses
(table A6.2). Hungary has progressed
in the EU’s Digital Decade target for
digital public
services for citizens. In 2023 it had a score of 73,
compared to the EU average score of 79 in 2023.
Hungary’s score for digital public services for
businesses is 75, compared to an EU average
score of 85. Concerning access to electronic health
records, Hungary performs relatively well, scoring
86 out of 100, significantly exceeding the EU
average of 79. This success can largely be
attributed to the development of the EESZT
(Electronic Health Service Space/Health Window
application). The new mobile application, which
provides access to health records, has become the
country’s most widely used mobile digital public
service. The main gaps in Hungary’s e-health
maturity are the inability to authenticate with a
(pre)notified eID and the fact that the access
service does not follow guidelines on web
accessibility.
The uptake of online public services is very
high
(85%, EU average: 75.0%). However, the use
of eID is still low. Only 31.5% of individuals have
used their eID to access online services for private
purposes in the last 12 months, below the EU
average of 41% (
123
). Hungary has not yet set up
and notified eID schemes for legal persons under
(
123
) European Commission.
Digital Decade 2024: Country reports
Social dialogue
Social dialogue in Hungary remains limited,
especially in the public sector.
Despite some
improvements regarding the transparency and
institutional framework of tripartite forum of the
private sector (VKF), the overall framework of
social dialogue is still weak (see Annex 10). This
is partly
due to the fragmentation of employers’
and employees’ representations, with different
memberships and functions. Moreover, the
establishment of a separate employment status
for certain groups of public employees has
weakened their ability to defend their collective
interests. There is little to no consultation of social
partners on major challenges and reforms to
labour market and social policies. ESF+ is
supporting social partners in building capacity (
122
).
(
121
) World Bank. 2024. Business Ready 2024. Washington, DC:
World Bank. doi:10.1596/978-1-4648-2021-2.
(
122
) For an analysis of the involvement of
Hungary’s
social
partners at national level in the European Semester and the
Recovery and Resilience Facility, see Eurofound (2025),
National-level social governance of the European Semester
and the Recovery and Resilience Facility.
63
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the eIDAS Regulation(
124
). This means that
Hungarian businesses cannot authenticate
themselves to access public services provided by
other Member States, including those enabled by
the Once-Only Technical System, part of the EU
Single Digital Gateway (
125
).
Hungary
is
finalising
the
necessary
infrastructure for seamless, automated
exchange of authentic documents and data
across the EU.
There are still additional steps to
be taken by Hungary to become technically ready
to connect to the Once-Only Technical System (
126
).
Integrity
A far higher percentage of companies than
the EU average consider corruption to be
widespread and a problem in doing business,
and ensuring timely and effective application
of anti-corruption measures in practice is
crucial.
In Hungary, 78% of companies consider
that corruption is widespread (EU average 64%)
and 41% consider that corruption is a problem
when doing business (EU average 36%) (
130
).
Moreover, only 25% of companies believe that
people and businesses caught bribing a senior
official are appropriately punished (EU average
31%) (
131
). There has been no progress yet in
establishing a robust track record against high-
level corruption and enforcement against foreign
bribery is still lacking (
132
). The Hungarian RRP
includes
several
measures
targeted
at
strengthening the anti-corruption framework. It
remains vital to ensure that these measures are
timely and effectively applied in practice.
Furthermore, public procurement remains an area
at high risk of corruption in Hungary. 29% of
companies (EU average 27%) think that corruption
has prevented them from winning a public tender
or a public procurement contract in practice in the
last three years (
133
). Construction, health, IT and
communication services also appear to be high-
risk areas (
134
). The RRP contains several
commitments also in the area of public
procurement.
Hungary has yet to put in place
comprehensive regulations on lobbying and
the post-employment obligations of public
officials.
The new National Anti-Corruption
Strategy 2024-2025 and Action Plan, the
government committed to bring forward a
legislative proposal for a lobbying law, including
rules on revolving doors, to be prepared by the
(
130
)Flash
Eurobarometer 543 on businesses’ attitudes towards
corruption in the EU (2024).
(
131
)Ibid.
(
132
)See
the 2024 country-specific chapter for Hungary of the
Rule of Law Report, p. 20.
(
133
)
Flash Eurobarometer 543 on businesses’ attitudes towards
corruption in the EU (2024).
(
134
) See the 2024 country-specific chapter for Hungary of the
Rule of Law Report, pp. 25-26.
Civil service
Hungary's civil service is relatively young,
with a higher ratio of staff aged 49 or below
compared to those aged 50 or above than the EU
average (
127
). The share of employees with higher
education is relatively low, in contrast to the
strong participation of civil servants in adult
learning.
The low attractiveness in the Hungarian
administration can impact its overall
performance.
One of the major challenges is the
significant pay gap (
128
) between the public and
private sector contributing to a high turnover
amounting to 20-30% per year (
129
). The lack of
attractiveness is exacerbated by limited
opportunities for teleworking where Hungary ranks
well below the EU average. A system of in-kind
benefits aims to address the problem. The system
includes discounts for sports and cultural services
combined with local programmes for onboarding
and employees’ wellbeing.
(
124
) European Commission,
eIDAS Dashboard
(
125
) European Commission,
The Once Only Principle System: A
breakthrough for the EU’s Digital Single Market
(
126
) European Commission,
Once-Only Technical System
Acceleratormeter
(
127
) Eurostat. Employment by sex, age and economic activity.
(
128
)Overall the pay gap is 12% according to official statistics.
see KSH Central Statistical Office (2024)
link
and
link
(
129
)https://kormany.hu/hirek/a-hatekony-kozigazgatashoz-a-
regiok-egyuttmukodesere-van-szukseg
64
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Ministry of Justice by 30 November 2025.
Hungary’s lobbying rules remain incomplete, with
no systematic follow-up to cases of non-
compliance, which can create unfair advantages
for some businesses. Post-employment restrictions
and cooling-off periods remain largely fragmented
and limited in personal scope, and enforcement of
sanctions remains largely ineffective (
135
).
Justice
The justice system continues to perform
efficiently overall.
The disposition time in civil
and commercial cases in first instance courts has
increased slightly but, at 135 days, compared to
134 days in 2022, is still among the lowest in the
EU. The estimated time taken to resolve
administrative cases at first instance has further
decreased and continues to be one of the lowest in
the EU (120 days, compared to 125 days in 2022).
The quality of the justice system is good overall,
including as regards digitalisation. The courts have
several digital tools at their disposal, including an
electronic case management system, distance
communication technology and secure electronic
communication. Despite a recent increase of the
salary base, stakeholders have expressed concerns
about the process for its adoption. The
Commission is monitoring the implementation of
the recent reform seeking to strengthen judicial
independence (
136
).
(
135
) See the 2024 country-specific chapter for Hungary of the
Rule of Law Report, pp. 21-22.
(
136
) For more detailed analysis of the performance of the justice
system in Hungary, see the upcoming 2025 EU Justice
Scoreboard and the 2024 Rule of Law Report.
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SUSTAINABILITY
ANNEX 7: CLEAN INDUSTRY AND CLIMATE MITIGATION
Hungary
faces
significant
challenges
regarding its clean industry transition and
climate mitigation:
Despite progress in battery
manufacturing, capacity in broader net-zero
technologies is limited, with existing policy
frameworks not offering comprehensive support.
Hungary is highly dependent on critical raw
material imports, highlighting vulnerabilities in
strategic autonomy. Urgency is needed to tackle
industrial emissions, improve waste management,
and enhance circular economy practices, alongside
efforts to reduce emissions from transport and
buildings. This annex reviews the areas in need of
urgent attention in Hungary’s clean industry
transition and climate mitigation.
heat pump systems (producing 400 MW) by 2030.
In contrast, production capacity ranges between
100 and 400 MW/y (approximately 1-2% of the
EU capacity) for solar PV, with capacity for both
equal shares of modules and cells.
The policy framework supporting the scale-
up of net zero technology manufacturing is
limited to sectoral policies.
The government
has introduced various supportive policies for the
battery sector, including substantial tax breaks and
subsidies, and a National Battery Strategy(
138
) to
position Hungary as a key contributor to the
European supply chain. But the country lacks a
comprehensive enabling regulatory framework.
There is no move to streamline industrial
permitting, introduce non-price criteria in auctions
and public procurement or develop industrial
clusters promoting innovation.
Hungary has ambitious plans for a hydrogen
industry,
but the sector is still in its early stages.
The National Hydrogen Strategy (2021) outlines
goals for a hydrogen economy, emphasising green
hydrogen production for industrial decarbonisation
and sustainable transportation. The strategy aims
to produce 36 000 tons of hydrogen a year by
2030. However, significant action has yet to occur,
with only the largest industrial consumers and
stakeholders beginning smaller projects.
Transforming the car industry
The automotive industry is an important
sector for Hungary,
representing a considerable
proportion of manufacturing output and up to 15%
of exports(
139
). In 2023 it employed approximately
100 000 individuals. There is increasing
engagement internationally, particularly from
Chinese companies. The rise in electric vehicle (EV)
production is drawing major suppliers, including
the world’s largest battery manufacturers.
External forces create significant future
challenges.
These include the weakening of the
German economy, it primary market. A sizable
proportion of vehicle manufacturing output is
exported to the US, making it vulnerable to
international geopolitical shifts.
(
138
)
Hungarian-National-Battery-Industry-Strategy-
Strategic autonomy and technology
for the green transition
Net zero industry
Hungary is a leader in battery manufacturing
but production in other net zero technologies
remains modest
(
137
). It is emerging as a
significant player in the production of electric
vehicle (EV) batteries, with a manufacturing
capacity amounting to between 40 and 42 GWh/y
(17-18% of total EU capacity) for battery and
storage technologies. Prominent Chinese EV
battery manufacturers, such as EVE Energy, CATL,
and Sunwoda, are expanding operations. The
Chinese company BYD established a new electric
vehicle and battery manufacturing facility in
Szeged, starting in 2025.
Labour shortages are an issue in the battery
value chain,
with companies attracting workers
from each other, other value chains and non-EU
countries. Vocational training programmes are
struggling to provide the necessary skills.
Hungary is a competitive exporter of heat
pump components,
such as centrifugal pumps,
heat exchange units and electric generating sets.
The domestic market has huge potential, with the
government aiming to install at least 100 000
(
137
) European Commission: Directorate-General for Energy,
The
net-zero manufacturing industry landscape across the
Member States 2025.
2030_ENG.pdf
( )
Industry
–
Hungarian Central Statistical Office
139
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The automotive sector is grappling workforce
issues to stay competitive.
Dual challenges of
labour shortages and high labour costs present
obstacles for automotive manufacturers. In the
third quarter of 2024 compared with the same
quarter in the previous year, Hungary had the third
highest increases in hourly wage costs for the EU
(+14.1%) (
140
), part of a continued trend over the
past decade. New manufacturing sites have
difficulties finding affordable local workers and
are recruiting people from other regions of
Hungary or foreign workers.
Hungary has an ageing car fleet,
with over
20% of vehicles being more than 20 years old(
141
).
Although Hungary is transitioning towards electric
vehicles, in 2023, 75.7% of new registrations were
still petrol-powered cars (including hybrids).
The largest imports of critical raw materials
include aluminium, coking coal and fluorspar (
147
).
There is room to reduce Hungary’s
dependency on critical raw material in some
sectors of the circular economy.
Hungary’s
recycling rate for electrical and electronic
equipment waste (
148
) has decreased in the last
year and is now slightly below the EU average
(79.3% vs. 80.7% in 2022). Hungary would benefit
from increasing recycling and relying less on
critical raw materials imports. The recycling and
reuse rate for vehicles (
149
) was above the EU
average in 2022 (96.9% vs. 89.1%).
Climate mitigation
Industry decarbonisation
Manufacturing provides less than a sixth of
all greenhouse gas emissions, but its
emissions intensity is high,
dominated by
process emissions. At 15%, the share of industry
in Hungary’s total greenhouse gas emissions is
below the EU average of 21% (
150
). In 2022, the
manufacturing sector emitted 320 g CO2eq of
greenhouse gases per euro of gross value added
(GVA), almost 20% more than the EU average. The
emissions intensity of manufacturing production
decreased by 36% since 2017, more than in the
EU overall
(20%). More than half of Hungary’s
industrial emissions (56% in 2022) are related to
industrial processes; in the EU this value is 43%,
the remainder being related to energy use.
The process related emissions intensity of
manufacturing in Hungary is improving but
still high.
Between 2017 and 2022, process and
product
related
emissions
intensity
of
manufacturing production in Hungary improved by
(
147
)
RMIS - Country Profiles
Critical raw materials
Hungary is dependent on imports of critical
raw materials, which are key for a green
transition.
Despite a recent decrease, Hungary’s
material import dependency (
142
) (24.1%) was still
above the EU average in 2023 (22%). The average
import concentration index (
143
) of 0.2 between
2018 and 2023 is slightly higher that the EU
average (0.18). In 2023, the share of domestic
material consumption (
144
) dedicated to non-
metallic minerals and biomass was higher (
145
)
than the EU average (respectively 62.4% and
25.9% vs. 54.4% and 22.9%), showing the
dependency of Hungary’s economy on these
specific categories
of raw materials. Hungary’s
material footprint (
146
) increased to 15.7 t/capita in
2023, above the EU average (14.2 t/capita). While
it is a leading producer of perlite (second in the EU
and sixth worldwide), it lacks domestic production
of many essential materials and relies on imports.
(
140
) Eurostat:
Labour cost index - recent trends - Statistics
(
141
)
Newly registered electric cars by country | European
142
Explained
(
148
)
Eurostat, Dataset [cei_wm60], 2024.
(
149
)
Eurostat, Dataset [env_waselvt], 2024.
Environment Agency's home page
( )
Eurostat, dataset [env_ac_mid], 2024
.
(
143
) Concentration in selected raw materials, Import
concentration index based on a basket of critical raw
materials, based on
COMEXT Data.
144
( )
Eurostat, Dataset [env_ac_mfa], 2024
.
(
145
) European Environment Agency (EEA),
Hungary 2024 circular
economy country profile
, December 2024.
146
( )
Eurostat, dataset [cei_pc020], 2024
.
(
150
)
In 2023. Manufacturing includes all divisions of the “C”
section of the NACE Rev. 2 statistical classification of
economic activities. In the remainder of this section, unless
indicated otherwise, data on manufacturing refer to the
divisions of the NACE section C excluding division C19
(manufacture of coke and refined petroleum products), and
the year 2022. The source of all data in this section is
Eurostat; data following the UNFCCC Common Reporting
Framework (CRF) are from the European Environment Agency
(EEA), republished by Eurostat.
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28%, above the EU average of 23%.(
151
) In the
same period, energy use -related emissions
intensity improved by 18%, only slightly above the
EU average, 16%. As a result, the energy-related
emissions intensity of Hungary’s manufacturing
sector is like that of the EU, with 134 g CO2eq per
euro of GVA. With 172 g/€, its process and product
use-related emissions intensity remains much
higher than in the EU overall, 99 g/€. Between
2017 and 2022, Hungary saw an increase of 6
percentage points in the share of electricity and
renewables in the final energy consumption of its
manufacturing sector, bringing that share to 46%
in 2022. At the same time, the energy intensity of
manufacturing production decreased by 9 per cent,
from 1.9 to 1.8 GWh per euro of GVA.
Graph A7.1:
GHG emission intensity of manu-
facturing and energy-intensive sectors, 2022
4
3.5
3
CO2eq/€, the emissions intensity of GVA in
Hungary’s chemical industry is comparatively high,
7
th
in the EU. Hungary has seen increased
electricity prices for large consumers to very high
levels, putting EEIs under pressure (
153
). By 2024,
production in the chemical industry and the
manufacture of basic metals and non-metallic
mineral products declined by up to one third.
Production in the paper sector remained stable.
Graph A7.2:
Manufacturing industry production:
total and selected sectors, index (2021 = 100),
2017-2023
120
110
100
90
80
70
KG CO
2
eq / €
2.5
2
1.5
1
0.5
60
2017
2018
2019
2020
2021
2022
2023
Manufacturing
Manufacture of paper and paper products
Manufacture of chemicals and chemical products
C-C19
C17
Hungary
C20
EU-27
C23
C24
0
Manufacture of other non-metallic mineral products
Manufacture of basic metals
Source:
Eurostat
Source:
Eurostat.
Energy-intensive sectors have come under
pressure lately.
Energy-intensive industries
(EEIs) (
152
)
account for 11% of Hungary’s
manufacturing gross value added. With 2.3 kg of
(
151
) For the GHG emissions intensity of GVA related to energy use
and industrial processes and product use respectively, GHG
emissions are from inventory data in line with the UNFCCC
Common Reporting Format (CRF), notably referring to the
source sectors CRF1.A.2
–
fuel combustion in manufacturing
industries and construction and CRF2
–
industrial processes
and product use. The CRF1.A.2 data broadly correspond to
the NACE C and E sectors, excluding C-19. GVA data (in the
denominator for both intensities) are aligned with this
sectoral coverage. Therefore, they are not fully consistent
with the data referred to in other part of this section.
(
152
) Notably, the manufacture of paper and paper products
(NACE division C17), of chemicals and chemical products
(C20), “other” non-metallic
mineral products (C23; this
division includes manufacturing activities related to a single
substance of mineral origin, such as glass, ceramic products,
tiles, and cement and plaster), and basic metals (C24). To
date, these industries are energy-intensive
–
i.e. consuming
much energy both on site and/or in the form of purchased
electricity
–
and greenhouse gas emissions intensive, in
various combinations.
Hungary has some measures to support the
decarbonisation of industry; more are
needed.
Hungary encourages the development of
renewable energy supply and energy storage in
industry parks. Electricity market players have also
begun to set up renewable power purchase
agreements.
These
measures
could
be
complemented by dedicated support for improving
energy efficiency in manufacturing processes and
helping companies switch to cleaner technologies,
also through demand-side measures.
(
153
) To date in Hungary, electricity prices for non-household
consumers are among the highest in the EU. For a detailed
analysis of energy prices, see Annex 8 on the affordable
energy transition.
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Reduction of emissions in the effort
sharing sectors
Hungary is projected to reach its 2030 effort
sharing target if it adopts and implements
the planned additional climate mitigation
measures (
154
).
In 2023, GHG emissions from
Hungary’s effort sharing sectors are expected to
have been 14.7% below those of 2005. By 2030,
current policies are projected to reduce them by
15.2% relative to 2005 levels. Additional policies
considered in Hungary’s final updated National
Energy and Climate plan (NECP) are projected to
entail reductions by a further 9.8 percentage
points. Hence Hungary is projected to overachieve
its effort sharing target, -18.7%, by 6.3
percentage points (
155
), once those measures have
been adopted and implemented.
Swift action on decarbonising transport and
buildings appears particularly needed in
Hungary.
Between 2005 and 2023, greenhouse
gas emissions from road transport increased by
17% in Hungary, while they decreased by 5% in
the EU overall. Speeding up climate mitigation in
these sectors would help protect households,
businesses and transport users in Hungary from
the impact of the forthcoming carbon price.
Graph A7.3:
Greenhouse gas emissions from the
effort sharing sectors, 2005 and 2023
60
50
40
MtCO2e
30
20
10
0
2005
Domestic transport (excl. aviation)
Agriculture
Waste
2023
Buildings (under ESR)
Small industry
Source:
European Environment Agency
Sustainable industry
Circular economy transition
There is room to increase the economy’s
circularity through additional policies.
Resource productivity increased to 1.33 Euro/kg in
2023 but remains under the EU average (2.74
Euro/kg). The circular material use rate remained
below the EU average in 2023 (5.9% vs 11.8%). In
May 2023, the OECD report “Towards a National
Circular Economy Strategy for Hungary”
(
156
)
suggested measures to support the circular
economy transition, such as providing additional
economic incentives for the separate collection of
municipal bio-waste
by supporting “pay-as-you-
throw”-based
household waste charges and
increasing landfill taxes. A National Circular
Economy Strategy, as requested in the OECD
report, is under preparation.
Hungary’s
performance
in
waste
management is deteriorating.
Hungary is
generating less waste than the EU average, with
municipal waste generation of 429 kg/capita in
2023 (vs. an EU average of 511 kg/capita), but the
country continues to show several negative trends
(see Graph A7.4). The recycling rate for municipal
waste decreased from 37.4% in 2019 to 33.4% in
2023 (EU average 48.7%) and the recycling rate
(
156
) OECD,
Towards a National Circular Economy Strategy for Hungary
,
OECD Publishing, Paris, 2023.
(
154
) The national greenhouse gas emission reduction target is set
out in Regulation (EU) 2023/857 (the Effort Sharing
Regulation). It applies jointly to buildings (heating and
cooling); road transport, agriculture; waste; and small industry
(known as the effort sharing sectors).
(
155
) The effort sharing emissions for 2023 are based on
approximated inventory data. The final data will be
established in 2027 after a comprehensive review.
Projections on the impact of current policies (“with existing
measures”, WEM) and additional policies (“with additional
measures”, WAM), as per Hungary’s final updated
NECP.
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for plastic packaging waste decreased to 28% in
2022 (EU average 41%). Hungary has missed the
2020 EU recycling targets and significant efforts
will be needed to reach the targets for preparing
for reuse and recycling of municipal waste and for
recycling of plastic and glass packaging waste,
which has been postponed to 2030. Hungary is
also at risk of not meeting the 2035 target to
landfill no more than 10% of municipal waste
generated, with a municipal waste landfilling rate
at 54% in 2023. The recycling rate for
construction and demolition waste (
157
) slightly
increased to 22.2% in 2022 (EU average 79.8%).
Hungary doesn’t invest enough in the circular
economy transition.
Hungary is estimated (
158
)
to need total additional investment worth at least
EUR 316 million a year for the circular economy
transition,
including
waste
management,
representing 0.19% of Hungary’s GDP and 12.9%
of investment needs in the environmental sector.
Hungary would benefit from further implementing
economic instrument to invest in infrastructure for
separate collection, sorting and recycling.
Zero pollution industry
Hungary is among the Member States most
affected by the health impacts from air
pollution.
Health impacts of air pollution (
159
)
amounted to 90 032 years of life lost in 2022. It
is estimated (
160
) that every year around 8 600
deaths can be attributed to fine particulate matter
2.5 (PM
2.5
), 1 300 deaths to nitrogen dioxide (NO
2
)
and 2 000 to ground-level ozone (O
3
). Some main
sources of air pollution are industrial processes
and related activities (transport, energy production,
and waste treatment), alongside heating systems,
and Hungary would benefit from measures linking
energy efficiency and air pollution. Emissions
intensity of industrial air pollutants in Hungary
caused more damage to health and the
environment than in average in the EU, with EUR
37.8 of damage per thousand EUR of gross value
added (GVA) (
161
) in 2021, compared to an EU
average of EUR 27.5/thousand EUR GVA.
Graph A7.4:
Municipal waste treatment
600
500
400
390
406
420
407
429
Kg per capita
300
200
100
0
2019
2020
2021
2022
2023
Material recycling
Composting and digestion
Landfill/disposal
Total incineration (incl. energy recovery)
Waste treatment unspecified
EU-27 total waste per capita
Source:
Eurostat
Air quality is a major concern, with industry
continuing to release large amounts of
pollutants.
Despite a positive trend for some
pollutants, the situation worsened for several
substances. Between 2010 and 2022, industrial
release of PM
10
increased by 174% and cadmium
(Cd), mercury (Hg), and lead (Pb) by 449%. It is the
highest increases of all Member States. Hungary is
not meeting its emissions reduction commitments
(
162
) for 2020-2029 for ammonia (NH
3
) and PM
2.5
and not projected to meet commitments for 2030
onwards for NO
x
, non-methane volatile organic
compounds, NH
3
and PM
2.5
. An estimated (
163
) total
additional investment of at least EUR 512 million
a year is needed to meet its environmental
objectives concerning pollution prevention and
control, representing 0.30% of Hungary’s GDP.
Water pollution from industry is falling,
except for heavy metal releases.
Between
2010 and 2022, industrial releases of pollutants
to water decreased by 25% for total nitrogen,
25% for total organic carbon and 26% total
phosphorus. However, the releases of heavy metal
(Cd, Hg, Pb and nickel) increased by 38% (
164
).
(
162
) EEA,
Hungary
–
air pollution country fact sheet 2024,
December 2024.
(
163
) European Commission, DG Environment,
Environmental
investment needs & gaps assessment programme,
2025
update. Expressed in 2022 prices.
(
164
) EEA,
Industrial releases of pollutants to water and economic
activity in the EU-27,
September 2024.
(
157
) Based on
Eurostat, dataset
[env_wastrt__custom_13270296], 2024.
(
158
) Environmental Implementation Review 2025.
(
159
)
Eurostat, Dataset [hlth_cd_iap], 2025.
(
160
) EEA,
Hungary
–
air pollution country fact sheet 2024,
December 2024.
161
( ) EEA,
Industrial emission intensity indicators,
2021.
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Waste management is the main contributor to
industrial emissions to water (
165
), and to a lesser
extent the chemical, energy production, and pulp
and paper industries.
(
165
) Industrial Reporting under the Industrial Emissions Directive
2010/75/EU and European Pollutant Release and Transfer
Register Regulation (EC) No 166/2006 - ver. 12.0 Sep. 2024
(Tabular
data).
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Table A7.1:
Key clean industry and climate mitigation indicators: Hungary
Strategic autonomy and technology for the green transition
Net zero industry
Operational manufacturing capacity 2023
- Solar PV (c: cell, w: wafer, m: module), MW
- Wind (b: blade, t: turbine, n: nacelle), MW
Automotive industry transformation
Motorisation rate (passenger cars per 1000 inhabitants), %
New zero-emission vehicles, electricity motor, %
Critical raw materials
Material import dependency, %
Climate mitigation
Industry decarbonisation
GHG emissions intensity of manufacturing production, kg/€
Share of energy-related emissions in industrial GHG emissions
Energy-related GHG emissions intensity of manufacturing
and construction, kg/€
Share of electricity and renewables in final energy consumption
in manufacturing, %
Energy intensity of manufacturing, GWh/€
Share of energy-intensive industries in manufacturing production
GHG emissions intensity of production in sector [...], kg/€
- paper and paper products (NACE C-17)
- chemicals and chemical products (NACE C20)
- other non-metallic mineral products (NACE C23)
- basic metals (NACE C24)
Reduction of effort sharing emissions
GHG emission reductions relative to base year, %
- domestic road transport
- buildings
2005
Effort sharing: GHG emissions, Mt; target, gap, %
Sustainable industry
Circular economy transition
Material footprint, tonnes per person
Circular material use rate, %
Resource productivity, €/kg
Zero pollution industry
Years of life lost due to PM2.5, per 100,000 inhabitants
Air pollution damage cost intensity, per thousand € of GVA
Water pollution intensity, kg weighted by human factors per bn € GVA
1,377
988
1,032
1,124
37.8
0.6
1,350
-
702
571
27.5
0.9
2018
15.5
6.9
0.9
47.8
Hungary
2019
16.5
5.5
0.9
2020
14.4
5.1
1.0
2021
14.5
5.0
1.1
2022
14.3
4.9
1.3
2023
15.7
5.9
1.3
0.70
1.97
2.54
2.04
0.61
1.94
2.54
2.06
2018
14.9
-30.8
0.62
2.09
2.56
2.04
2019
21.8
-32.8
0.58
2.20
2.55
2.39
2020
4.3
-29.5
0.53
2.28
2.34
1.82
2021
-3.6
15.5
-25.3
2021
46.1
2017
0.44
58.6
163.0
39.4
1.94
2018
0.44
59.3
164.1
39.9
1.94
Hungary
EU-27
200 (c), 200 (m)
-
2017
357
0.64
2017
2018
375
0.95
2018
29.5
2019
393
1.16
2019
27.1
- Electrolyzer, MW
- battery, MWh
2020
406
2.38
2020
26.8
2021
418
3.53
2021
27.9
2022
426
4.22
2022
29.7
-
40000-42000
2023
435
5.38
2023
24.1
Trend
2018
539
1.03
2018
24.2
2021
561
8.96
2021
22.6
Hungary
2019
0.42
58.8
154.9
41.5
1.90
2020
0.43
58.8
158.7
41.5
2.02
2021
0.4
60.2
154.9
42.5
2.03
2022
0.32
58.3
134.4
45.7
1.77
10.7
0.54
2.35
2.18
2.01
2022
-8.1
24.7
-35.2
2022
44.0
0.47
2.74
2.15
1.08
2023
-14.7
17.2
-44.2
2023
40.8
2023
0.31
56.1
-
47.3
1.71
EU-27
2017
0.34
44.8
158.4
43.3
1.29
2022
0.27
42.5
132.9
44.2
1.09
7.3
-
-
-
-
0.73
1.25
2.53
2.79
2018
1.4
21.4
0.68
1.26
2.24
3.49
2023
5.2
32.9
WAM
6.34
Target
-18.7
Trend
WEM
-3.5
EU-27
2018
14.7
11.6
2.1
2021
15.0
11.1
2.3
Source:
Net zero industry:
European Commission:
The net-zero manufacturing industry landscape across Member States: final
report,
2025.
Automotive industry transformation:
Eurostat.
Critical raw materials:
Eurostat.
Climate mitigation:
See
footnotes in the "climate mitigation" section; reduction of effort sharing emissions:
EEA greenhouse gases data viewer;
European
Commission,
Climate Action Progress Report,
2024.
Sustainable industry:
Years of life lost due to PM2.5: Eurostat and EEA,
Harm to human health from air pollution in Europe: burden of disease status,
2024. Air pollution damage: EEA,
EU large industry
air pollution damage costs intensity,
2024. Emissions covered: As, benzene, Cd, Cr, Hg, NH3, Ni, NMVOC, NOX, Pb, dioxins, PM10,
PAH, SOX. Water pollution intensity: EEA,
EU large industry water pollution intensity,
2024. Releases into water covered from
cadmium, lead, mercury, nickel. Other indicators: Eurostat.
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ANNEX 8: AFFORDABLE ENERGY TRANSITION
This annex outlines the progress made and
the ongoing challenges faced in enhancing
energy competitiveness and affordability,
while advancing the transition to net zero.
It
examines the measures and targets proposed in
the final (draft) updates to the national energy
and climate plans (NECPs) for 2030.
While recent years have witnessed a
significant growth in solar photovoltaics
(PVs), lack of spare grid capacity and system
flexibility hinder further renewable energy
expansion.
Consumer empowerment remains
very limited, with little or no access to dynamic
pricing
and aggregators’ services.
Regulated
energy prices for households represent a major
cost for the system and increase the burden of
high prices for businesses, whose electrification is
also slowed down by a very unfavourable
electricity/gas price ratio. Hungary remains
significantly dependent on Russian fossil fuels,
with very little progress in supply diversification.
electricity prices is double the EU average for both
gas and electricity, at 55.4% and 27.2%
respectively. Taxes are significantly lower than the
EU average, with no excise duty being applied on
top of the VAT for electricity and only a very small
one for gas.
Retail energy prices for industrial consumers
have also fallen and while they remain above
the EU average the gap has narrowed
significantly compared to 2023.
Hungarian
non-household consumers still pay 26% more for
electricity and 16% more for gas than the EU
average. Taxes and levies (excluding VAT) account
for only 9.2% of electricity prices and 6.9% of gas
prices for industrial users, considerably below the
EU averages of 11% and 9%, respectively.
With an average of 101 EUR/MWh in
2024(
166
), Hungary had the EU’s sixth-highest
wholesale electricity prices; and while prices
in Hungary declined early in the year amid
falling natural gas costs, they surged during
the spring/summer and again in the winter,
diverging from Central-Western European
(CWE) markets.
This increase was driven by
factors affecting both consumption and
generation. Prolonged summer heatwaves and a
cold winter led to higher consumption in the
region, while increased export needs from certain
coupled markets and limited non-fossil flexibility
further exacerbated the supply-demand gap,
especially during peak demand hours. This gap
was mainly covered by costly natural gas-fired
generation, ramping up during the evening hours in
the summer and throughout the entire day during
the winter, as well as higher imports (mostly from
Slovakia and Austria). Consequently, and more so
than in 2023, these conditions drove concentrated
price spikes in the evening hours (18h-21h), when
solar output declined and demand increased,
especially during the summer. On the other hand,
average daytime hourly prices were lower
compared to 2023, likely owing to the uptake of
solar output in Hungary (+37% in 2024) and in
neighbouring markets(
167
).
Energy prices and costs
Graph A8.1:
Retail energy price components for
household and non-household consumers, 2024
(i) For household consumers, consumption band is DC for
electricity and D2 for gas. Taxes and levies are shown
including VAT.
(ii) For non-household consumers, consumption band is ID for
electricity and I4 for gas. Taxes and levies are shown
excluding VAT and recoverable charges, as these are typically
recovered by businesses.
Source:
Eurostat
Hungary’s retail electricity
and gas prices for
households have declined in 2024 and remain
the
lowest in the EU due to the government’s
price cap.
The share of network costs in
(
166
) Fraunhofer (ENTSO-E data).
(
167
) Yearly electricity data, Ember (generation and consumption
data throughout the paragraph).
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Graph A8.2:
Monthly average day-ahead wholesale
electricity prices and European benchmark
natural gas prices (Dutch TTF)
The
implementation
of
grid-related
legislation and developments needs to be
accelerated.
In 2024, an unprecedented number
of applications for the connection of renewable
energy sources (RES) to the grid exceeding 10 GW
caused continuing restrictions for new grid
connection. The transmission system operator and
distribution system operators hosted ‘free capacity
announcements’
to assess project developers’
interest in connection points. This was done in
order to ease the strain on the grid by indicating
development and investment needs. The
transmission system operator required collateral
from project developers and allowed projects to
connect earlier than planned in order to inhibit
speculation and support the sector’s continued
growth.
Government Decree 54/2024 has effectively
halted new grid connections
for most
renewable energy projects, annulling recent
capacity applications exceeding 10 GW. Capacity
requests for grid connection beyond 2030 have
been systematically rejected. The Decree states
that a
new grid connection capacity allocation
system will be
implemented starting in early
2025, making new feed-in capacity for weather-
dependent renewables unlikely in the near future.
However, on-site (self-consumption only) power
plants remain unaffected.
The Hungarian government is adopting a top-
down grid connection management approach,
where the transmission system operator will
determine both the locations for new
connections and the type of capacity
required.
According to the government, this would
improve the outlook for wind, geothermal and non-
fossil storage, which could be useful to balance
the recent growth of solar PVs. While aiming to
align grid expansion with renewable growth, the
measures create uncertainties for investors,
potentially slowing new projects and favouring
existing developments with secured grid access.
Currently, the estimated time taken to connect a
utility-scale PV system, as reported by the
industry, is about six years, which is substantially
longer than the EU average (around four
years)(
169
). As for wind energy, the first grid
connection of a wind farm is not expected before
(
169
) EU Market Outlook For Solar Power 2023
–
2027,
SolarPowerEurope.
(i) the Title Transfer Facility (TTF) is a virtual trading point for
natural gas in the Netherlands. It serves as the primary
benchmark for European natural gas prices.
(ii) CEE and CWE respectively provide average prices in the
central-western European (Belgium, France, Germany,
Luxembourg, the Netherlands and Austria) and central-
eastern European (Poland, Czechia, Slovakia, Hungary,
Slovenia and Romania) markets.
Source:
S&P Platts and ENTSO-E
Flexibility and electricity grids
Hungary is part of the Core(
168
) capacity
calculation region.
The general trend in this
region is a reduction of the cross-border capacity
made available to trade, which also applies to
Hungary. Member States should ensure that a
minimum of 70% of technical cross-border
capacity is available for trading. Hungary has an
action plan in place to reinforce the electricity grid
and can do more to further increase cross-zonal
electricity trading, particularly with Austria, by
optimizing the use of existing cross-border
infrastructure. Furthermore, Hungary adopted a
network development plan for a new Hungarian-
Romanian cross-border electricity transmission
line. Construction is planned to start in January
2026.
(
168
) Core is the capacity calculation region (CCR) which covers
central European countries namely Austria, Belgium Czechia,
Germany, France, Croatia, Hungary, the Netherlands, Poland,
Romania, Slovenia, Slovakia and, once connected, Ireland. A CCR
is a group of countries which calculate cross-border electricity
trade flows together.
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2029. This demonstrates that the strain on the
grid poses a barrier to future growth.
The electricity system shows significant
untapped flexibility potential.
Hungary does
not report on the installed non-fossil flexibility
capacity in the draft updated NECP. In spite of this,
Hungary has committed to taking steps to
promote the installation of electricity storage
through a combination of legislative and financial
incentives, including in the form of pumped-
storage power-plant capacity. The promotion of
demand response is one of
Hungary’s objectives.
The development of flexible tariff structures and
the creation of a legislative environment
supporting the creation of aggregators have been
mentioned by Hungary as ways to achieve this.
Despite the government ambition to achieve 1GW
storage capacity by 2030, today total capacity is
around only 0.02GW, with only DK and LV having
less in the EU. The lack of system flexibility,
coupled with the increasing penetration of
intermittent solar energy, is reflected in the rising
number of negative prices occurences, 74 in 2023
and 53 in 2024.
Hungary’s
regulatory
framework
still
contains barriers to the development of
flexible resources.
Demand-side response
cannot access the wholesale market and access to
the ancillary service market involves specific
barriers to assets installed at the distribution level.
The slow deployment of smart meters impacts the
availability of dynamic retail contracts.
Consumer empowerment remains limited.
Electricity consumers in Hungary have access to
fully regulated offers only, i.e. regulated fixed
prices and regulated variable prices for households
and regulated fixed prices for non-household
consumers(
170
). The share of fixed-price contracts
is 100% vs an EU average of 73%(
171
). In 2023,
consumers in Hungary did not have access to
dynamic-price contracts. In the same year, the
electricity switching rates of household consumers
decreased by 0.4% compared to 2022(
172
).
Electricity switching rates of non-household
consumers are not reported. In Hungary, in 2023
(
170
)https://www.acer.europa.eu/sites/default/files/documents/Pub
lications/ACER-CEER_2024_MMR_Retail.pdf
(
171
)
Idem.
(
172
)
Idem.
only 9% of consumers had access to smart
meters(
173
), compared to an EU average of around
63%, and it is not possible for consumers to
access near real-time consumption data. By 2030,
the EU set a 80% target for smart meters
deployment.
Hungary’s first energy community
was
registered in 2023.
The aim of the Hungarian
energy strategy is to ensure that, by 2030, at least
one renewable energy community operates in each
of Hungary’s 175 microregions. But the
development of energy communities is hampered
by poor grid access as well as by regulatory and
financial barriers. Hungary has recently adopted
legislation that simplifies permit-granting for
renewable energy communities. To this end,
Hungary launched a funding programme of
EUR 12.7 million in 2024. There are only three
energy communities in Hungary and the
percentage of households generating electricity is
3.2%(
174
).
In 2023, electricity accounted for 20.9% of
Hungary’s final energy consumption, below
the EU average of 22.9%, and this share has
remained largely stagnant in the last
decade(
175
).
When it comes to households,
electricity accounts for 20.1% of final energy
consumption, while in industry it represents 37.7%
(see also Annex 7). In Hungary, the electricity/gas
price ratio for industry is almost 4, higher than in
most of the EU. Households pay electricity more
than three times as much as gas. This represents a
major obstacle for the electrification of the
Hungarian economy. In the transport sector, the
share of electricity in final consumption remains
negligible at 2.3%. Further progress in
electrification across sectors is required for cost
effectively decarbonising the economy and
bringing the benefits of affordable renewable
generation to consumers.(
176
)
(
173
)
Idem.
(
174
)
Idem.
(
175
) CAGR (compound annual growth rate) of 1.2% between
2013 and 2023 and minimum/maximum share of 18.4% and
20.9%, respectively.
(
176
) Analysis based on Eurostat data for the second semester of
2024. For household consumers, consumption band is DC for
electricity and D2 for gas, which refer to medium-sized
consumers and provide an insight into affordability. For non-
household consumers, consumption band is ID for electricity
and I4 for gas, referring to large-sized consumers, providing
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Renewables and long-term contracts
Graph A8.3:
Hungary's installed renewable
capacity (left) and electricity generation mix
(right)
RES permitting.
These include (i) introducing
legislation that simplifies permit-granting for
renewable energy communities, (ii) efforts to
ensure better grid planning by having operators
announce application rounds for connection points
and (iii) introducing deposits to limit unrealised
projects. There is room for improvement in human
resources, repowering existing installations and
establishing regulatory sandboxes for innovative
RES projects.
Hungary has doubled its target for solar PV
in its final updated NECP.
By 2030, Hungary
aims to have 12 GW of solar PV capacity. To
support this development, in 2024 Hungary
launched the Napenergia Plusz programme, which
offers residential customers who want to install
solar panel systems and energy storage
equipment with a non-refundable state grant of up
to 66% of the investment costs. Some 25 000
households will benefit from the measure.
Moreover, by the end of 2024, no new schedule on
the expected allocation of support for renewables
had been released on the Union Renewables
Development Platform. Nor did Hungary make a
pledge under the European wind power action plan
either.
The power purchase agreement (PPA) market
in Hungary is currently in its very early
stages, with only a few dozen MW of
capacities being contracted.
The first corporate
PPA contract in Hungary was signed in early 2022,
for 26 MW of PV capacity, as an on-site PPA
between ID Energy Group and Lafarge. PPA
contracts are in a disadvantaged position relative
to contract-for-difference (CfD) auctions because
energy producers must pay an additional income
tax, whereas the participants in CfD are exempted.
This rule was slightly amended in early 2024, as a
new regulation exempts power plants from the
payment of this tax if their capacity is over 5 MW
and they are implemented through an on-site PPA
contract, and do not feed into the electricity
network. Regarding CfD, since March 2022, no
tender for new renewable energy projects has
been organised, allegedly due to the lack of grid
connection capacities. The system allows for
delayed entry into the compensation payment
scheme, leaving producers with the possibility of
entering into short-term PPAs (or other merchant
solutions) if market conditions are more
advantageous and thus enabling them to avoid
pay-backs if electricity prices are high.
“Other” includes renewable municipal waste,
solid biofuels,
liquid biofuels, and biogas.
Source:
IRENA, Ember
In 2024, total installed solar capacity of
solar PV has reached 7.7 GW, with a 30%
YoY increase and surpassing the national
target previously set for 2030 (6GW).
Regarding onshore wind, despite some positive
regulatory progress in removing obstacles, total
capacity is stuck at 0.3GW for 10 years and the
2030 target of 1 GW remains unambitious. This is
particularly notable given the government’s
recognition of wind
energy’s role in diversifying the
electricity mix and reducing system and balancing
costs. In 2023, the share of renewables in final
energy consumption
–
calculated according to the
RED methodology, was 17%, among the lowest in
the EU and significantly below the EU average of
24.5%.
Renewables generated 32% of electricity in
Hungary in 2024,
below the EU overall share of
47%(
177
). 25% of electricity was produced by solar
energy, the highest share in the EU. The energy
mix is still largely dominated by fossil fuels (68%
share), with renewables covering just 14% of
gross inland consumption in 2023 (the aggregate
value for the EU is 20.1%.
Hungary has taken several important steps
towards improving the legal framework on
an insight into international competitiveness (price used for
the calculation excludes VAT and other recoverable
taxes/levies/fees as non-household consumers are usually
able to recover VAT and some other taxes).
(
177
) Yearly electricity data, Ember.
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Energy efficiency
Hungary has demonstrated progress towards
reaching the 2030 EU targets for energy
efficiency.
In 2023, primary energy consumption
(PEC) decreased by 7.3% to 22.12 Mtoe. Final
energy consumption (FEC) decreased by 7.6% to
16.76 Mtoe. Compared to 2022, FEC decreased in
all main sectors: in industrial by 7.4%, in transport
by 5.5%, in residential by 7.9% and in services by
14.2%. Under the recast Energy Efficiency
Directive (Directive 2023/1791), Hungary should
try to reach a PEC of 23.35 Mtoe and an FEC of
16.17 Mtoe by 2030.
Hungary has notified the Commission of its
comprehensive heating and cooling assessment
identifying potential for the application of high-
efficiency cogeneration and efficient district
heating and cooling in line with Article 25(1) of the
Energy Efficiency Directive.
As part of its long-term renovation strategy,
Hungary aims to reach 20% savings in the
energy use of the residential building stock
by 2030.
In the final updated NECP, Hungary
announced that the upcoming national building
renovation plan, of which the draft is due to be
prepared in 2025, will be more ambitious
regarding the building stock, while the associated
measures will also be reviewed. Although final
energy consumption in households decreased by
7.8% between 2022 and 2023, it remained more
or less constant when limate corrections were
applied(
178
). Therefore, Hungary needs to step up
its efforts to improve the energy efficiency of
buildings if it is to make a meaningful contribution
to the 2030 reduction target for energy
consumption in the buildings sector.
In 2022, heating and cooling represented
85% of the country’s residential final energy
consumption (compared to an EU average of
78%), of which 23% came from renewables
(compared to an EN average of 26%).
Approximately 12 000 heat pumps were sold in
2023, representing a decrease of 25% compared
to the previous year. Hungary offers a renovation
(
178
) Climate correction applied to the whole final energy
consumption in households that is multiplied by the average
heating degree days (HDD) over the period 2006-2023 and
divided by the HDD in the corresponding year.
subsidy covering up to 50% of renovation costs
and corresponding to a project value of up to
HUF 3 000 000 (EUR 7 300) for families. This
subsidy can also cover heat pumps. In 2023,
electricity in Hungary was 3.4 times more
expensive than gas, which increased to 4.0 times
more expensive in the first half of 2024. This
means that end users will save energy but will not
make any significant financial savings if they
choose a heat pump for heating. The residential
electricity-to-gas price ratio has increased by 7%
over the past five years, making heat pumps less
financially attractive.
Hungary deploys a supportive national
financing framework that mobilises energy
efficiency investment. It is composed of
grants and subsidies
and of relevant financial
instruments that can leverage private investments.
In 2024, Hungary continued to implement several
relevant financing measures, notably the Baross
Gábor credit programme - green investment loan
(Baross Gábor Újraiparosítási Zöld Beruházási
Hitel). As part of its national financing framework
supporting energy efficiency, Hungary adequately
deploys financial instruments for energy
efficiency, These include the residential loan
scheme for energy efficiency and renewable
energy-based modernisations of the building stock
(Lakossági
energiahatékonysági Hitelprogram),
as
well as tax credits. The effectiveness of the energy
efficiency obligation schemes to support energy
efficiency in enterprises is undermined by the low
mandatory annual savings and low penalties for
non-compliance. In term of sectors supported,
Hungary’s national financing framework mainly
focuses on public and residential buildings.
Security of supply and diversification
Since Russia’s invasion of Ukraine, Hungary
has strengthened its energy ties with Russia.
In 2023 and 2024, Hungary imported substantial
volumes of Russian gas beyond the long-term
contract of 4.5 bcm per year, with 2024 imports
nearing 7 bcm.
Russian crude accounts for around 74% of
its oil imports in 2023.
The country could
compensate for a potential phase-out of the
Druzhba pipeline by making more use of the
Janaf/Adria pipeline in Croatia.
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Hungary remains fully dependent on Russian
nuclear fuel.
It has taken some steps to ensure
security of supply. Notaybly in October 2024, the
Paks operator concluded an agreement with an
alternative fuel supplier (Framatome) for
deliveries from 2027. It is important for Hungary
to develop a national plan to fully phase out its
dependency on Russian nuclear fuel, as foreseen
by the REPowerEU Roadmap adopted on 6 May
2025.
Fossil fuel subsidies
In 2023, environmentally harmful (
179
) fossil
fuel subsidies without a planned phase-out
before 2030 represented 1.01%(
180
) of
Hungary’s GDP(
181
), above the EU weighted
average of 0.49%.
Income/price support
accounted for 89% of this volume, while tax
measures and direct grants represented 10% and
1%, respectively. Fossil fuel subsidies without a
planned phase-out before 2030 and which do not
specifically address, in a targeted way, energy
poverty nor genuine energy security concerns
included the utility cost reduction programme, a
VAT reduction for district heating using natural
gas, and excise tax refunds for agricultural use of
diesel. Additionally, Hungary’s 2023 Effective
Carbon Rate(
182
) averaged EUR 50.6 per tonne of
CO₂, below the EU weighted mean of EUR 84.80
6
.
179
Direct fossil fuel subsidies that incentivise maintaining or
increasing in the availability of fossil fuels and/or use of
fossil fuels.
Numerator is based on volumes cross-checked with the
Hungarian authorities. For all Member States, it includes
public R&D expenditures for fossil fuels as reported by the
IEA (Energy Technology RD&D Budgets) and excludes, for
methodological consistency, excise tax exemption on
kerosene consumed in intra-EU27 air traffic.
2023 Gross Domestic Product at market prices, Eurostat.
The Effective Carbon Rates is the sum of carbon taxes, ETS
permit prices and fuel excise taxes, representing the
aggregate effective carbon rate paid on emissions.
180
181
182
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Table A8.1:
Key Energy Indicators
Hungary
2021
Household consumer - Electricity retail price (EUR/KWh)
Energy & supply [%]
Network costs
Taxes and levies including VAT
VAT
Household consumer - Gas retail price
Energy & supply
Network costs
Taxes and levies including VAT
VAT
Non-household consumer - Electricity retail price
Energy & supply
Network costs
Taxes and levies excluding VAT
Non-household consumer - Gas retail price
Energy & supply
Network costs
Taxes and levies excluding VAT
Wholesale electrity price (EUR/MWh)
Dutch TTF (EUR/MWh)
0.1005
34.2%
44.5%
21.3%
21.3%
0.0306
53.6%
25.2%
21.2%
21.2%
0.0931
54.2%
19.9%
7.2%
0.0398
57.7%
5.1%
20.1%
113.4
n/a
EU
2023
0.1141
26.3%
52.4%
21.3%
21.3%
0.0335
34.6%
44.2%
21.2%
21.2%
0.2525
55.4%
21.3%
3.2%
0.0834
68.4%
6.1%
5.4%
107.1
n/a
2022
0.0975
27.6%
51.2%
21.2%
21.2%
0.0301
51.5%
27.2%
21.3%
21.3%
0.2014
67.7%
11.5%
-0.8%
0.0859
73.9%
2.7%
2.7%
270.9
n/a
2024
0.1044
23.4%
55.4%
21.3%
21.3%
0.0286
42.3%
36.4%
21.3%
21.3%
0.1987
52.9%
20.0%
9.2%
0.0552
67.0%
6.3%
6.9%
100.7
n/a
2021
0.2314
36.6%
26.7%
36.7%
14.5%
0.0684
43.7%
22.5%
33.8%
15.5%
0.1242
43.0%
15.8%
30.4%
0.0328
66.2%
7.7%
12.5%
111.0
46.9
2022
0.2649
54.3%
25.3%
20.3%
13.4%
0.0948
61.0%
17.3%
21.7%
11.6%
0.1895
66.5%
10.7%
9.9%
0.0722
77.3%
3.8%
6.1%
233.2
123.1
2023
0.2877
55.6%
24.8%
19.6%
13.8%
0.1121
64.5%
17.1%
18.4%
10.2%
0.1971
63.0%
11.9%
11.2%
0.0672
77.3%
5.3%
7.3%
99.1
40.5
2024
0.2879
47.8%
27.2%
25.0%
14.6%
0.1128
53.9%
18.3%
27.8%
13.6%
0.1661
55.8%
15.5%
15.4%
0.0517
68.7%
7.1%
11.6%
84.7
34.4
2017
Gross Electricity Production (GWh)
Combustible Fuels
Nuclear
Hydro
Wind
Solar
Geothermal
Other Sources
Gross Electricity Production [%]
Combustible Fuels
Nuclear
Hydro
Wind
Solar
Geothermal
Other Sources
Net Imports of Electricity (GWh)
As a % of electricity available for final consumption
Electricity Interconnection [%]
Share of renewable energy consumption - by sector [%]
Electricity
Heating and cooling
Transport
Overall
32,915
15,407
16,098
220
758
349
1
82
46.8%
48.9%
0.7%
2.3%
1.1%
0.0%
0.2%
12,878
32.1%
58.3%
7.5%
19.9%
7.7%
13.6%
2018
32,067
14,725
15,733
222
607
629
12
139
45.9%
49.1%
0.7%
1.9%
2.0%
0.0%
0.4%
14,348
35.1%
58.8%
8.3%
18.2%
7.7%
12.5%
2019
34,291
15,429
16,288
219
729
1,497
18
111
45.0%
47.5%
0.6%
2.1%
4.4%
0.1%
0.3%
12,584
30.4%
53.1%
10.0%
18.2%
8.1%
12.6%
2020
34,930
15,358
16,055
244
655
2,459
16
143
44.0%
46.0%
0.7%
1.9%
7.0%
0.0%
0.4%
11,677
28.2%
35.3%
11.9%
17.7%
11.6%
13.9%
2021
36,120
15,301
15,990
212
664
3,796
12
145
42.4%
44.3%
0.6%
1.8%
10.5%
0.0%
0.4%
12,754
29.1%
32.5%
13.7%
17.9%
6.2%
14.1%
2022
35,802
14,392
15,812
178
610
4,732
4
73
40.2%
44.2%
0.5%
1.7%
13.2%
0.0%
0.2%
12,152
28.2%
41.4%
15.3%
20.2%
7.8%
15.1%
2023
35,546
11,704
15,918
222
646
6,925
16
115
32.9%
44.8%
0.6%
1.8%
19.5%
0.0%
0.3%
11,099
26.2%
48.0%
19.5%
22.3%
7.6%
17.1%
2024
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
41.7%
-
-
-
-
2020
Import Dependency [%]
of Solid fossil fuels
of Oil and petroleum products
of Natural Gas
Dependency from Russian Fossil Fuels [%]
of Natural Gas
of Crude Oil
of Hard Coal
56.6%
43.7%
87.1%
75.6%
95.0%
61.0%
21.7%
2021
54.1%
38.5%
86.9%
67.2%
95.0%
58.2%
18.1%
2022
64.2%
41.4%
89.4%
99.1%
82.4%
85.7%
7.3%
2023
62.1%
24.9%
89.0%
98.6%
78.1%
77.4%
0.0%
2020
57.5%
35.8%
96.8%
83.6%
41.0%
25.7%
49.1%
2021
55.5%
37.2%
91.7%
83.6%
40.9%
25.2%
47.4%
2022
62.5%
45.9%
97.8%
97.6%
20.7%
18.4%
21.5%
2023
58.3%
40.8%
94.5%
90.0%
9.3%
3.0%
1.0%
2017
Gas Consumption (in bcm)
Gas Consumption year-on-year change [%]
Gas Imports - by type (in bcm)
Gas imports - pipeline
Gas imports - LNG
Gas Imports - by main source supplier [%]
Russia
Romania
United States
10.7
7.0%
9.8
9.8
0.0
95.0%
0.0%
0.0%
2018
10.3
-3.6%
7.7
7.7
0.0
95.0%
0.0%
0.0%
2019
10.4
0.7%
11.7
11.7
0.0
95.0%
0.0%
0.0%
2020
10.9
4.2%
7.9
7.9
0.0
95.0%
0.0%
0.0%
2021
11.4
5.1%
7.5
7.5
0.0
95.0%
0.0%
0.0%
2022
9.7
-14.9%
9.3
9.3
0.0
82.4%
0.0%
0.0%
2023
8.6
-10.9%
8.2
8.2
0.0
78.1%
11.5%
4.9%
Source:
Eurostat, ENTSO-E, S&P Platts
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ANNEX 9: CLIMATE ADAPTATION, PREPAREDNESS AND ENVIRONMENT
Climate change and environmental pollution
are serious threats to Hungary’s population,
environment and economy.
The country is
showing an increasing vulnerability to extreme
climate events and faces challenges in
implementing preparedness strategies, particularly
as regards water resilience. Hungary is
increasingly exposed to drought and flood hazards,
as illustrated by the floods in September 2024.
Urgent measures are needed to implement
sustainable water management strategies,
focusing on green infrastructures, and to ensure
the long-term sustainability of sectors that rely on
ecosystem services. The state of nature and
ecosystems continues to degrade, creating
significant risks to Hungary's economy and
competitiveness. The country needs to take
targeted measures to effectively prevent further
degradation, better protect its nature, and ensure
sufficient investments to restore ecosystems. To
that end, Hungary should continue taking steps to
ensure its transition towards more sustainable
agriculture practices.
agriculture (
184
).
According to Hungary’s third river
basin management plan, recent droughts have
affected crop and livestock production, inland
waterway navigation, and public water supply.
Among the risks relating to climate change, further
to
droughts and floods, Hungary’s
agriculture is
vulnerable to soil erosion, windstorms and early or
late frosts. These risks can lead to yield reduction,
forest fires and the spread of new pests and
diseases. In 2019, Hungary adopted a drought
management plan with a range of drought
mitigation measures.
It
does not provide details on
the projected impacts of these measures though,
nor how these relate to water scarcity
management areas. Overall, there have been no
significant changes in how the Water Framework
Directive (WFD) is implemented in Hungary
regarding water abstraction and water scarcity
management. Considering the climate and socio-
economic changes in the Danube, Hungary would
benefit from enhanced international cooperation
on water abstraction and water scarcity, through
existing international frameworks such as EUSDR,
ICPDR and bilateral water commissions among
others.
There is room for more preparedness
measures based on green infrastructures in
Hungary.
Due to more frequent droughts, with
higher temperatures and evaporation, agriculture's
demand for water is increasing. This puts pressure
on groundwater and water supply systems. In
recent years, Hungary has focused on irrigation
development
for
enhancing
agricultural
productivity. In this context, Hungary will need
comprehensive measures to develop a resilient
and water-efficient agriculture. A change of
agricultural practices would reinforce climate
adaptation
and
prevent
dependency on
increasingly unreliable rain and river flows (
185
).
Hungary’s
common agricultural policy strategic
plan supports investments and agroecological
practices for natural water retention and resource
efficiency, and it is expected to improve water
balance on 1 million hectares of agricultural land.
According to the second flood risk management
(
184
) In 2022, among the EU Members with over 3 mn inhabitants,
only Belgium, France, Croatia and Portugal had larger parts
of their territory affected by droughts.
(
185
) Commission Staff Working Document,
Third river basin
management plans, second flood hazard and risk maps and
second flood risk management plans, Member State:
Hungary,
4 February 2025.
Climate adaptation and preparedness
As regards the impacts of climate change in
Hungary, the problems of droughts and flash
floods have recently moved into focus.
Over
the past century, the increase in the average
temperature in Hungary (1.2 °C over the period
1901-2018) has been significantly higher than the
estimated global figure of 0.9 °C. The upward
trend in the average temperature has been
particularly sharp since the 1980s. This coincides
with increasingly long and intense droughts, with
regions experiencing both a scarcity and an
abundance of water within the same year. Heavy
rainfall has become more frequent, and part of the
annual distribution of rainfall is expected to shift
to occurring outside the vegetation period (
183
).
Agriculture is particularly vulnerable to the
impacts of climate change, and sustainable
water management strategies are therefore
needed.
In 2022, drought affected 27% of
Hungary’s territory, with devastating damage to
(
183
) See the
modelling of the Hungarian Meteorological Service.
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plan (
186
), Hungary considers natural long-term
flood prevention by addressing land use in
floodplains, but its flood protection strategy still
relies mainly on structural water retention projects
and grey infrastructures. Hungary would also
benefit from further transboundary coordination
on flood protection.
Although uninsured risks appear low,
potential losses in Hungary due to climate
change impacts cannot be ignored.
In 2022,
climate-related economic losses amounted to
about 1.4% of gross domestic product (GDP) (
187
).
Hungary’s insurance protection gap for natural
catastrophes, though not including droughts, is
comparatively low overall, albeit moderate for
floods. A stress test in the European Commission’s
fiscal sustainability report (2021) finds non-
negligible fiscal impacts for Hungary from possible
climate change related hazards, even under the
1.5 °C and 2 °C scenarios (
188
).
Hungary has scope to reinforce to strengthen
institutional and administrative aspects of
its climate adaptation policies.
The ministry of
energy is the main authority for climate
adaptation, with some responsibilities shared with
other ministries and administrations. The follow-up
on Hungary’s national climate strategy of 2018
through annual action plans has been pending.
Local authorities are not legally obliged to prepare
climate strategies, but all the counties and 132
settlements have elaborated a climate strategy
including adaptation. NATéR, the policy support
tool for domestic climate adaptation with data,
forecasts and information on climate impacts, has
not been further developed since 2020, which
impairs its usefulness going forward. There is a
need for capacity building on adaptation including
(
186
) Commission Staff Working Document,
Third river basin
management plans, second flood hazard and risk maps and
second flood risk management plans, Member State:
Hungary,
4 February 2025.
(
187
) Source:
Eurostat.
Still, this magnitude was exceptional so far;
such losses have been typically macroeconomically
negligible up until now.
(
188
) Notably an increase in the debt to GDP ratio of 3 to 4
percentage points. The report finds that an increase in global
temperatures of 3 °C would lead to more abrupt and
nonlinear impacts. The analysis only considers extreme
events and not the compounding impacts of slow-onset
climate change. It cautions that the results are likely to
underestimate expected fiscal impacts. See: European
Commission, 2021,
Fiscal Sustainability Report, Part 2,
Chapter 2,
Link.
at subnational level; to this end, Hungary intends
to prepare a curriculum and training materials to
strengthen administrative capacity on climate
adaptation and integrated water management.
Water resilience
There is room for improvement in Hungary's
water resilience.
Water productivity (
189
) has
slightly increased in Hungary over recent years
(
190
), with EUR 30 per m³ of abstracted water in
2022. The water exploitation index plus (WEI+) has
also slightly increased from 1.4% in 2021 to 1.7%
in 2022, but it remains below the EU average
(3.6% in 2021). Despite a decreasing trend, the
energy sector is still Hungary's most water-
consuming sector (
191
), accounting for 72% of the
net water consumption in 2022 (e.g. 1 043 million
m³ of a total of 1 446 million m³). However, net
water
consumption
significantly
increased
between 2010 and 2022, by 136% for
manufacturing, 29% for public water supply, and
11% for agriculture. Hungary has also room to
increase administrative capacity in the water
sector. Following a transfer of responsibilities from
the Ministry of Interior in 2024, the Ministry of
Energy became the main authority for water
management, protection, and utilities. However,
water governance is still shared with the Ministry
of Agriculture, notably regarding water supply for
agriculture, and the Ministry of Interior, regarding
drinking water quality.
Water quality is a major challenge for
Hungary due to the significant pressures on
water bodies from agriculture, industry and
settlements.
According to Hungary’s third river
basin management plan, only 11.3% of surface
water bodies are classified as having good
ecological status/potential, far below the EU
average (37.3%), mainly due to diffuse nutrient
pollution from agriculture. Their chemical status
has not improved since the second plan’s
assessment, as only 46% of surface water bodies
have a good chemical status, mainly due to
(
189
) Measured as GDP in 2010 chain linked volumes over total
fresh surface water abstracted in cubic metres.
(
190
) EUR 28 per m
3
of abstracted water in 2018.
(
191
) Based on data provided by the European Environment
Agency (EEA) between 2010 and 2022.
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pollution from heavy industry emissions and
combustion
processes (
192
).
As
regards
groundwater
bodies,
the
percentage
of
groundwater bodies with good quantitative status
remains at 80%, below the EU average (90%).
Moreover, 17.3% of groundwater bodies with good
quantitative status are identified as being at risk
of falling to a poor status by 2027. The
percentage of groundwater bodies with a good
chemical status has slightly increased to 80.5%.
However, 10.8% of groundwater bodies with a
good chemical status in Hungary are identified as
being at risk of falling to a poor status by 2027.
Groundwater bodies are mainly affected by
untreated wastewater, nutrients from agriculture,
urban run-off, industrial wastewater and
contamination from old industrial sites. The third
plan highlights that there are significant pressures
from agriculture, industry and settlements in
Hungary.
Despite
some
progress,
Hungary’s
wastewater treatment remains a significant
cause for concern.
Wastewater treatment is a
major source of water pollution, as discharges of
urban wastewater are a significant cause of poor
water quality in Hungary, in particular for rivers
and groundwater bodies. Hungary is one of the
Member States that has faced the greatest
difficulties in implementing the Urban Waste-
Water Treatment Directive (UWWTD). Despite an
increase since 2018, Hungary’s
compliance rate
with the Directive was only 59% in 2020 (
193
), far
below the EU average (76%), resulting in a ruling
against it by the Court of Justice of the European
Union in 2023. The Hungarian authorities have
acknowledged that many plants in operation
should be refurbished or upgraded.
Hungary has scope to take additional
measures to achieve compliance.
EUR 659
million from national sources and EU funds
already contribute to meeting Hungary’s
investment needs for water protection and
management. However, the investment needs
(
192
) Failure to achieve good chemical status is mainly due to a
small number of persistent, bioaccumulative and toxic (PBT)
substances (polybrominated diphenyl ethers, mercury,
polyaromatic hydrocarbons, perfluorooctane sulfonic acid
and its derivatives and heptachlor and heptachlor epoxide)
and non-PBT substances ((arsenic, but also cadmium, lead
and nickel, along with the hydrocarbon fluoranthene).
(
193
) European Commission, 2020,
UWWTD National Summary
Chapter 2020 Hungary,
LInk.
(Graph A9.2) show a substantial gap for water
protection and water management (EUR 610
million per year by 2027 or 0.36% of Hungary’s
GDP). Over half of this gap can be attributed to
unaddressed financing needs in wastewater
management (EUR 313 million per year). EUR 40
million per year of the investment gap relates to
drinking water, while around EUR 255 million per
year relates to other aspects of the WFD.
Infrastructure development would help to improve
wastewater collection and treatment and water
reuse, and to reduce leaks in the networks and the
general water supply. Increasing investment will
be all the more important as, on one hand, the
UWWTD was revised and strengthened in
2024 (
194
), and on the other, Hungary plans to
further develop several water-intensive industrial
plants in the coming years. For instance, the
Hungarian authorities has announced the
construction of plants dedicated to battery
manufacturing in Nyíregyháza and Debrecen,
which will increase both water and energy
demands, and raise the issue of potential
pollution, with increased needs for wastewater
treatment. Additional investments are also needed
to increase administrative capacities, implement
effective measures to achieve full compliance with
the WFD and the UWWTD, decontaminate water
bodies, and support nature-based solutions, flood
prevention and river restoration. Hungary would
also benefit from enhanced transboundary
cooperation to achieve the objective of the WFD.
Biodiversity and ecosystems
Biodiversity and nature are deteriorating in
Hungary, and actions to restore habitats and
species should be strengthened.
According to
the latest available data, only 13.3% of the
country’s habitats have a good status, lower than
the EU average of 14.7%. Similarly, the
conservation status of species is concerning, with
35% reported as having a good status, slightly
above the EU-28 average (27%). Less than 8% of
the forest habitats (
195
) show a favourable
conservation status, and overall Hungary’s forest
(
194
) Directive 2024/3 019, of 27 November 2024. The deadline
for transposition is 31 July 2027.
(
195
) Assessments done for the forest habitats listed under
Article 17 of the Habitats Directive.
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conditions are more degraded than the EU
average, with a forest health indicator of 0.58 in
2018 (compared to the EU average of 0.62).
Moreover, data show deteriorating trends for
habitats and species compared to the previous
reporting period. This situation has serious
implications for Hungary’s environmental
and
climate resilience, as the loss of biodiversity
impairs ecosystems’ ability to provide services that
help mitigate the effects of climate change (such
as regulating water cycles, maintaining soil health,
and sequestering carbon) and climate-related
events such as floods, fires and droughts.
Nature degradation creates significant risks
to competitiveness, as Hungary’s economy
relies on ecosystem services.
Overall,
Hungary’s dependency on ecosystem services is
close to the EU average, with 44% of its gross
value added showing a high level of dependency,
ranking 13
th
among the Member States. Several
sectors, such as agriculture, forestry, fisheries, the
mining and metals industry, construction, water
utilities and healthcare delivery (see Graph A9.1)
are particularly dependent on ecosystem services,
with 100% of the gross value added of these
sectors directly dependent on ecosystem services.
This means that failure to maintain the capacity of
ecosystems to deliver services could entail
significant costs or even stop production in these
sectors. Protecting and restoring key ecosystems
would ensure that the long-term competitiveness
of these and other economic sectors is preserved.
Graph A9.1:
Direct dependency(1) on ecosystem
services(2) of the gross value added generated by
economic sector in 2022
0%
Agriculture
Forestry
Fishery and acquaculture
Mining and metals
Construction
Water utilities
Healthcare delivery
Aviation travel and tourism
Food beverages and tobacco
Supply chain and transport
Public services and others
Electricity
Chemical and materials industry
Electronics
Oil and gas
Real estate
Heat utilities
Automotive
Retail consumer goods and…
Information technology
Banking and capital markets
Insurance and asset…
Digital communications
High
Medium
Low
20%
40%
60%
80% 100%
(1) Dependency based on the sector’s own operations,
excluding value chain operations within countries and across
international value chains. A high dependency indicates a high
potential exposure to nature-related shocks or deteriorating
trends, which means that the disruption of an ecosystem
service could cause production failure and severe financial
loss.
(2) Ecosystem services are the contributions of ecosystems to
the benefits that are used in economic and other human
activity, including provisioning services (e.g. biomass
provisioning or water supply), regulating and maintenance
services (e.g. soil quality regulation or pollination), and cultural
services (e.g. recreational activities).
Source:
Hirschbuehl et al., 2025,
The EU economy's
dependency on nature,
Link.
Targeted action on nature protection and
restoration is needed in order to meet
Hungary’s nature restoration targets.
In
2022, 22.2% of Hungary's territory was protected
land area, and this percentage has remained
stable over the last few years, below the EU
average. There is therefore scope for Hungary to
achieve its political commitment to expand
protected areas and improve the conservation of
existing protected areas by 2030, as set out in its
National Biodiversity Strategy for 2030 (
196
).
Between 2006 and 2012, the extent of soil areas
providing flood control ecosystem services in
(
196
) Government of Hungary, 2023,
National Biodiversity
Strategy,
Link.
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Hungary fell by 12% due to soil sealing (
197
).
Another of Hungary's areas for action concerns the
restoration of 5 029 km
2
of habitats listed in
Annex I to the Habitats Directive, corresponding to
up to 5.4% of its territory (
198
). Hungary needs
EUR 1 482 billion in investment per year to
effectively conserve and restore its natural capital,
mitigate the impacts of climate change, and
preserve the country’s rich biodiversity (see Graph
A7.2). The current level of financing for
biodiversity and ecosystem conservation in
Hungary is around EUR 482 million per year, which
represents a financing gap of EUR 1 billion. This
shortfall puts at risk the country’s commitment to
global biodiversity agreements and undermines its
long-term economic and social development.
Graph A9.2:
Investment needs and gaps in EUR
million, in 2022 constant prices
target for land use, land use change and
forestry (LULUCF).
Hungary has seen modest
improvements in its LULUCF sector carbon
removals since 2018. To meet its 2030 LULUCF
target, additional carbon removals of -0.9 million
tonnes of CO
2
equivalent (CO
2
eq) are needed (
199
).
The latest available projections show a gap to
target of 0.1 million tonnes of CO
2
eq for
2030 (
200
). Additional measures therefore need to
be applied to reach the 2030 target.
Hungarian agriculture has an increasing
environmental impact on air, water and soil.
Hungary's utilised agricultural area (UAA)
amounted to 5 million hectares in 2022. There
was a significant increase in nutrient losses
between 2018 and 2021 (from 43 kg to 56.1 kg
of nitrogen per hectare of UAA), which is a
significant environmental concern and poses a
threat to human health. According to data from
the Nitrates Directive, 7.27% of groundwater
monitoring stations in Hungary recorded average
nitrate concentrations above 50 mg/l between
2016 and 2019, exceeding the healthy threshold
for human consumption. The livestock density
index was 0.43 in 2020, below the EU average of
0.75. Ammonia emissions from agriculture have
shown an increasing trend over the last decade,
representing 92.8% of total agricultural emissions
in 2022, which is above the EU average (89.8%).
Hungary only monitored the level of pesticide
pollution at a few monitoring stations (and only
for rivers). Despite this low level of monitoring,
60% of surface water bodies were reported as
exceeding the pesticide thresholds in 2021.
Hungary must pursue its efforts to transition
to a sustainable food system by further
implementing policies to reduce the
environmental
impact
of
agriculture.
Agriculture is a key economic sector in Hungary.
The bioeconomy, encompassing the production and
processing of biological products, contributed
EUR
10.75 billion of added value to the country’s
gross domestic product in 2021 (
201
), showing an
increasing trend since 2018. Agriculture accounted
for around EUR 5.1 billion, the beverage industry
EUR 477 million, and the food industry contributed
(
199
) National LULUCF targets of the Member States in line with
Regulation (EU) 2023/839.
(
200
) Climate Action Progress Report 2024 COM/2024/498.
(
201
)
Jobs and wealth in the EU bioeconomy
1,600
1,400
1,200
1,000
800
600
400
200
-
Biodiversity
Baseline
Gap
Water
Source:
European Commission, DG Environment,
Environmental investment needs & gaps assessment
programme, 2025 update.
Sustainable agriculture and land use
Hungary’s carbon removals fall short of the
level of ambition needed to meet its 2030
(
197
) European Commission, European Environment Agency
(2021), Accounting for ecosystems and their services in the
European Union.
(
198
) European Commission (2022), Impact assessment
accompanying the proposal for a Regulation on nature
restoration.
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around EUR
2.4 billion to Hungary’s GDP.
Sustainable agriculture practices can help mitigate
the environmental impact of agriculture and
ensure the long-term competitiveness of the
sector. Hungary's common agricultural policy
strategic plan supports measures to improve
carbon storage, protect natural resources, preserve
biodiversity and pursue other climate and
environmental objectives, with EUR 1.2 billion,
71% of its rural development funding, and EUR 1
billion, 15% of its direct payments. However, there
is scope to further promote sustainable practices.
In 2022 (
202
), organic farming, which reduces the
use of synthetic fertilisers and pesticides, made up
only 6.3% of Hungary’s agricultural land, below
the 2020 EU average of 9.10%.
(
202
)
D’Andrimont, R. et al., 2024, Estimation of the share of
landscape features in agricultural land based on the LUCAS
2022 survey,
Link.
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Table A9.1:
Key indicators for progress on climate adaptation, preparedness and environment
Climate adaptation and preparedness:
Drought impact on ecosystems
[area impacted by drought as % of total]
Forest-fire burnt area
(1)
[ha, annual average 2006-2023]
Economic losses from extreme events
[EUR million at constant 2022 prices]
Insurance protection gap
(2)
[composite score between 0 and 4]
Heat-related mortality
(3)
[number of deaths per 100 000 inhabitants in 2013-
2022]
Sub-national climate adaptation action
[% of population covered by the EU Covenant of
Mayors for Climate & Energy]
Water resilience:
Water Exploitation Index Plus, WEI+
(4)
[total water consumption as % of renewable
freshwater resources]
Water consumption
[million m
3
]
Ecological/quantitative status of water bodies
[% of water bodies failing to achieve good status]
Surface water bodies
Groundwater bodies
Biodiversity and ecosystems:
Conservation status of habitats
(6)
[% of habitats having a good conservation status]
Common farmland bird index
2000=100
Protected areas
[% of protected land areas]
Sustainable agriculture and land use:
Bioeconomy's added value
(7)
[EUR million]
Landscape features
[% of agricultural land covered with landscape
features]
Food waste
[kg per capita]
Area under organic farming
[% of total UAA]
Nitrogen balance
[kg of nitrogen per ha of UAA]
Nitrates in groundwater
(8)
[mgNO
3
/l]
Net greenhouse gas removals from LULUCF
[Kt CO
2
-eq]
2018
9 452
-
2019
9 744
-
2018
13.3
80.7
-
2019
-
81.0
-
(5)
Hungary
2018
0
715
8
-
32
2019
0.77
715
14
-
32
2020
0.25
715
11
-
32
2021
1.78
715
34
-
32
2022
26.19
715
2 430
0.88
32
2023
0
715
30
0.88
EU-27
2018
6.77
2021
2.76
24 142
62 981
44
53
55
56
56
59
41
44
Hungary
2018
1.3
2019
1.4
2020
1.4
2021
1.4
2022
1.7
2023
-
EU-27
2018
4.5
2021
4.5
1 337
1 407
1 441
1 507
1 446
-
-
-
-
-
-
-
Hungary
2020
-
81.3
-
84%
20%
-
-
-
-
-
-
EU-27
59%
93%
2021
-
77.3
22
2022
-
75.7
22
2023
-
-
-
2018
14.7
72.2
-
2021
-
74.4
26
Hungary
2020
9 681
-
2021
10 750
-
2022
2023
EU-27
2018
634 378
2021
716 124
4
-
-
3.9
43.0
-
(9)
-
5.7
40.7
-
5 382 -
93
6.0
49.9
-
7 106 -
91
5.8
56.1
-
7 195 -
84
6.3
-
-
6 803
-
-
7.99
-
-
-
256 077 -
240 984
-
-
4 806 -
(1) The data show the average for the timespan 2006-2023 based on EFFIS - European Forest Fire Information System.
(2) Scale: 0 (no protection gap)
–
4 (very high gap). EIOPA, 2024, Dashboard on insurance protection gap for natural catastrophes.
(3) van Daalen, K. R. et al., 2024, The 2024 Europe report of the Lancet Countdown on health and climate change: unprecedented
warming demands unprecedented action. The Lancet Public Health.
(4) This indicator measures total water consumption as a percentage of the renewable freshwater resources available for a given
territory and period. Values above 20% are generally considered to be a sign of water scarcity, while values equal or greater than
40% indicate situations of severe water scarcity.
(5) European Commission, 2024, seventh Implementation Report from the Commission to the Council and the European
Parliament on the implementation of the Water Framework Directive (2000/60/EC) and the Floods Directive (2007/60/EC) (Third
River Basin Management Plans and Second Flood Risk Management Plans).
(6) For this indicator, the EU average includes figures for the UK under the previous configuration, EU-28.
(7) European Commission, 2023, EU Bioeconomy Monitoring System dashboards.
(8) Nitrates can persist in groundwater for a long time and accumulate at a high level through inputs from anthropogenic sources
(mainly agriculture). The EU drinking water standard sets a limit of 50 mg NO
3
/L to avoid threats to human health.
(9) Net removals are expressed in negative figures, net emissions in positive figures. Reported data are from the 2024
greenhouse gas inventory submission. 2030 value of net greenhouse gas removals as in Regulation (EU) 2023/839
–
Annex IIa.
Source:
Eurostat, EEA
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FAIRNESS
ANNEX 10: LABOUR MARKET
In recent years, Hungary's labour market has
performed well and shown considerable
improvement.
However, the country still faces
structural challenges that have a detrimental
impact on its competitiveness and potential
economic growth. These challenges include
persistently low productivity, stark regional
imbalances, a low and declining impact of the
Active Labour Market Policy (ALMP) system and
the lack of an integrated service provision, as
reflected in the significant underrepresentation of
certain groups in the labour market - particularly
Roma communities, people with lower levels of
educational attainment and persons with
disabilities. As Hungary works towards its 2030
employment-rate target, key challenges to achieve
a more robust and inclusive labour market and
thriving economy - include harnessing the
potential of underrepresented groups and
improving the effectiveness of social dialogue.
Hungary’s labour market outcomes are
stable and stand at historically high levels,
but the slightly increasing unemployment
rates require monitoring.
Employment and
activity rates (for the 20
–
64 and 15
–
64 age
groups respectively) reached historical peaks in
2024 (81.1% and 78.6%). Both rates remained
well above the EU average in 2024 (75.8% and
75.4%). At 85%, the country’s 2030 employment-
rate target is within reach, but persistently low
employment rates among vulnerable groups might
make it difficult to meet the target. Employment
growth is slowing down, and the number of people
who hold a second job has risen steadily since
2021. The overall unemployment rate increased
from 3.6% in 2022 to 4.1% in 2023 and 4.5% in
2024. Long-term unemployment rose by 0.2
percentage points (pps) to 1.4%, in 2023, and
increased further to 1.5% in 2024. In 2024,
unemployment increased in all regions except in
Pest, and was around 7% in three of the four
least-developed regions. These regional disparities
are the result of lower educational attainment and
fewer jobs in rural areas (see Annex 17).
Young people continue to face significant
difficulties finding work.
In 2024, 15.2% of
young people between 15-24 were unemployed
(up by 4.6 pps from 2022). Young people with
lower levels of educational attainment were much
more likely to be unemployed, both in Hungary and
in the rest of the EU (29.2% vs 19.8% in 2023).
Regions with historically lower educational
attainment levels have high youth unemployment
rates, e.g. 22.8% in Southern Transdanubia in
2024, when 4.2% of young people in the 15-294
age group were unemployed for 12 months or
longer. These figures also show the negative
impact of dropping out of school and early school
leaving (see Annex 12). The proportion of young
people not in employment, education or training
(NEETs) remained around the EU average among
15–29-year-olds (10.9% vs 11.0% in 2024).
Graph A10.1:
Unemployment rates (%)
16
14
12
10
8
6
4
2
0
2018
2019
2020
2015
2016
2017
2021
2022
2023
Unemployment rate 15-74
Long-term unemployment rate 15-74
Youth Unemployment rate 15-24
Source:
Eurostat.
In the period 2021 to 2027, the ESF+ is the
only source of funding for the Youth
Guarantee.
Its aim is to support the labour
market integration of NEETs, albeit with a large
budget of EUR 526 million. Since 2024, Hungary
has been trying to help the more vulnerable young
people, especially the inactive, by establishing
country-wide mapping strategies and outreach
plans. There is further scope for improving the
quality and choice of Youth Guarantee training
intended to increase long-term employability. As
from 2025, interest-free, multi-purpose loans
(Munkáshitel) of up to HUF 4 million (around
EUR 10 000) are available to 17–25-year-olds.
Such loans are contingent on at least 20 hours of
employment per week or self-employment
throughout the loan period; students and
graduates in higher education are excluded. The
idea is to offer financial incentives for young
87
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people into work more quickly. However, this
measure might be less effective for low-skilled
young people, who would rather need reskilling or
upskilling, which is a long-term investment in
making them more employable but discourages
participation in higher education.Vulnerable
groups such as low-qualified adults, Roma
and persons with disabilities also face
barriers to labour market integration.
Employment outcomes in Hungary are closely tied
to educational attainment. The employment rate
for people with at most lower secondary (59.9%)
was over 20 pps lower than for people with upper
secondary or post-secondary education in 2024.
Among 15-64-year-olds, only 48.7% of Roma (
203
)
people were in work in 2023, as opposed to 75.5%
of those not from Roma communities, and 20.6%
of Roma people were unemployed (vs 3.8% of
non-Roma people). The disability employment gap
decreased by 2.4 pps in 2024 but remains high, at
27.2 pps. Almost 40% of young persons with
disabilities are NEETs (2022) (
204
). To improve the
situation, Hungary recently set an employment
target for persons with disabilities.
Vulnerable groups also tend to remain
unemployed for longer.
Since the 2021
legislation on the public employment service,
ALMP has focused on re-employment via wage
subsidies, and there is reduced access to reskilling
and upskilling measures, which could ensure long-
term labour market integration. The recent 2024
legislative amendment now enables PES to play a
more prominent role in the provision of labour
market trainings. Insufficient availability of quality
training providers might appear as a challenge.
Given that fewer than one in three long-term
unemployed people who get a job remain
employed after six months there is room for
improvement in providing tailor-made, complex
services
such
as
transversal
skills(
205
)
development, health and psychological services
and support in job-seeking to address needs of
long-term unemployed-. In the Economic
(
203
) National Statistical Office. Indicators to the National Social
Inclusion Strategy, 2024.
(
204
)
European comparative data on persons with disabilities -
data 2022 - European Commission
(
205
) Transversal skills like critical thinking, teamwork, and learning
skills are essential for work, education and daily life.
Developing and recognising these skills play an important
role in promoting sustainable economic growth, social
inclusion, and competitiveness.
Development
and
Innovation
Operational
Programme Plus (EDIOP Plus), Hungary allocated
EUR 787 million (HUF 295 billion) of ESF+ funds to
labour market measures
–
of which 40% goes to
people over 30 and 60% to people under 30. The
planned measures were launched during 2024
with the aim of helping 300 000 people to find
work and are primarily targeted at vulnerable
groups and the long-term unemployed.
Graph A10.2:
Labour market slack
HU
8
% of
extended
labour force
7
6
5
4
3
2
1
0
2018
2019
2020
2021
2022
2023
2024
Unemployed
Underemployed
Available but not seeking
Seeking but not available
Source:
Eurostat.
Historically low unemployment rates have
been rising since 2022, while the overall
labour market slack remains low.
In 2024, the
unemployment rate (4.5%) remained below the EU
average (5.9%), as it has been since 2012.
However, unemployment in Hungary has been
rising since 2022, in contrast with a broadly stable
trend in the EU. Labour market slack (
206
) increased
from 6% in 2023 to 6.3% in 2024 but remained
well below the EU average of 11.7%. This slight
increase was driven by an increase in
unemployment, while the other components
remained stable. The rates of under-employed
people working part time in Hungary are among
the lowest in the EU. The labour reserve is more
than 10 times the number of vacant posts in the
(
206
) Labour market slack refers to all unmet needs for
employment, namely it represents the extent to which labour
supply exceeds labour demand in the short run. It
encompasses four components: under-employed people
working part-time, unemployed people, people seeking work
but not immediately available, and people available to work
but not seeking.
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three least developed of Hungary’s counties. The
government announced urgent measures in 2024
to harness this untapped labour potential of
around 300 000 people, although specific details
are still to be provided.
Labour shortages remain a challenge, in
certain sectors.
The job-vacancy rate has been
on a downward trend since 2022. At 2.1%, it was
below its pre-pandemic level (2.5% in 2019), and
slightly below the EU average (2.4%) in 2024. The
decrease in vacancies is most prominent in the
private sector, while the largest shortages were
reported in the administrative, healthcare, social
work, public administration and defence - sectors.
The job-vacancy rates were between 3% and 4%
for all of these sectors in 2024. The low number of
employees in the public and health sectors is
partly due to the low level of salaries and working
conditions (see Annex 11). According to recent
CEDEFOP-EURES data (
207
), employers indicated a
need for more office associates, office
professionals, researchers and engineers. In
October 2024, the proportion of employers
expecting labour shortages to limit their
production was relatively high in the service
(33.5% vs 26.8% in the EU) and construction
(29.3% vs 28.0% in the EU) sectors (
208
).
There is a growing need for skilled workers in
emerging sectors that are key to the green
and digital transitions.
In 2024, employment in
the
country’s
energy-intensive
industries
accounted for 5.0% of total employment, while job
creation in the green economy remained limited. In
2022, employment in the environmental goods
and services sector was among the lowest in the
EU, at 1.0% of total employment (vs 3.3% in the
EU). At the same time, the job-vacancy rate in
manufacturing, electricity, gas and water supply -
key sectors for the green transition - was above
the EU average. The greenhouse gas emission
intensity of Hungary’s workforce has improved,
decreasing from 12.2 tonnes per worker in 2015
to 9.7 tonnes in 2023 (vs 12.3 in the EU),
reflecting progress in the green transition.
By contrast, the ICT sector remains
underdeveloped,
with
ICT
specialists
accounting for 4.5% of total employment in
(
207
)
EURES - Countries and occupations | CEDEFOP
(
208
) Source: European Business and Consumer Surveys.
2024, compared to 5.0% in the EU.
This is
partly due to a high drop-out rate from higher
education programmes preparing ICT specialists
(see Annex 12) and graduates not entering ICT
employment in Hungary. Women are particularly
underrepresented, at only 15.2% of ICT specialists
(vs 19.5% in the EU). The proportion of the
population with at least basic digital skills
increased by 10 pps to 58.9% in 2023, compared
to an EU average of 55.6% (see Annex 12).
However, this proportion is much lower for the
inactive (
209
) (aged 25-64 and excluding students)
(32.4%), those with lower levels of educational
attainment (33.4%) and the unemployed (44.1%).
This indicates that those who are more vulnerable
in the labour market lag significantly behind in
digital skills, further hampering their ability to find
work.
Overall, Hungary has almost halved its skills
mismatches during the last decade.
The
macroeconomic skills mismatch (
210
) decreased
consistently from 30.0 in 2013 to 17.5 in 2023,
then increased slightly to 17.7 in 2024. In 2024,
despite the low overall tertiary graduate rate,
14.5% of workers with higher-education
qualifications were employed in occupations that
did not require that level of qualification, while the
EU average for the same year was 21.5%. Sectors
such as accommodation and food service
activities, agriculture, forestry and fishing,
transport, and administrative and support service
activities have the highest over-qualification rates.
However, they are lower than the EU levels for the
same sectors.
In Hungary, wage growth has been strong.
Nominal wages are expected to grow by 7.8% in
2025, after reaching the highest growth rate
(17.2%) in the EU in 2022 and remaining among
the highest in 2023 (14.4%) and 2024 (12.5%).
Nominal wage growth in Hungary is expected to
fall to EU average levels (3.4%), following a period
marked by great divergence (2022-2024). In
(
209
)
A person who is neither employed nor unemployed is
economically inactive.
This means that they are not in paid
work,and are not looking for work. This may be because
someone is retired, looking after family or home, or a
student, among other reasons.
The set of people outside the
labour is also called the "inactive population"
(
210
) The macroeconomic skills mismatch indicator measures the
dispersion of employment rates across skill groups
(represented by qualification levels, with ISCED 0-2 low; 3-4
medium and 5-7 high).
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parallel, real wages have been growing at a rapid
(yet volatile) pace, reaching 8.5% in 2024 and
expected at 4.0% in 2025. This is also significantly
above the EU average. Real wages increased in
2022 (3.7%) but declined by 2.1% in 2023 (
211
).
The rise in real wages is due to both persistent
nominal wage growth and steep disinflation (from
17.0% in 2023 to 3.8% in 2024). The statutory
minimum wage increased by more than 45.4%
between January 2022 and January 2025, an
increase of around 5.1% in real terms. The
minimum wage remains lower than in almost all
other EU Member States, however.
Graph A10.3:
Unit labour costs and productivity
HU
260
240
220
200
180
160
140
120
100
80
surpassed the expected levels in 2023 and 2024.
In recent years, ULCs increased by considerably
more than in most EU Member States: 14.2% in
2022, 15.7% in 2023 and 12.2% in 2024, and it is
forecast to increase by 6.0% in 2025. While export
market shares have still been growing in recent
years (e.g. over 2021-2023), continuous strong
wage developments may increasingly affect
competitiveness if not backed by higher
productivity.
Social dialogue remains limited, especially in
the public sector.
The overall framework of
social dialogue remains weak due to the
fragmentation of employers’ and employees’
representations, with different memberships and
functions. Following the establishment of an ad
hoc group to discuss ALMPs in 2023, the
government adopted a legal basis(
213
) for the
institutional framework for the tripartite forum of
the private sector (VKF) in autumn 2024. The VKF
has consultancy powers on questions on the
minimum
wage
and
national
tripartite
negotiations, in line with the minimum wage
directive and its transposition into Hungarian law.
This is an improvement on the previous
arrangement: whereas previously the VKF was
governed only by the rules of procedure signed by
the parties; there is now a more transparent and
legally binding framework.
In parallel, the public sector has seen a
gradual erosion of workers’ rights in recent
years, including restricting teachers’ right to
strike and abolishing the army trade union.
The establishment of a separate employment
status for certain groups of public employees has
weakened their ability to defend their collective
interests: in some cases, collective agreements
have become void and have had to be
renegotiated. The two relevant groups in the public
sector are barely still in existence and only OKÉT
had one meeting in October 2024. There is little to
no consultation with social partners on major
challenges and reforms to the labour market and
social policy, for example on pensions or the
minimum income. Hungary is supporting social
partners in building capacity, mainly through the
(
213
) Government Regulation 308/2024 (X. 25.) entered into force
on 26 October 2024:
https://njt.hu/jogszabaly/2024-308-20-
22.2#SZ10@BE0@POB
index
2007=100
60
Source:
Eurostat.
Rapid wage growth, along with substantial
increases in unit labour costs (ULCs) may
undermine
competitiveness
if
not
accompanied by productivity growth.
Wage
growth over the period from 2014-2022 has been
slightly below what could be expected based on
developments in the usual macroeconomic
drivers(
212
) in Hungary. By contrast, wage growth
(
211
) For nominal wage growth, pay per employee is considered.
This includes: i) Wages and salaries payable in cash or in
kind; and ii) Social contributions payable by employers. For
real gross wages, the deflator used is HICP. Real wages using
this deflator may differ from real wages shown in AMECO
(that uses private consumption as deflator). Data for 2024
and 2025 are based on the European Commission Autumn
2024 economic forecast.
(
212
) Wage benchmarks are predicted by developments in
inflation, productivity, the trade balance and the
unemployment rate.
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
Nominal compensation per employee
Real productivity per person
Nominal unit labour cost
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ESF+ - with an allocation of 0.32% or
EUR 17 million in ESF+ funding for this purpose.
91
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ANNEX 11: SOCIAL POLICIES
Despite improvements in overall social
conditions over the last decade in Hungary,
certain vulnerable groups benefited much
less and continue to face significant
challenges related to poverty and social
exclusion.
Poverty or social exclusion risks are on
the rise and expected to rise further due to
inflation in basic commodities, a decade of
inadequate social assistance and a lack of
targeted mainstream social policy measures.
Socially disadvantaged people, such as Roma,
persons with disabilities and the low-skilled, face
barriers to accessing quality education, the labour
market and social mobility overall. The limited
capacity of the social protection system and
unequal access to quality services also pose risks
for Hungary’s sustainable and inclusive growth.
After a decade of improvement, poverty and
social exclusion is on the rise again in
Hungary.
The people at-risk-of-poverty or social
exclusion (AROPE) rate saw a gradual decline
between 2015 and 2022, but increased for two
years in a row by 1.3 pps to 19.7% in 2023 and by
further 0.5pps to 20.2% in 2024. It remained still
below the EU average of 21.0% in 2024. The
increasing AROPE rate is mainly driven by a high
severe material and social deprivation (SMSD)
rate, which rose in 2023 and decreased in 2024
(by 1.1 pps to 9.3% vs 6.4% in the EU) and an
increasing (though still below EU average) at-risk-
of poverty (AROP) rate (+1.6 pp. to 14.7% vs
16.2% in the EU).
Progress towards the 2030
poverty reduction target has stopped.
The
number of people at-risk-of-poverty or social
exclusion further increased by 42 000 in 2024,
following an increase of 122 000 in 2023. At the
current pace (-9 000 since 2019), Hungary risks
not reaching its 2030 target(
214
) of reducing the
number of people at-risk-of-poverty or social
exclusion by 292 000. To combat poverty, Hungary
would benefit from taking further steps, especially
since the country has one of the highest depths of
poverty in the EU. Described by the gap between
the median income of those at risk of poverty or
the national poverty threshold, it was 29.7% in
2024. . The poverty gap for children was one of
(
214
) HU expresses its national poverty reduction target as a
reduction in the material and social deprivation rate for
families with children (to 13% by 2030) that can be translated
into a reduction by 292 000 of people at risk of pov-
erty or social exclusion by 2030.
the highest in the EU in 2023 after climbing by
343% (by 49.8 pps) to 64.3%, from one of the
lowest rates in 2022., and then falling to 28.2% in
2024.
Graph A11.1:
At-risk-of-poverty-or-social-
exclusion rate and its component rates
HU
35
30
25
20
15
10
5
0
% of
population
2021
2015
2016
2017
2018
2019
2020
2022
2023
At-risk-of-poverty-or-social-exclusion rate
At-risk-of-poverty rate
Severe material and social deprivation
People living in low work intensity households
Source:
Eurostat.
Rural areas and some specific groups are
particularly affected by poverty or social
exclusion.
In 2024, the AROPE rate in rural areas
(25.8%) was 11.37pps higher than in urban areas.
Partly related to the degree of urbanisation, there
are significant differences in AROPE rates across
regions. In Central Transdanubia, the AROPE rate
was at 11.6%, and 29.9% in northern Hungary in
2024. The AROPE rate also increased among
persons with disabilities (by 2.4 pps to 32.4%, vs
28.8% in the EU), and is 18 pps higher than for
persons without disabilities. This is linked to lower
employment and high disability employment gap
in Hungary (see Annex 10). Roma people were over
three times more likely to be AROPE than non-
Roma people in 2023 (61.7% vs 18.7%) (
215
). ,
Households with three or more children (28.1.1%)
and single households (over 30%), especially
single parents, older people on their own and
single female households were also much more
affected by poverty or social exclusion in 2024. To
tackle social exclusion and deprivation, in 2024,
Hungary amended its National Social Inclusion
Strategy 2021-2030, mainly aiming to prevent
and combat segregation. The strategy’s action
(
215
)
Helyzetkép | 2023
92
2024
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3035349_0094.png
plan for 2021-2024 (extended until June 2025) is
complemented with actions to map segregated
neighbourhoods and monitor the supply of social
housing. A new strategy action for 2025-2027 is
under preparation. The new actions and monitoring
framework can help improve transparency and the
effectiveness of the actions.
Educational attainment and employment
status play an important role in determining
poverty risks.
The AROPE rate among the low-
skilled increased by 4.6 pps, to 45.6% in 2023 and
by further 0.9pps to 16.5% in 2024, which were
above the EU average , the highest rates since
2017. This was driven by increased monetary
poverty (31.6%). Adults with a low-level of
education also faced above the EU average in-
work poverty (2439% vs 17.4% in the EU) in 2024,
in contrast with a below average rate and a minor
decline among those with at least secondary
education attainment. People not employed (
216
)
(18-64 age group) were three times (27.1%), and
those unemployed seven times (47.1%) more
likely than the employed (6.5%) to face poverty
risks.
The risk of poverty or social exclusion among
children after a sharp increase returned to
slightly below EU average in 2024.
Between
2023 and 2024 the AROPE rate for children
fell
back by 3.3 pps to 21.1%, which is below the EU
average (24.2%). The AROPE rate of children
whose parents have low educational attainment
decreased by 7.5 pps in 2024 to reach 67.9%%,
and remained above EU average (61.2%). Hungary
has not set a complementary child poverty
reduction target. To mitigate the impact of child
poverty, Hungary is implementing the European
Child Guarantee (ECG) under its action plan of May
2023. The 2024 progress report shows progress in
some areas, including improving affordability of
transport and free eye screening in disadvantaged
neighbourhoods. More effort to ensure better
access of children AROPE to quality early
childhood education and care would be beneficial
for children’s early development and their parents’
access to the labour market. The implementation
of the ECG is supported by EU cohesion policy
funds and the Recovery and Resilience Facility.
This includes the creation of creches, material
assistance to the most deprived children and their
families, and educational, housing and social
(
216
) Not employed: unemployed, retired and other inactive.
assistance
services
in
the
300
most
disadvantaged
municipalities.
The
funding
amounts to a total of EUR 413 million of RRF and
social cohesion policy funding.
Income inequalities increased despite recent
significant income growth.
The real gross
disposable household income (GDHI) per capita is
at 161.0% of its 2008 level compared to 113.6%
in the EU, highlighting the strong wage growth in
recent years. However, the income of the richest
20% of the population was 4.3 times higher than
that of the poorest 20% in 2023 (vs 4.7 in the EU),
compared to 4.5 in 2023. This suggests that lower
income quintiles benefited less from recent
income growth than higher income quintiles. The
income share of the lowest income decile fell
below the EU average in 2023 and remained
below in 2024, at 3.0%. In recent years, taxes and
social benefits lowered income equality to a much
lower extent in Hungary than in most EU countries
(34% vs 49% in the EU in 2024). According to
national data in 2024, the gross average social
income per person in the lowest income quintile
was HUF 421 000, while it was HUF 1 269 million
for the top income quintile.
Some of the key factors influencing
inequalities are a weak social benefit
system, lacking targeted support measures
to low-income households as well as barriers
to enter the labour market for the most
vulnerable
(see Annex 10). The very high inflation
rate in 2022 and 2023, with persistently high food
prices (even in 2024), notably affected and
continues to affect low-income households, who
spend a higher share of their budget on food than
higher-income households. Other important drivers
include the insufficient access to quality education,
especially
among
socio-economically
disadvantaged, families, including those at risk of
poverty or social exclusion. There is scope for
improving the effects of taxes and social transfers
on reducing inequalities (
217
).
The adequacy of social protection further
deteriorated.
Social protection expenditure is
among the lowest in the EU (12.3% vs 19.2% of
GDP in 2023), especially for social assistance and
unemployment benefits. In 2022, households on
(
217
) Economic inequalities in the EU - Key trends and policies,
p. 33
Publications catalogue - Employment, Social Affairs &
Inclusion - European Commission.
93
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3035349_0095.png
minimum income benefits had a net income of
only 18.9% of the at-risk-of-poverty threshold and
only 7.8% of the net income of a low-wage worker
(vs respectively 55.6% and 46.1% in the EU). The
adequacy of the minimum income is therefore one
of the lowest in the EU (59%) and even continues
to decrease, as the nominal value of the minimum
income (HUF 28 500 or EUR 74 per month) has
not changed since 2012, while consumer prices
have increased by 75% since then. Similarly, the
adequacy of the unemployment benefit is also one
of the lowest in the EU (see Annex 10).
The limited capacity of the system to
alleviate poverty risks points to further
scope for increasing both the efficiency and
effectiveness of social transfers.
Following a
steep decline from above EU average (50.6% vs
37.1%) in 2021 to 36.7% in 2022, the impact of
social transfers (excluding pensions) on poverty
reduction remained fairly stable at EU average
(35.0% vs 34.4% in the EU) in 2024 after a
further decrease in 2023). The impact of social
transfers on reducing poverty among children fell
from 70.2% in 2021 to 36.1% in 2023 (vs 43.1%
in the EU) before recovering to 48.4% 2024. Social
transfers are also less effective at alleviating
poverty in the most disadvantaged regions, such
as the northern Great Plain (30.2%). Linking the
adequacy of minimum income schemes to the
minimum wage or indexing it to inflation would
help secure its adequacy and reduce Hungary’s
high SMSD rate.
Graph A11.2:
Impact of social transfers on poverty
reduction (%)
HU
70
65
% of
population
The social protection system also presents
coverage gaps.
Workers in non-standard forms
of employment (including casual, seasonal
workers, trainees and apprentices) are not covered
by sickness and invalidity benefits. The self-
employed and temporary contract workers are less
likely to receive social benefits than their EU peers
(7.9. and 18.0% vs EU 12.7% and 39.2%.) There is
scope for further actions to strengthen access to
social protection, in line with the related 2019
Council Recommendation (
218
).
House prices increased significantly over the
last decade and continue to grow strongly.
House prices have sharply risen by 160% since
2015. They rose by more than 20% in 2022 and
by 7% in 2023 despite the higher interest rate
environment. They have risen further in 2024
(+13% year-on-year in 2024-Q3). Mortgage rates
increased from 4.2% in 2021 to 9.8% in 2023. The
adjustment to higher interest rates has reduced
housing transactions and building activity. The
number of housing transactions reduced 9.9% and
27.0% in 2022 and 2023, respectively while
building permits fell sharply by nearly 40% in
2023, which may suggest a lower supply in the
future and subsequent risks of lingering price
pressures. Despite the decline in transactions,
mortgage credit increased in 2023, after some
stagnation in 2022, driven by mortgage subsidy
schemes and lower lending rates.
Overall the affordability of housing has
deteriorated on the back of strong demand
and limited supplyHouse
prices have grown
faster than incomes over the past decade and the
standardised house price-to-income ratio sharply
rose from 2015 to 2022 before easing in 2023,
still attaining 15% overall increase since 2015.
The number of dwellings has increased by 4%
since 2015 while population has decreased
slightly. Hence, the ratio of dwellings per capita
has increased by 6% since 2015 but it remains
low compared to other EU countries. The ratio of
house completions per capita has increased
strongly since 2015 but also remains low in EU
comparison. Recent developments suggest that the
mismatch between supply and demand will
remain. Generous housing policies focused on the
demand side fuel house price increases in the
(
218
)
Council adopts recommendation on adequate minimum
income - Employment, Social Affairs & Inclusion - European
Commission
60
55
50
45
40
35
30
2021
2015
2016
2017
2018
2019
2020
2022
2023
HU Total
HU Children
EU Total
EU Children
Source:
Eurostat.
2024
94
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3035349_0096.png
context of constrained supply At the same time,
taking into account the cost of mortgages, the
borrowing capacity of households remained
broadly stable over the past decade. While the
rental market is rather small, the ratio of new
rents to incomes increased over the last decade
especially in the city centres. Rents also increased
by 85%, and by 25% only between 2021 and
2023.
High housing costs negatively impact living
standards.
In 2024, 8.5%, (EU: 8.2%) of the
population faced housing costs higher than 40%
of their total disposable household income
–
a
0.2 pps increase from 2023. For people
experiencing poverty risks, the housing-cost
overburden rate rose sharply in recent years,
driven by limited access to affordable housing, and
at 33.5% remained above Eu average in 2024 (EU:
31.1%), . Sharply increased rent prices can partly
explain the very high housing overburden rate
among tenants with rent at market prices in 2024
(40.5%). Poor housing conditions are widespread
among marginalised communities. Transport
poverty in Hungary is widespread, particularly in
rural regions where rail accessibility is low, public
transport options are limited or non-existent, and
one in four residents is at risk of social exclusion.
There is no national policy targeting transport
poverty, and structural measures remain limited.
Rural mobility would benefit from expanding
affordable, zero-emission bus and rail services,
and enhancing multimodal connectivity.
Low-income households have limited access
to the available housing support measures.
In
recent years, Hungary has provided generous
financial support for families to buy, renovate and
build homes, often on condition of committing to
having children in the future. These measures
mostly require own resources and are based on
loans. Low-income households are rarely awarded
such loans as they are considered high-risk clients
by banks. Although EU funds have supported
creating and renovating social housing units in
recent years, the total number of social housing
units in Hungary fell from 59 000 to 38 000 in
2023, or from 1.3% to 0.9% of the total housing
stock. The decline in the availability of social
housing has come about as a result of the lack of
government policy as well as a lack in incentives
for municipalities to maintain their social housing
stock. Municipalities also seem to have more
opportunities to rent out their housing stock at
market value. The RRF allocated financing to the
building of 400 new and the refurbishing of 1 000
social housing units by 2026 in the 300 most
disadvantaged municipalities. In addition, in 2024,
the government announced measures to promote
affordable housing. Only some elements of this
plan have been presented, including narrowing the
conditions of an ongoing large-scale incentive for
home ownership of young families (age limitation).
A new programme of HUF 20-30 billion for the
construction of rental housing and student housing
have also been announced, but its allocation is
limited compared to the 2025 budget of HUF 300-
400 billion for non-means-tested support for
home ownership, and its details are still to be
presented.
Energy
poverty
and
environmental
inequalities pose challenges to the fair green
transition.
The percentage of the population
unable to keep their home sufficiently warm fell
sharply from 15% in 2012 to 4.7% in 2022, due
to a cap on gas and electricity prices since 2013.
However, after the partial removal of the cap mid-
2022, energy poverty surged by more than 50% to
7.2% in 2023 (though remaining below EU
average of 10.6%) but decreased to 6.1% in 2024.
For people at-risk-of-poverty or social exclusion,
however the share of the population unable to
keep their home sufficiently warm is 16.8% in
2024. A two-band pricing was introduced for
residential consumers and the price caps remained
up to the level of average consumption (and up to
a higher level for natural gas for large families).
Gas prices increased by 62% and firewood prices
by 90% between 2021 and 2023, then slightly
decreased in 2024. The carbon footprint inequality
between the wealthiest and the poorest 20% of
the population is one of the highest in the EU (2.3
vs 1.9).
The root causes of energy poverty among the
poorest households are yet to be addressed.
Hungary has adopted a range of measures,
including a focus on energy efficiency and support
for renewable energy projects. Notable initiatives
in the Hungarian RRP include support for the
installation of residential solar panels, heating
modernisation, and financial assistance for
vulnerable households. Hungary is also focusing on
improving energy efficiency in disadvantaged
areas, with a particular emphasis on rural and
eastern regions. However, structural measures
aimed at addressing the root causes of energy
poverty remain limited. Currently, national policies
of regulated energy prices and consumer
95
 kom (2025) 0217 - Ingen titel
3035349_0097.png
protection schemes continue, though Hungary
would benefit from more comprehensive and
targeted measures to address energy efficiency
and social inclusion at a broader scale.
96
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3035349_0098.png
ANNEX 12: EDUCATION AND SKILLS
Hungary’s competitiveness is limited by early
school leaving, low levels of basic skills and
educational attainment, and skills shortages.
Challenges in providing quality education
combined with strong inequalities in education
leave one in two disadvantaged pupils with low
basic skills, often resulting in fewer upskilling
opportunities and employment prospects later in
life. Moreover, the high number of early leavers
from education and training and the relatively low
number of higher education graduates does not
meet employers’ demand for highly skilled
workers. The low share of science, technology,
engineering and mathematics (STEM) graduates
further exacerbates skills shortages and hinders
Hungary’s potential for research and innovation,
productivity growth and competitiveness. The
above average participation of adults in training
might be an important window of opportunity to
reskill and upskill the working age population for
better employability. Vulnerable groups, however,
deserve special attention.
Participation of children as of age 3 in early
childhood education and care (ECEC) is in line
with the EU average, but lowering staff
qualification requirements impacts service
quality for building the foundations for basic
skills.
From the age of three, 92.6% of children
participate in ECEC (vs 93.3% in the EU). Regional
coverage of kindergartens remains uneven: in
2022,
31%
of
municipalities
had
no
219
kindergarten ( ). In 2020, the government
changed
the
employment
conditions
in
kindergartens, reducing the required number of
qualified teaching staff. In January 2024,
qualification requirements were eased further,
allowing secondary vocational education and
training (VET) graduates in kindergarten education
to work as ECEC teachers, which was previously
only possible with a higher education diploma.
There are large inequalities in educational
outcomes, leaving significant parts of the
population behind.
More than half of students
from the bottom quarter of the socio-economic
distribution underachieve in mathematics (54.9%
vs 48.0% in the EU). Inequalities are rooted in the
way the education system is organised: of all
students in the EU, disadvantaged students in
Hungary most often attend separate schools from
(
219
)
Varga, J. (ed): A közoktatás indikátorrendszere 2023.
their advantaged peers. The concentration of
disadvantaged students in certain schools and
insufficient support for low-achieving students
also lead to a high level of separation based on
performance. Of all students in the EU, low-
achieving students in Hungary are the second
most separated from their high-achieving peers.
Performance-based selection starts at age 10,
when best-achieving students can apply to eight-
year general secondary schools.
Teacher shortages are a pressing concern.
In
2018, one third of schools participating in the
OECD Programme for International Student
Assessment (PISA) had reported a shortage of
qualified teachers, but this rose to more than 40%
by 2022. The biggest teacher shortages in
Hungary are in rural areas, and the proportion of
unqualified teachers at schools with a
disadvantaged profile is two to three times higher
than at schools with a normal profile (
220
). A
growing number of students in initial teacher
education are admitted with relatively low
application scores. In a recent survey, teachers
cited low wages, high workload, a lack of
professional autonomy, the composition of the
curriculum, and administrative burden as the
biggest problems in their work (
221
). There is no
system to forecast teacher supply and demand,
which could support planning. The teaching
workforce is also ageing: in 2021, 29.5% of
teachers were aged 55 or older (EU: 24.5%).
Further efforts are needed to build a highly
skilled teaching workforce that can improve
young people’s skills.
Hungary started
implementing a major reform of teachers’ salaries
in 2024, co-financed by the European Social Fund
Plus (ESF+), as part of a programme to make the
teaching profession more attractive. In 2022, the
actual salaries of lower secondary teachers were
equivalent to just 57% of other tertiary graduates’
salaries (
222
). The aim of the reform is to increase
this percentage to at least 80% by January 2025
and to keep it at this level until at least December
2030. As a first step, a 32% average increase was
implemented in January 2024, followed by a 21%
(
220
)
Varga, J. (ed): A közoktatás indikátorrendszere 2023.
(
221
)
Társadalomtudományi Kutatóközpont Politikatudományi
Intézete: Pedagóguskutatás 2023 - Gyorsjelentés.
Társadalomtudományi Kutatóközpont Politikatudományi
Intézete: Pedagóguskutatás 2023 - Gyorsjelentés.
(
222
)
OECD: Teachers' and school heads' actual salaries relative to
earnings of tertiary-educated workers, by age group and by
gender.
97
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3035349_0099.png
increase in January 2025. In addition, teachers
working in disadvantaged municipalities or schools
with a high share of disadvantaged pupils and
applying inclusive methods receive a 20% salary
top-up. Novice teachers have seen their salaries
rise even faster, with increases at least 10
percentage points (pps) higher between 2023 and
2025.
Early school leaving and a lack of basic skills
among young people are the main barriers to
skills development later in life.
4.1% of 14-
year-olds and 3.4% of 15-year-olds were out of
school in 2023, well above the EU averages of
1.7% and 2.6%, respectively. Early school leaving
decreased for two consecutive years, in 2023 and
2024, and stands now at 10.3%, still above the EU
average of 9.3%. The rate is higher in villages
(16.9%), in the least-developed regions (+3.1pps
up to 21.6% in Northern Hungary), for persons
with disabilities (at 41.2% one of the highest in
the EU) in 2024, and among Roma (58.7%; non-
Roma: 9.3% in 2023) (
223
). Despite the persisting
challenge and extensive data on student
performance
collected
through
national
competency tests and the school drop-out early
warning system, there are no effective large-scale
programmes in place to support low-performing
primary and secondary schools to reduce the
number of school dropouts or to improve
education outcomes. In addition, the low level of
basic skills of 15-year-olds remains a cause for
concern (
224
). In PISA 2022, around one third of
Hungarian
students
underperformed
in
mathematics and one quarter in reading and
science.
Since 2012, the share of top performers has
not changed significantly, limiting the pool of
innovative talent.
Despite being below the EU
average in the previous PISA rounds, the country’s
proportion of top-achieving students is now on par
with the EU average in mathematics, and slightly
below average in science and reading. However,
this is only because the EU average gradually
decreased in all three domains while Hungary’s
performance remained stable.
The lack of excellence at school level is a key
driver behind low participation in STEM fields
in higher education and remains a key barrier
to boosting competitiveness and the
economy’s innovation capacity.
Among pupils
in the eighth grade, 37% were low achievers in
computer and information literacy
–
below the EU
average of 43% but far above the EU target of
less than 15%. This may be linked to challenges
stemming
from curricula, teachers’ digital skills
and the digital education infrastructure. The
recovery and resilience facility and cohesion policy
programmes are funding digital equipment for
pupils and aim to improve teachers’ digital skills
and pedagogical skills in a digital environment
through specialised training.
Graph A12.1:
Underachievement in mathematics,
reading and science by students' socio-economic
background (%)
60
50
40
30
20
%
10
0
Mathematics
Advantaged students
Reading
Disadvantaged students
Science
Total
Source:
PISA 2022
(
223
) Government of Hungary: Hungarian National Social Inclusion
Strategy 2030. 2024 data.
(
224
)
Compared to 2012, the shares of low achievers increased to
29.5% in mathematics (EU: 29.5%), 25.9% in reading (EU:
26.2%) and 22.9% in science (EU: 24.2%).
VET participation is increasing, but barriers
to progression to higher educational levels
put three-year VET students in a particularly
disadvantaged position.
In line with the
government’s intention to promote VET,
participation in upper secondary VET has increased
in recent years, with about 50.9% of pupils in
secondary VET programmes in 2023 (3 pps down
from 2022). This is due to: (i) higher enrolment
rates among young people in five-year VET
courses, which lead to an upper secondary school
leaving certificate giving access to higher
education; and (ii) the possibility of obtaining a
second VET qualification free of charge, which
attracts more adults to VET (over a quarter of all
VET students studied in adult-learning status in
2023/2024). About a quarter of all VET pupils
(25,1%) in medium-level VET are enrolled in STEM
fields in Hungary in 2022 (36,2% EU wide).
Though decreasing in number, almost 25% of VET
students (and 13% of all upper secondary full-
time students) were enrolled in three-year VET
98
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3035349_0100.png
programmes, which do not give direct access to
any further formal full-time studies.
Average performance in basic skills tends to
be weaker among VET students, which
creates challenges for the labour market.
In
PISA 2022, Hungarian students had one of the
largest gaps in average mathematics performance
between general and vocational programmes,
largely due to differences in the socio-economic
composition of schools. Despite low educational
outcomes, the employment rate of recent VET
graduates aged 20-34 at 84.2% was above the EU
average in 2023, pointing to a tight labour market.
Increasing the taught time dedicated to basic skills
and continuing mentoring and additional
pedagogical support to low-achievers, co-funded
from ESF+, could help Hungary tackle the
challenge of low achievement in VET.
The declining number of higher education
graduates is driving skill shortages.
Despite a
growing demand for higher education graduates,
in 2024 only 32.3% of Hungarians aged 25-34
had a tertiary education degree (vs 44.2% in the
EU). The employment rate of recent tertiary
graduates (94.7%) exceeds the EU average
(87.7%), indicating high demand.
The low educational attainment rate is
compounded
by
low
intergenerational
225
educational mobility ( ).
Hungary has the
fourth-lowest share of first-generation graduates
among OECD countries, according to data recorded
between 2011 and 2018. Children of parents with
no higher education qualifications are less likely to
obtain a tertiary degree than those whose parents
have a degree (with a 27-percentage point gap in
tertiary degree attainment compared to their peers
from more educated families). Less than 1% of
Roma aged 15-24-year-olds were enrolled in
higher education in 2023 (
226
). Data show a high
correlation between total net earnings and the
share of graduates. The share of graduates
explains the 61% earnings gap between
municipalities (
227
). Therefore, improving equity in
(
225
)
Első generációs diplomások Magyarországon. In: Szabó-
Morvai, Á. & Pető, R. (Eds.). Munkaerőpiaci Tükör 2022.
Társadalmi egyenlőtlenség és mobilitás.
(
226
) Government of Hungary: Hungarian National Social Inclusion
Strategy 2030. 2024 data.
(
227
)
Gazdaságkutató Zrt.: A települési jövedelmek közötti
különbségek
főleg a diplomások eltérő arányára vezethetők
vissza
educational participation could promote social
mobility and increase earning levels.
The number of higher education graduates in
STEM remains low, despite policy efforts.
Graduate tracking data show high employment
rates among STEM graduates, particularly from
ICT and engineering programmes, and they also
earn significantly more than graduates from other
fields (
228
).
Hungary
implemented
several
measures to increase participation in STEM priority
areas. However, in 2022, only 24.1% of all tertiary
students were enrolled in STEM subjects (vs 27.1%
in the EU). However, the share of students enrolled
in ICT subjects (8.3%) was well above the EU
average (5.2%). The share of female students
enrolled in ICT was low, at 15.3% (vs 20.2% in the
EU). In school education, the low number of
teaching hours in science and a shortage of
science teachers (
229
) contribute to students not
pursuing studies in STEM-related fields.
Some sectors are affected by lingering skills
shortages.
Hungarian small and medium-sized
enterprises (SMEs) claimed that skills shortages
hampered their general business activities more
than their EU counterparts did. A lack of digital
skills prevented the effective use of digital
technology in business and lacking skills was also
a barrier to a more environmentally friendly way
of working (
230
). Job vacancy rates have been
decreasing and are now below the EU average
(2.1% vs 2.4% in the EU in 2024). While this is
partly related to the economic slowdown, the
share of unfilled jobs is high in some sectors, such
as health and social work, administrative and
support services and public administration.
Hungary has been developing skills forecasting
tools, but they are not linked together or
coordinated, the set of data published is limited,
and the involvement of social partners in its
management could be improved.
Low basic skills among adults and persistent
inequalities present serious challenges to
competitiveness.
The 2022 Programme for the
International Assessment of Adult Competencies
survey, which measures adult performance in
(
228
)
https://www.diplomantul.hu/adminisztrativ-adatbazisok-
egyesitese.
(
229
) Varga, J. (ed): A közoktatás indikátorrendszere 2023.
(
230
) Eurobarometer survey 2023:
Skills_shortages_recruitment_retention_trategies_in_SMEs_fl_5
29_factsheet_HU_hu.pdf.
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literacy, numeracy and problem solving, showed
Hungarian adults performing below the EU
average in all domains. The 16-24 age group who
are still enrolled in initial education or have
recently completed it scored significantly below
average, signalling potential issues in the quality
of education. Almost one in four adults are low
achievers both in numeracy and literacy (24.1%
compared to 21.8% in the EU), and the impact of
the family’s educational background remains
significant in adulthood. Educational attainment
also significantly influences labour market
outcomes and wages.
Graph A12.2:
Adult learning participation and
digital skills of some vulnerable groups
70
60
market is not able to keep its highly specialised IT
experts.
The high energy intensity of the Hungarian
economy will require substantial investment
in reskilling and upskilling to ensure a fair
green transition.
In 2024, labour shortages were
reported in Hungary for several occupations
requiring specific skills related to the green
transition, including refuse sorters, insulation
workers and mixed crop growers (
231
). The share of
employees who participated in education and
training in energy intensive industries slightly
increased, from 6.3% in 2022 to 8.4% in 2024,
but was still below the EU average of 11.7%.
Nevertheless, many Hungarians consider that their
skills enable them to contribute to the green
transition (66% vs 54% in the EU) (
232
).
Maintaining a high adult participation rate in
learning could be an opportunity to increase
the competitiveness of Hungary’s workforce,
but vulnerable groups need targeted support.
In 2022, Hungary was among the best performers
in the EU (39.5%) in adult participation in learning,
with 62.2% of adults participating in learning in
the previous 12 months. This is higher than the
national target of 60% by 2030. Adults with a low
level of educational attainment, unemployed
people, and people outside the labour force
participate less in learning (42.1%, 20.7% and
18.6%, respectively). A regulation on short courses
leading to micro-credentials and their certification
was published at the end of 2024 to address skills
shortages, and the piloting of individual learning
accounts between 2025 and 2027 has been
announced. The law on adult training and its
implementing decree sets out the main features of
a new adult learning fund (to be operational as
from 2027), which should finance policy
development, labour market forecasting and large-
scale training. Details on how individuals,
especially the most vulnerable, can benefit from
the fund as well as the source of funding are not
yet available.
50
40
30
20
10
0
Total
Persons with low Persons outside
educational
the labour force
attainment
Unemployed
persons
Participation rate in education and training in the past 12 months (2022, %)
Individuals with basic or above basic overall digital skills (2023, %)
Source:
Eurostat; Adult Education Survey 2022 (excluding
guided on-the-job training).
The adult population’s
digital skills are above
the EU average, but some vulnerable groups
lag behind.
In 2023, 58.9% of the population had
at least a basic level of digital skills, a sharp rise
from 49.1% in 2021 and surpassing the EU
average of 55.6%. Those most vulnerable in the
labour market
–
namely those outside the labour
force, adults with lower secondary education or
less, and unemployed people
–
still lag behind the
average (29.4%, 33.4% and 44.1%, respectively).
Those working in agriculture, forestry and fishery
as well as manual workers also perform well
below the national average (41.4% and 45.5%
respectively). Looking at high levels of digital skills,
the share of ICT graduates was above the EU
average in Hungary, including among women
(6.8% and 1.2% vs 4.5% and 1.0% in the EU).
However, the low share of ICT specialists in
employment (4.2% vs 4.8% in the EU in 2023),
with one of the lowest shares of female IT
specialists, suggests that the Hungarian labour
(
231
) Source: European Labour Authority,
EURES Report on
labour shortages and surpluses 2024,
2025, based on data
from EURES National Coordination Offices. Skills and
knowledge requirements align with the ESCO taxonomy on
skills for the green transition, with examples analysed using
the ESCO green intensity index.
(
232
) Eurobarometer - 97.4.
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ANNEX 13: SOCIAL SCOREBOARD
Table A13.1:Social
Scoreboard for Hungary
Social Scoreboard for Hungary
Adult participation in learning (during the last 12 months, excl. guided on
the job training, % of the population aged 25-64, 2022)
Early leavers from education and training
(% of the population aged 18-24, 2024)
Equal opportunities and
access to the labour market
Share of individuals who have basic or above basic overall digital skills
(% of the population aged 16-74, 2023)
Young people not in employment, education or training
(% of the population aged 15-29, 2024)
Gender employment gap
(percentage points, population aged 20-64, 2024)
Income quintile ratio
(S80/S20, 2024)
Employment rate
(% of the population aged 20-64, 2024)
Dynamic labour markets
and fair workingconditions
Unemployment rate
(% of the active population aged 15-74, 2024)
Long term unemployment
(% of the active population aged 15-74, 2024)
Gross disposable household income (GDHI) per capita growth
(index, 2008=100, 2023)
At risk of poverty or social exclusion (AROPE) rate
(% of the total population, 2024)
At risk of poverty or social exclusion (AROPE) rate for children
(% of the population aged 0-17, 2024)
Impact of social transfers (other than pensions) on poverty reduction
(% reduction of AROP, 2024)
Social protection and
inclusion
Disability employment gap
(percentage points, population aged 20-64, 2024)
Housing cost overburden
(% of the total population, 2024)
Children aged less than 3 years in formal childcare
(% of the under 3-years-old population, 2024)
Self-reported unmet need for medical care
(% of the population aged 16+, 2024)
Critical situation
To watch
Weak but improving Good but to monitor
On average
Better than average
Best performers
62,2
10,3
58,9
10,9
7,9
4,26
81,1
4,5
1,5
161,0
20,2
21,1
35,0
27,2
8,5
16,5
1,0
(1) Update of 5 May 2025. Members States are categorised based on the Social Scoreboard according to a methodology agreed
with the EMCO and SPC Committees. Please consult the Annex of the Joint Employment Report 2025 for details on the
methodology (https://employment-social-affairs.ec.europa.eu/joint-employment-report-2025-0).
Source:
Eurostat
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ANNEX 14: HEALTH AND HEALTH SYSTEMS
Hungary’s health system faces significant
challenges. These need to be addressed if the
country is to improve the health of its
population and social fairness, while
boosting the competitiveness of the
economy.
These challenges include low life
expectancy, linked to high treatable and
preventable mortality, and geographical disparities
in the accessibility of healthcare. Both issues are
associated with suboptimal cost-effectiveness and
funding of the health system, an insufficient focus
on disease prevention and outpatient care, and
shortages of healthcare workers.
Life expectancy at birth in Hungary
rebounded above its pre-COVID-19 level but
was still among the lowest in the EU in 2023.
Women are expected to live 6.5 years longer than
men. That said, they can only expect to live around
2.6 years longer than men in good health.
Mortality rates due to preventable and treatable
causes are among the highest in the EU,
suggesting shortcomings in the effectiveness of
the health system (see Annex 15).
Graph A14.1:
Life expectancy at birth, years
81.3
76.5
80.4
75.5
80.1
(
233
). Hungary participates in several joint actions
funded by EU4Health aimed at reducing the
burden of cardiovascular diseases, cancer,
diabetes and respiratory diseases. Between 2022
and 2040, Hungary’s working age population is
forecast to shrink by 0.4% every year as a result
of lower birth rates (EU-level projection: 0.3%).
Graph A14.2:
Treatable mortality
per 100 000 population
176.0
91.3
173.2
89.2
179.6
91.7
188.9
178.4
93.3
89.7
2018
2019
2020
Hungary
EU
2021
2022
Age-standardised death rate
(mortality that could be
avoided through optimal quality healthcare)
Source:
Eurostat (hlth_cd_apr)
80.6
76.0
81.4
76.7
74.1
2019
2020
2021
Hungary
EU
2022
2023
Source:
Eurostat (demo_mlexpec)
Shortcomings in the effectiveness of the
health system also negatively impact
Hungary’s workforce, productivity and
competitiveness.
In Hungary, mortality at
working age as a proportion of total mortality is
significantly higher than the EU average,
exacerbating the effects of population ageing on a
shrinking labour force. The rate of potential
productive life years lost due to non-
communicable diseases such as cancer and
diseases of the circulatory system (‘cardiovascular
diseases’) is high compared to the rest of the EU
Hungary’s health system is strongly hospital
centred.
In 2022, health spending per inhabitant
was one of the lowest in the EU, with the largest
share going to hospital care (around 34% of total
health expenditure). This, together with a high
number of hospital beds (590 per 100 000
population in 2022, much higher than the EU
average), illustrates Hungary’s strongly hospital-
centred care model. Over-reliance on hospitals
within a health system can hamper healthcare
accessibility,
suggesting
opportunities
for
optimising the cost-effective allocation of
resources. Out-of-pocket payments account for a
greater proportion of spending on health in
Hungary than the EU average (
234
). More than half
of all out-of-pocket payments are for outpatient
pharmaceuticals. Historically, the health system in
Hungary has been underfunded: both capital
spending annually 0.2% of GDP (EU average: 0.5%
average 2016-2022) and public share of spending
on healthcare (72.6%) are among the lowest in the
EU (EU average: 81.3%). This is reflected in the
low availability of key diagnostic technology:
Hungary has among the fewest medical imaging
devices per capita in the EU. Under the Hungarian
recovery and resilience plan (RRP), around
(
233
) Update to 2022 data of analysis presented by Health at a
Glance: Europe 2016 - © OECD 2016.
(
234
) OECD/European Commission (2024),
Health at a Glance:
Europe 2024: State of Health in the EU Cycle,
pp. 186-187.
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Table A14.1:Key
health indicators
2019
Cancer mortality per 100 000 population
Mortality due to circulatory diseases per 100 000 population
Current expenditure on health, purchasing power standards, per capita
Public share of health expenditure, % of current health expenditure
Spending on prevention, % of current health expenditure
Available hospital beds per 100 000 population**
Doctors per 1 000 population*
Nurses per 1 000 population*
Mortality at working age (20-64 years), % of total mortality
Number of patents (pharma / biotech / medical technology)
Total consumption of antibacterials for systemic use,
daily defined dose per 1 000 inhabitants****
327.7
714.8
1 483
68.7
3.2
606
3.5
4.2
21.1
12
14.4
2020
320.9
731.4
1 689
70.8
3.7
601
3.1
4.2
19.9
25
11.2
2021
309.9
722.8
1 866
72.5
7.6
601
3.3
4.3
21.0
5
11.9
2022
312.2
732.1
1 867
72.6
2.9
590
3.5
4.4
19.1
8
14.4
2023
n.a.
n.a.
n.a.
71.5
n.a.
n.a.
n.a.
n.a.
18.6
8
14.2
EU average*
(latest year)
234.7 (2022)
336.4 (2022)
3 684.6 (2022)
81.3 (2022)
5.5 (2022)
444 (2022)
4.2 (2022)*
7.6 (2022)*
14.3 (2023)
29 (2023)***
20.0 (2023)
*The EU average is weighted for all indicators except for doctors and nurses per 1 000 population, for which the EU simple
average is used based on 2022 (or latest 2021) data except for Luxembourg (2017). Doctors’ density data refer to practising
doctors in all countries except Greece, Portugal (licensed to practise) and Slovakia (professionally active). Density of nurses: data
refer to practising nurses (EU recognised qualification) in most countries except France and Slovakia (professionally active) and
Greece (hospital only). **‘Available hospital beds’ covers
somatic care, not psychiatric care. ***The EU median is used for patents.
Source:
Eurostat database; European Patent Office; ****European Centre for Disease Prevention and Control (ECDC) for 2023.
EUR 1.3 billion is planned for health reforms and
supporting investments. In addition to the RRP,
significant
funding
for
healthcare
(EUR 154 million) is planned under the EU
cohesion policy funds in 2021-2027. These funds
aim to strengthen and modernise inpatient care
and its infrastructure, bolstering the provision of
services by the hospital network, and
strengthening the integration of primary and
preventive care by setting up group practices of
general practitioners.
Hungary places insufficient focus on disease
prevention.
Spending on prevention in Hungary is
low. In 2022, it accounted for 2.9% of total
spending on health, much lower than the EU
average of 5.5%. Cardiovascular diseases and
cancer remain the leading causes of death, with
mortality rates among the highest in the EU. In
2022, breast cancer, cervical cancer and colorectal
cancer screening rates were below 30% (
235
).
Suicide rates have decreased over time in Hungary
but are still among the highest in the EU. Long
waiting lists have been reported, delaying access
to mental health services and other types of care.
Behavioural risk factors are a key driver of
mortality in Hungary. Alcohol consumption is
above the EU average, smoking rates among the
highest in the EU, and consumption of fruit and
vegetables, and levels of physical activity outside
working time among the lowest in the EU (
236
). A
public health policy strategy for the period 2023-
2033 has been adopted setting key objectives and
tasks.
(
235
)
Health at a Glance: Europe 2024,
pp. 162.
(
236
)
Health at a Glance: Europe 2024,
Chapter 4.
Persistent shortages of health professionals
limit the provision of healthcare.
For several
years, the density of doctors in Hungary (3.5 per
1 000 population in 2021) has been below the EU
average of 4.2 per 1 000. Hungary has one of the
lowest shares of general practitioners in the EU
(12% vs an EU average of 21%). Moreover, the
uneven geographical distribution of doctors is a
major barrier to access to care in peripheral
regions (see Annex 17). The Hungarian government
has incentivised doctors to work in the public
sector, granting them a 120% salary increase over
three years (2021-2023) (
237
). It also banned
Informal payments.
Hungary had only 4.4 practising nurses per
1 000 population in 2022, one of the lowest
rates in the EU (EU average: 7.6 per 1 000
population), posing a significant challenge to
the health system and more broadly, the care
system (see Annexes 10 and 12) (
238
).
Hungary
has among the EU’s lowest shares of nurses aged
between 25 and 34 and the highest shares of
nurses aged between 45 and 54, raising concerns
about the long-term accessibility of health
services. The Hungarian government has
substantially improved the remuneration of nurses
in recent years to increase attractiveness and
retention in the profession. It announced further
remuneration increases in 2024 - 20% in nominal
(
237
)
Health at a Glance: Europe 2024,
pp. 190-191.
(
238
) Under the newly adopted Eurostat definition of nurses (in line
with Directive 2005/36/EC on the recognition of professional
qualifications) nurse density numbers are significantly lower
than those arrived at when using a broader definition, for
example that used for OECD health statistics.
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terms. The aim is to have the average basic salary
of nurses reach 37% of the average basic salary
of doctors (
239
). Nevertheless, between 2020 (Q1)
and 2024 (Q3) employment in healthcare services
dropped by 3.4% (compared to an EU-level
increase of 11.4%). Hungary participates in the
HEROES joint action (
240
) under EU4Health, through
which EU countries share knowledge and
experience on health workforce planning.
The Hungarian health system’s potential to
drive innovation and foster industrial
development in the EU medical sector is not
being fully exploited.
Hungary is among the EU
countries that report the lowest public spending on
health research and development. This is reflected
in the low number of European patents generated:
eight in 2023 in the combined areas of
pharmaceuticals, biotechnologies and medical
devices (vs an EU-level median of 29) (
241
). A
moderate amount of clinical trials are held in
Hungary (
242
).
Hungary aims to scale up the digitalisation
of its health system, with support from EU
programmes.
The shares of people accessing
their personal health records online and of people
using online health services (excluding phone)
instead of in-person consultations increased in
2024 compared to 2020, yet there is still room for
further deployment (see Annex 6). Moreover, major
differences in patient use have been observed
depending on their socio-economic background.
Significant planned investments under the RRP aim
to boost the digital transformation of the
healthcare sector in Hungary. Measures focus on:
(i) the development of information technology
infrastructure in healthcare institutions; (ii) the
development of telemedicine solutions; (iii) the
rollout of enhanced mobile health applications;
and (iv) a remote health monitoring system for
older people. Hungary participates in several
EU4Health-funded projects which facilitate the
implementation of the European Health Data
Space and strengthen digital infrastructure in
Hungary (
243
).
(
239
)
Health at a Glance: Europe 2024,
pp. 196-197.
(
240
)
JA HEROES | Health workforce planning project.
(
241
)
European Patent Office,
Data to download | epo.org.
(
242
)EMA
(2024),
Monitoring the European clinical trials
environment,
p. 9
.
243
( ) DQ4HDAB - Enhancing Data Quality for Use by the Health
Data Access Body, Xt-EHR - Extended EHR@EU Data Space
for Primary Use, EHDS2 Pilot - Pilot for a European Health
Data Space on secondary use of health data, TEHDAS2 -
Second Joint Action Towards the European Health Data
Space
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HORIZONTAL
ANNEX 15: SUSTAINABLE DEVELOPMENT GOALS
This Annex assesses Hungary’s progress on
the Sustainable Development Goals (SDGs)
along the dimensions of competitiveness,
sustainability,
social
fairness
and
macroeconomic stability.
The 17 SDGs and their
related indicators provide a policy framework
under
the UN’s 2030 Agenda for Sustainable
Development. The aim is to end all forms of
poverty, fight inequalities and tackle climate
change and the environmental crisis, while
ensuring that no one is left behind. The EU and its
Member States are committed to this historic
global framework agreement and to playing an
active role in maximising progress on the SDGs.
The graph below is based on the EU SDG indicator
set developed to monitor progress on the SDGs in
the EU.
In relation SDGs on
competitiveness,
Hungary
is improving but needs to catch up with the
EU average on all of them (SDGs 4, 8 and 9).
The country is achieving mixed results on industry,
innovation and infrastructure (SDG 9), performing
Graph A15.1:
Progress towards the SDGs in Hungary
well on sustainable infrastructure but being
outperformed on R&D indicators, in particular on
patent applications to the European Patent Office
(29 per million inhabitants in 2024; EU average:
156) and expenditure on R&D (1.38% of GDP in
2023; EU average: 2.24%). Its investment share of
GDP (SDG 8; 25.6% in 2023) continues to be
above the EU average (21.7%). With the exception
of the gender gap, Hungary outperforms the EU
average on all employment indicators (SDG 8), but
on decent work indicators, it could do better on
fatal accidents at work (1.70 out of every 100 000
workers in 2022). The recovery and resilience plan
(RRP) includes measures supporting the
development of research and development
cooperation and boosting digitalisation in
education, public administration, and the health,
transport and energy sectors.
While Hungary is improving (SDGs 7, 9, 13
and 15) or is performing well (SDGs 15 and
11) on some SDGs related to
sustainability,
it
is moving away from others (SDGs, 2, 11 and
For detailed datasets on the various SDGs, see the annual Eurostat report ‘Sustainable
development in the European Union’;
for
details on extensive country-specific data on the short-term progress of Member States:
Key findings
–
Sustainable development
indicators - Eurostat (europa.eu).
A high status does not mean that a country is close to reaching a specific SDG, but signals that it
is doing better than the EU on average. The progress score is an absolute measure based on the indicator trends over the past
five years. The calculation does not take into account any target values, as most EU policy targets are only valid for the aggregate
EU level. Depending on data availability for each goal, not all 17 SDGs are shown for each country.
Source:
Eurostat, latest update of 28 April 2025. Data refer mainly to the period 2018-2023 or 2019-2024. Data on SDGs may
vary across the report and its annexes due to different cut-off dates.
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12) and needs to catch up with the EU
average (SDGs 2, 7, 9, 12 and 13).
On SDG 12
(Responsible consumption and production),
Hungary is moving further away from the EU
average. There is room for improvement on the
circular economy, where the circular material use
rate is low (HU: 5.9%, EU: 11.8%; see also Annex
9) and has decreased from 6.9% in 2018. Other
contributing factors are the small environmental
goods and services sector, passenger car
emissions (decreasing more slowly than the EU
average) and low energy productivity. On a
positive note, Hungary’s net greenhouse gas
emissions (SDG 13; 5.1 tonnes per capita in 2023)
continue to be below the EU average (6.8 tonnes
per capita). Moreover, the net greenhouse gas
emissions from land use and forestry have
decreased and remain below well the EU average.
The RRP includes measures to facilitate the
development of renewable energy and improve the
sustainability of transport, water management and
the circular economy.
On
social fairness,
Hungary needs to catch up
with the EU average on all SDGs (SDGs 3, 4,
5, 7, 8 and 10) apart from SDG 1 where
Hungary is only slightly above the EU
average. While Hungary is moving away from
SDG 10, Hungary is improving on several
SDGs (SDGs 1, 3, 4, 5, 7 and 8) on fairness.
While Hungary has made progress on most
indicators related to SDG 1 (No poverty), Hungary
is still below EU average on severe material, social
and housing deprivation rate. On SDG 3 (Good
health and well-being), Hungary needs to catch up,
primarily by reducing the obesity rate and
avoidable mortality. While the unadjusted gender
pay gap (SDG 5) decreased, on average, to 12.0%
of men’s average gross hourly earnings in the EU
as a whole, it widened by 3.6 percentage points to
17.8% in Hungary in the five years preceding
2023. Moreover, Hungary continues to lag far
behind the EU average on indicators related to
women
in
leadership
positions
(senior
management positions and seats in the national
parliament). The negative progress on SDG 10
(Reduced Inequalities) is mainly driven by the
worsened inequalities within the country, as
evidenced by the increase in the urban-rural gap
for risk of poverty or social exclusion. The RRP
supports social development in disadvantaged
settlements and aims to improve higher and
vocational education and modernise the health
sector.
Hungary is improving only on SDG 8 and still
needs to catch up with the EU average on all
SDGs related to
macroeconomic stability
(SDGs 8, 16, 17).
To catch up with the rest of the
EU on SDG 16 (Peace, justice and strong
institutions), Hungary has room for considerable
improvement on general government total
expenditure on law courts, as well as on the
worsening perceived independence of the justice
system and Corruption Perceptions Index. On SDG
17 (Partnerships for the goals), Hungary continues
to be below the EU average for global partnership
indicators. The RRP includes reforms to improve
public finances, measures in areas related to the
rule of law and the anti-corruption framework, and
reforms to strengthen judicial independence.
As the SDGs form an overarching framework, any
links to relevant SDGs are either explained or
depicted with icons in the other annexes.
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ANNEX 16: CSR PROGRESS AND EU FUNDS IMPLEMENTATION
Hungary faces structural challenges in a
wide range of policy areas, as identified in
the country-specific recommendations (CSRs)
addressed to the country as part of the
European Semester.
They refer, among other
things, to the budgetary framework, long-term
sustainability of the pension system, business
environment,
taxation,
energy
efficiency,
renewable energy generation, fossil fuel subsidies,
water resilience, education, skills, social policy,
healthcare and housing.
The Commission has assessed the 2019-2024
CSRs considering the policy action taken by
Hungary to date and the commitments in its
recovery and resilience plan (RRP).
At this
stage, Hungary has made
at least ‘some progress’
on 20% of the CSRs (
244
),
and ‘limited progress’ on
65% (Table A16.2).
EU funding instruments provide considerable
resources to Hungary by supporting
investments and structural reforms to
increase competitiveness, environmental
sustainability and social fairness, while
helping to address challenges identified in
the CSRs.
In addition to the EUR 6.5 billion grant
and 3.9 billion loan funding from the Recovery and
Resilience Facility (RRF) in 2021-2026, EU
cohesion policy funds (
245
) have allocated EUR 21.7
billion (
246
) to Hungary (amounting to EUR 26.1
billion with national co-financing) for 2021-2027
(
247
) to boost regional competitiveness and growth.
Support from these instruments combined
represents around 16.25% of 2024 GDP (
248
). The
contribution of these instruments to different
policy objectives is outlined in Graphs A16.1 and
A16.2. This substantial support comes on top of
financing provided to Hungary under the 2014-
2020 multiannual financial framework, which
financed projects until 2023 and has had
significant benefits for the economy and
Hungarian society. Project selection under the
2021-2027 cohesion policy programmes has
progressed, however significant volumes of
investment are yet to be mobilised. Access to
funding is limited by non-fulfilled enabling
conditions and pending issues under the
conditionality procedure. Solving these outstanding
issues is key to the successful implementation of
cohesion policy programmes in Hungary. Hungary
has still not fulfilled the horizontal enabling
condition on the Charter of Fundamental Rights in
regard to academic freedom, LGBTI issues linked
to the so-called child protection law and the
treatment of asylum seekers. There are also three
thematic enabling conditions which are not yet
fulfilled, blocking payments to Hungary.
The Hungarian RRP contains 93 investments
and 73 reforms to stimulate sustainable
growth and address social and regional
divides.
A year before the end of the RRF
timespan, no disbursements have taken place and
no RRP milestones and targets have been
confirmed as implemented (
249
). Progress is
hindered, in particular, by the lack of effective
mechanisms
to protect the EU’s financial interests,
persistent problems related to the anti-corruption
framework, weaknesses in control procedures, and
competition in public procurement, and a lack of
clarity in investment objectives, and uncertainty
and delays in the implementation of investments.
Hungary needs to urgently accelerate efforts to
ensure completion of RRP measures by 31 August
2026.
Hungary also receives funding from several
other EU instruments,
including those listed in
(
247
) European territorial cooperation (ETC) programmes are
excluded from the figure.
(
248
) RRF funding includes both grants and loans, where
applicable. GDP figures are based on Eurostat data for 2024.
(
249
) As of mid-May 2025, Hungary has not yet submitted any
payment requests.
(
244
) 2% of the 2019-2024 CSRs have been fully implemented,
2% substantially implemented, and some progress has been
made on 16%.
(
245
) In 2021-2027, cohesion policy funds include the European
Regional Development Fund, the Cohesion Fund, the
European Social Fund Plus and the Just Transition Fund. The
information on cohesion policy included in this annex is
based on adopted programmes with the cut-off date of 5
May 2025.
(
246
) EU 21.7 billion is the initial EU allocation to Hungary,
reflecting decisions adopted on 22 December 2022. This
amount has been reduced by EUR 1.04 billion, corresponding
to commitments suspended in 2022 that could not be
entered in the EU general budget by the end of 2024. This
was due to the application, in the absence of remedies taken
by Hungary, of Article 2(1) of Council Implementing Decision
(EU) 2022/2506 of 15 December 2022 and pursuant to
Article 7(3) of Regulation (EU, Euratom) 2020/2092 on a
general regime of conditionality for the protection of the
Union budget. As of 1 January 2025, the total EU funding
available to Hungary under cohesion policy 2021-2027
programmes is EUR 20.7 billion.
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Table A16.1. Most notably, the common
agricultural policy (CAP) provides Hungary with an
EU contribution of EUR 8.5 billion under the CAP
strategic plan 2023-2027 (
250
). Operations
amounting to EUR 1.1 billion (
251
) have been signed
under the InvestEU instrument backed by the EU
guarantee, improving access to financing for
riskier operations in Hungary.
Graph A16.1:
Distribution of RRF funding in
Hungary by policy field
Green transition
Digital transformation
Smart, sustainable and
inclusive growth
Social & territorial cohesion
Health & resilience
Next generation
(1) Each RRP measure helps achieve the aims of two of the
six policy pillars of the RRF. The primary contribution is shown
in the outer circle, while the secondary contribution is shown
in the inner circle. Each circle represents 100% of the RRF
funds. Therefore, the total contribution to all pillars displayed
on this chart amounts to 200% of the RRF funds allocated.
Source:
European Commission
environment.
The
European
Regional
Development Fund (ERDF) is supporting
investments in both productive assets and
intangibles in 6 600 small and medium-sized
enterprises (SMEs), generating EUR 560 million in
private investment. Grants complement significant
investment-loan programmes launched in 2024.
The ERDF also supports innovation activities for up
to 2 500 SMEs through calls published in 2024,
including small-scale organisational and process
innovation. Additionally, targeted calls and loan
programmes
are
supporting
the
digital
transformation of SMEs, including in advanced
technologies, thereby improving their level of
digital intensity. Around EUR 1 billion from the
European Social Fund Plus (ESF+) supports access
to the labour market, targeting those most in need
and young people. This helps SMEs and individuals
adapt through training, wage subsidies, workplace
safety measures and health screening. Special
focus is placed on developing skills for the green
and digital transition. Implementation includes
improving the quality of vocational education and
training by reducing early school leaving,
enhancing key competencies, modernising teacher
development and promoting apprenticeships in
new sectoral training centres.
Other
funds
are
contributing
to
competitiveness in Hungary, for instance
through open calls.
The Connecting Europe
Facility has financed strategic investments for
instance in enhancing connectivity, sustainability,
and efficiency along the Trans-European Transport
Network (TEN-T), rail infrastructure, and the
development of alternative fuel infrastructure;
infrastructure projects that allow for energy
market integration, decarbonisation of the energy
system and security of energy supply, and the
diversification of natural gas sources and routes in
Hungary; and advancing the deployment and take
up of 5G in smart communities. Horizon Europe
has supported research and innovation from
scientific breakthroughs to scaling up innovations,
with Climate, Energy and Mobility and Food,
Bioeconomy Natural Resources, Agriculture and
Environment as top priorities in Hungary. In 2024,
the TSI provided support to accelerate climate
adaptation measures in water management, to
adapt its VAT digital reporting requirements, to
operationalise the transfer strategies for banking
resolution, to revise cost and finance parameters
in hospital care, to introduce data asset
management
in
the
tax
and
custom
administration, and to promote the mental health
Graph A16.2:
Distribution of cohesion policy
funding across policy objectives in Hungary
Smarter Europe
Greener Europe
Connected Europe
Social Europe
Europe closer to citizens
JTF specific objective
Source:
European Commission
Cohesion policy funds aim to increase the
productivity
and
competitiveness
of
Hungarian firms and improve the business
(
250
)
An overview of Hungary’s formally approved strategy to
implement the EU’s common agricultural policy
nationally
can be found at:
https://agriculture.ec.europa.eu/cap-my-
country/cap-strategic-plans/hungary_en
(
251
) Data reflect the situation on 31.12.2024.
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of youth in the field of online gambling and
gaming.
Hungary’s RRP also contains ambitious
measures
to
improve
the
business
environment and competitiveness.
Measures
are being implemented to strengthen the anti-
corruption framework and judicial independence,
reforms to improve competition in public
procurement, as well as the quality and
transparency of decision-making.
EU funds are playing a significant role in
promoting environmental sustainability and
green transition in Hungary during the
current seven-year EU budget (multiannual
financial framework).
The ERDF will deliver
transformative results by enhancing sustainability
and environmental protection. Over 313 000
residents of Hungary will benefit from improved
flood protection, while hundreds of thousands will
gain access to better water supply and wastewater
treatment. Additionally, the ERDF funding will help
protect natural habitats and cut greenhouse gas
emissions by over 0.5 million tonnes,
demonstrating the significant impact of EU
funding. Furthermore, the CAP strategic plan
2023-2027 is supporting water balance
improvement on 1 million hectares of agricultural
land. The plan allocates EUR 1.2 billion of EU
funding to environmental and climate objectives
under rural development (EAFRD) and EUR 1 billion
to eco-schemes under direct payments (EAGF).
Hungary’s RRP, including the REPowerEU
chapter, has a comprehensive set of reforms
and investments for the green transition.
Measures are being implemented to remove
regulatory obstacles and invest in grid
development to advance renewable energy use,
improve energy efficiency in private and public
building, and promote sustainable transport. The
plan currently dedicates 67.1% of the available
funds to measures that support climate objectives.
Promoting fairness, social cohesion and
improving access to basic services are
among the key priorities of EU funding in
Hungary.
ERDF support includes the catching-up
settlements programme, which enhances basic
and educational services in the
country’s 300
least-developed
settlements.
The
support
significantly contributes to increasing the
availability and quality of nursery places, adding
8 900 places across the least-developed regions.
This will help these regions retain their population,
especially young people and families. Importantly,
the ESF+ supports targeted teacher salary
increases, prioritising those disadvantaged areas,
at-risk students, and shortage subjects like STEM.
Furthermore, Hungary is dedicating EUR 1.3 billion
(25%) of its ESF+ to social inclusion and EUR 285
million (5.6%) to child poverty. This will benefit
250 000 disadvantaged people, including 100 000
children. Almost EUR 1.8 billion will go towards
supporting quality education by making teaching
more attractive. A flagship initiative targets the
300 most deprived villages with high child and
Roma populations, implementing integrated social,
education, employment and healthcare measures
locally.
Hungary’s RRP contains several reforms and
investments related to fairness and social
policies.
Measures are being implemented to
upgrade healthcare infrastructure and equipment,
improvement in health service provision. It also
contains measures to improve access to
mainstream education for disadvantaged students,
improve teachers working conditions, and
envisages expansion of early age childcare places.
The plan also has measures strengthening the
adequacy of pensions for lower-income
pensioners.
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Table A16.1:Selected
EU funds with adopted allocations - summary data (million EUR)
Selected EU funds with adopted allocations - summary data (million EUR)
Instrument/policy
RRF grants (including the RepowerEU allocation)
RRF loans
Allocation 2021-2026
6 511.7
3 918.3
Disbursed since 2021 (1)
140.1
779.5
Disbursed since 2021 (3)
(covering total payments to the
Member State on commitments
originating from both 2014-
2020 and 2021-2027
programming periods)
11 293.7
5 443.0
2 710.3
3 059.3
81.0
23.1
Instrument/policy
Allocation 2014-2020 (2)
Allocation 2021-2027
Cohesion policy (total)
European Regional Development Fund (ERDF)
Cohesion Fund (CF)
European Social Fund (ESF, ESF+) and the Youth Employment
Initiative (YEI)
Just Transition Fund (JTF)
Fisheries
European Maritime, Fisheries and Aquaculture Fund (EMFAF)
and the European Maritime and Fisheries Fund (EMFF)
Migration and home affairs
Migration, border management and internal security - AMIF,
BMVI and ISF (4)
The common agricultural policy under the CAP strategic
plan (5)
Total under the CAP strategic plan
European Agricultural Guarantee Fund (EAGF)
European Fund for Agricultural Development (EAFRD)
22 529.7
11 380.7
6 025.4
5 123.6
21 730.1
13 568.2
2 602.2
5 298.7
261.1
38.4
37.7
114.6
Allocation 2023-2027
8 454.9
6 819.8
1 635.1
224.8
70.4
Disbursements under the
CAP Strategic Plan (6)
2 773.1
2 418.5
354.6
(1) The cut-off date for data on disbursements under the RRF is 31 May 2025.
(2) Cohesion policy 2014-2020 allocations include REACT-EU appropriations committed in 2021-2022.
(3) These amounts relate only to disbursements made from 2021 onwards and do not include payments made to the Member
State before 2021. Hence the figures do not comprise the totality of payments corresponding to the 2014-2020 allocation. The
cut-off date for data on disbursements under EMFAF and EMFF is 29 April 2025. The cut-off date for data on disbursements
under cohesion policy funds, AMIF, BMVI and ISF is 5 May 2025.
(4) AMIF - Asylum, Migration and Integration Fund; BMVI - Border Management and Visa Instrument; ISF - Internal Security Fund.
(5) Expenditure outside the CAP strategic plan is not included.
(6) The cut-off date for data on EARDF disbursements is 5 May 2025. The information on EAGF disbursements is based on the
Member State declarations until March 2025. Disbursements for the Direct Payments (EAGF) started in 2024.
Source:
European Commission
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Table A16.2:Summary
table on 2019-2024 CSRs
Hungary
2019 CSR 1
Ensure compliance with the Council Recommendation of 14 June 2019 with a view to correcting the
significant deviation from the adjustment path towards the medium-term budgetary objective.
2019 CSR 2
Continue the labour market integration of the most vulnerable groups, in particular through upskilling,
and
improve the adequacy of social assistance and unemployment benefits.
Improve education outcomes and increase the participation of disadvantaged groups, in particular
Roma in quality mainstream education.
Improve health outcomes by supporting preventive health measures and strengthening primary
healthcare.
2019 CSR 3
Focus investment-related economic policy on research and innovation,
low-carbon energy,
transport infrastructure, and
waste management and
energy and resource efficiency, taking into account regional disparities.
Improve competition in public procurement.
2019 CSR 4
Reinforce the anti-corruption framework, including by improving prosecutorial efforts and access to
public information, and
strengthen judicial independence.
Improve the quality and transparency of the decision-making process through effective social dialogue
and engagement with other stakeholders and through regular, appropriate impact assessments.
Continue simplifying the tax system, while strengthening it against the risk of aggressive tax planning.
Improve competition and regulatory predictability in the services sector.
2020 CSR 1
Take all necessary measures, in line with the general escape clause of the Stability and Growth Pact,
to effectively address the COVID-19 pandemic, sustain the economy and support the ensuing recovery.
When economic conditions allow, pursue fiscal policies aimed at achieving prudent medium-term fiscal
positions and ensuring debt sustainability, while enhancing investment.
Address shortages of health workers and ensure an adequate supply of critical medical products and
infrastructure to increase the resilience of the health system.
Improve access to quality preventive and primary care services.
2020 CSR 2
Protect employment through enhanced short-time working arrangements and effective active labour-
market policies and extend the duration of unemployment benefits.
Improve the adequacy of social assistance and ensure access to essential services and
quality education for all.
2020 CSR 3
Ensure liquidity support to SMEs.
Front-load mature public investment projects and
promote private investment to foster the economic recovery.
Focus investment on the green and digital transition, in particular clean and efficient production and use
of energy,
sustainable transport,
water and waste management,
research and innovation, and
digital infrastructure for schools.
2020 CSR 4
Ensure that any emergency measures be strictly proportionate, limited in time and in line with European
and international standards and do not interfere with business activities and the stability of the
regulatory environment.
Ensure effective involvement of social partners and stakeholders in the policy-making process.
Improve competition in public procurement.
2020 CSR 5
Strengthen the tax system against the risk of aggressive tax planning.
2021 CSR 1
In 2022, maintain a supportive fiscal stance, including the impulse provided by the Recovery and
Resilience Facility, and preserve nationally financed investment.
When economic conditions allow, pursue a fiscal policy aimed at achieving prudent medium-term fiscal
positions and ensuring fiscal sustainability in the medium term.
At the same time, enhance investment to boost growth potential.
Pay particular attention to the composition of public finances, on both the revenue and expenditure
sides of the national budget, and to the quality of budgetary measures in order to ensure a sustainable
and inclusive recovery. Prioritise sustainable and growth-enhancing investment, in particular investment
supporting the green and digital transition.
Give priority to fiscal structural reforms that will help provide financing for public policy priorities and
contribute to the long-term sustainability of public finances, including, where relevant, by strengthening
the coverage, adequacy and sustainability of health and social protection systems for all.
Assessment in May 2025
Not relevant anymore
Limited progress
Limited progress
Limited progress
Limited progress
Limited progress
Limited progress
Limited progress
Some progress
Some progress
Limited progress
Limited progress
Limited progress
Limited progress
Limited progress
Some progress
Limited progress
Limited progress
No progress
Limited progress
Not relevant anymore
SDG 4, 8, 10
SDG 1, 2, 10
SDG 4, 8, 10
SDG 3, 16
SDG 9, 10, 11
SDG 7, 9, 10, 11, 13
SDG 10, 11
SDG 6, 10, 11, 12, 15
SDG 6, 7, 10, 11, 12, 15
SDG 9
SDG 16
SDG 16
SDG 8, 16
SDG 8, 10, 12, 16
SDG 9, 16
Relevant SDGs
SDG 8, 16
SDG 8, 16
Some progress
Limited progress
Limited progress
Limited progress
Limited progress
Limited progress
Some progress
Substantial progress
Some progress
Substantial progress
Limited progress
Some progress
Limited progress
Limited progress
Some progress
No progress
No progress
No progress
Limited progress
Limited progress
Limited progress
Not relevant anymore
Not relevant anymore
Not relevant anymore
SDG 3
SDG 3
SDG 1, 2, 8, 10
SDG 1, 2, 10
SDG 4
SDG 8, 9
SDG 8, 16
SDG 8, 9
SDG 7, 9, 13
SDG 11
SDG 6, 12, 15
SDG 9
SDG 4, 9, 16
SDG 16
SDG 8, 16
SDG 9
SDG 8, 16
SDG 8, 16
SDG 8, 16
Not relevant anymore
SDG 8, 16
Not relevant anymore
SDG 8, 16
(Continued on the next page)
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Table (continued)
2022 CSR 1
Limited progress
In 2023, ensure that the growth of nationally financed primary current expenditure is in line with an
overall neutral policy stance, taking into account continued temporary and targeted support to
Not relevant anymore
SDG 8, 16
households and firms most vulnerable to energy price hikes and to people fleeing Ukraine. Stand ready
to adjust current spending to the evolving situation.
Expand public investment for the green and digital transitions, and for energy security taking into
account the REPowerEU initiative, including by making use of the Recovery and Resilience Facility and
Not relevant anymore
SDG 8, 16
other Union funds.
For the period beyond 2023, pursue a fiscal policy aimed at achieving prudent medium-term fiscal
Not relevant anymore
SDG 8, 16
positions.
Improve the long-term sustainability of the pension system, while preserving adequacy in particular
Limited progress
SDG 8
through addressing income inequalities.
2022 CSR 2
Swiftly finalise the negotiations with the Commission on the 2021–2027 cohesion policy programming
Progress on the cohesion policy programming documents is
monitored under the EU cohesion policy.
documents with a view to starting their implementation.
2022 CSR 3
Limited progress
Continue the labour-market integration of the most-vulnerable groups, in particular through upskilling,
Limited progress
SDG 1, 2, 4, 8, 10
and extend the duration of unemployment benefits.
Improve the adequacy of social assistance and ensure access to essential services and adequate
Limited progress
SDG 1, 2, 10
housing for all.
Improve education outcomes and increase the participation of disadvantaged groups, in particular
Limited progress
SDG 4, 8, 10
Roma, in quality mainstream education.
Improve access to quality preventive and primary care services.
Limited progress
SDG 3
2022 CSR 4
Limited progress
Reinforce the anti-corruption framework, including by improving prosecutorial efforts and access to
Limited progress
SDG 16
public information, and
strengthen judicial independence.
Some progress
SDG 16
Improve the quality and transparency of the decision-making process through effective social dialogue,
Limited progress
SDG 16
engagement with other stakeholders and regular impact assessments.
Continue simplifying the tax system.
Limited progress
SDG 8, 10, 12
Improve regulatory predictability and competition in the services sector, in particular in retail and
No progress
SDG 9
utilities, and apply competition scrutiny systematically in business transactions.
Improve competition in public procurement.
Limited progress
SDG 9
2022 CSR 5
Limited progress
Promote reform and investment on sustainable water and waste management and the circularity of the
Limited progress
SDG 6, 12, 15
economy,
the digitalisation of businesses,
Some progress
SDG 9
green and digital skills, and
Limited progress
SDG 4
research and innovation.
Limited progress
SDG 9
2022 CSR 6
Some progress
Reduce overall reliance on fossil fuels
Limited progress
SDG 7, 9, 13
by accelerating the deployment of renewables, in particular by streamlining the permitting procedures
Some progress
SDG 7, 8, 9, 13
and the upgrading of the electricity infrastructure.
Limited progress
SDG 7, 9, 13
Diversify imports of fossil fuels by, inter alia , strengthening interconnection with the participation of
Limited progress
SDG 7, 9, 13
other countries.
Reduce the dependency on fossil fuels in buildings and transport by stepping up efforts on energy-
Some progress
SDG 7, 9, 13
efficiency measures for all, especially in residential houses
and on sustainable transport, in particular through electrification.
2023 CSR 1
Wind down the emergency energy support measures in force, using the related savings to reduce the
government deficit, as soon as possible in 2023 and 2024. Should renewed energy price increases
necessitate new or continued support measures, ensure that such support measures are targeted at
protecting vulnerable households and firms, are fiscally affordable and preserve incentives for energy
savings.
Ensure prudent fiscal policy, in particular by limiting the nominal increase in nationally financed net
primary expenditure in 2024 to not more than 4.4 %.
Preserve nationally financed public investment and ensure the effective absorption of grants under the
Facility and of other Union funds, in particular to foster the green and digital transitions.
For the period beyond 2024, continue to pursue a medium-term fiscal strategy of gradual and
sustainable consolidation, combined with investments and reforms conducive to higher sustainable
growth, in order to achieve a prudent medium-term fiscal position.
Pursue effective coordination and clear demarcation of macroeconomic policies in order to ensure fiscal
and external sustainability.
Phase out price and interest-rate caps in order to reduce distortive effects and to facilitate the smooth
transmission of monetary policy.
Target support measures in the housing sector to low-income households.
Strengthen the medium-term budgetary framework, align the preparation of annual budgets with the
budgetary year and limit discretion in the implementation of annual budgets.
Some progress
Limited progress
SDG 7, 9, 13
Limited progress
SDG 8, 16
Some progress
No progress
No progress
Limited progress
Limited progress
Limited progress
Limited progress
SDG 8, 16
SDG 8, 16
SDG 8, 16
SDG 8, 16
SDG 8
SDG 8, 10, 1
SDG 8, 16
(Continued on the next page)
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Table (continued)
2023 CSR 2
Urgently fulfil the required milestones and targets related to strengthening judicial independence and
RRP implementation is monitored through the assessment of
RRP payment requests and analysis of the bi-annual
safeguarding the protection of the financial interests of the Union in order to allow for a swift and
steady implementation of its recovery and resilience plan. Swiftly finalise the REPowerEU chapter with
reporting on the achievement of the milestones and targets,
to be reflected in the country reports. Progress on the
a view to rapidly starting the implementation thereof . Proceed with the speedy implementation of
2023 CSR 3
Limited progress
Improve the adequacy of the social assistance system, including unemployment benefits.
Limited progress
SDG 1, 2, 10
Improve access to effective active labour market measures, in particular upskilling opportunities for the
Limited progress
SDG 8, 4, 10
most disadvantaged groups,
and ensure effective social dialogue.
Limited progress
SDG 16
Improve the regulatory framework and competition in services by avoiding selective and arbitrary
administrative interventions and the use of tailor-made legislation providing undue advantage or
No progress
SDG 9, 16
disadvantage to specific companies,
by applying competition scrutiny systematically to business transactions and by reducing the use of
emergency measures to what is strictly necessary, in line with the principles of the single market and of
No progress
SDG 9, 16
the rule of law.
2023 CSR 4
Limited progress
Reduce overall reliance on fossil fuels
Limited progress
SDG 7, 9, 13
by accelerating the deployment of renewables, including wind energy, geothermal and sustainable
biomethane, in particular by streamlining permitting procedures, while conducting regular environmental
impact assessments, and by creating a supportive and predictable regulatory environment.
Phase out subsidies for fossil fuels.
Reform the rules on the balancing of the energy market and tariff setting in order to allow for cost
recovery and an optimum use of the grid.
Where necessary, upgrade the electricity infrastructure, including grid and storage capacities.
Diversify imports of fossil fuels in order to significantly decrease dependence on Russia, including by
strengthening cooperation with other Member States, including, where necessary, on infrastructure.
Improve energy efficiency, in particular in buildings, and continue efforts to reduce overall gas
consumption.
Adjust the current system of regulated energy prices in order to encourage energy saving while
providing targeted support for low-income households.
Step up policy efforts aimed at the provision and acquisition of skills and competences needed for the
green transition.
2024 CSR 1
Submit the medium-term fiscal-structural plan in a timely manner.
In line with the requirements of the reformed Stability and Growth Pact, limit the growth in net
expenditure 26 in 2025 to a rate consistent with, inter ali a, putting the general government debt on a
plausibly downward trajectory over the medium term and reducing the general government deficit
towards the 3% of GDP Treaty reference value.
Wind down the emergency energy support measures before the 2024/2025 heating season.
Pursue effective coordination and clear demarcation of macroeconomic policies to ensure fiscal and
external sustainability.
Phase out remaining price and interest rate caps to reduce distortive effects and facilitate the smooth
transmission of monetary policy.
Target support measures in the housing sector to low-income households.
Strengthen the medium-term budgetary framework, align the preparation of annual budgets with the
budgetary year and limit discretion in the implementation of annual budgets.
2024 CSR 2
In light of prolonged delays, significantly accelerate the implementation of cohesion policy programmes
and the recovery and resilience plan, including the REPowerEU chapter, ensuring completion of
reforms and investments by August 2026, by swiftly implementing the necessary measures to ensure
the protection of the EU’s financial interests and resolving pending issues on enabling conditions. In the
context of the mid-term review of cohesion policy programmes, continue focusing on the agreed
priorities, taking action to better address poverty, focusing on energy poverty and the least developed
districts and municipalities, and improve the smart specialisation strategy, while considering the
opportunities provided by the Strategic Technologies for Europe Platform initiative to improve
competitiveness.
2024 CSR 3
Improve the regulatory framework and enhance competition in product markets and services by
avoiding arbitrary administrative interventions and the selective use of tailor-made legislation providing
undue advantage or disadvantage to specific companies,
by applying competition scrutiny systematically to business transactions and by reducing the use of
emergency measures to what is strictly necessary, in line with the principles of the single market and
the rule of law.
Improve the adequacy of social assistance and unemployment benefits.
Improve educational attainment levels as well as access to effective active labour market measures, in
particular upskilling and reskilling opportunities for the most disadvantaged groups, and
ensure effective social dialogue.
2024 CSR 4
Reduce overall reliance on fossil fuels, accelerate the diversification of gas supply towards non-Russian
sources, and
take steps to phase out fossil fuel subsidies.
Some progress
No Progress
Limited progress
Limited progress
Limited progress
Limited progress
Limited progress
Limited progress
Some progress
Full Implementation
Full Implementation
Limited progress
Limited Progress
Limited progress
Limited progress
Limited progress
SDG 7, 8, 9, 13
SDG 12, 13
SDG 7, 8, 9
SDG 7, 8, 9
SDG 7, 8, 9
SDG 7, 8, 9
SDG 7, 13, 1, 10
SDG 4, 7, 13
SDG 8, 16
SDG 8, 16
SDG 8, 16
SDG 8, 16
SDG 8
SDG 1, 8, 10
SDG 8, 16
RRP implementation is monitored through the assessment of
RRP payment requests and analysis of the bi-annual
reporting on the achievement of the milestones and targets.
Progress on the cohesion policy is monitored in the context of
the Cohesion Policy of the European Union.
Limited progress
No progress
SDG 9, 16
No progress
Limited progress
No progress
Limited progress
Limited progress
Limited progress
No progress
SDG 9, 16
SDG 1, 2, 10
SDG 4, 8, 10
SDG 16
SDG 7, 8, 9
SDG 12, 13
Source:
European Commission
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ANNEX 17: COMPETITIVE REGIONS
While persistent regional disparities are
present in Hungary, significant opportunities
exist for growth and regional convergence,
provided there is also a positive change in
the business and institutional environment.
Several regions show promising potential in high-
tech sectors and knowledge-intensive services,
including electromobility, pharmaceuticals, and ICT,
in addition, other regions well-positioned to
leverage green technologies, including geothermal
energy. For this to happen however, further
investments in education, digital transformation,
R&D, energy and access to services are necessary,
while capitalizing on regional specializations.
Despite growth in the last decade, the gap
between the capital region and the other
regions is both substantial and persistent.
In
2023, real GDP per head in Budapest
corresponded to 168% of the EU average, while it
remained below 70% in all other NUTS 2 regions.
Észak-Alföld and Észak-Magyarország remain the
poorest regions of the country, with GDP per head
at 49 and 48% of the EU average.
Though all regions grew faster than the EU-
27
average
in
2014-2023,
internal
convergence is progressing slowly.
Except for
Budapest and Pest, the other regions are growing
more slowly than the national average. This shows
that not only the gap with the capital region is
increasing, but also that the gaps between
different non-capital regions are becoming
noteworthy.
Regional differences in human capital (
252
),
innovation capacities, and digital and
technological transformation significantly
influence productivity patterns across
Hungary.
Employment in high-tech sectors is in
general above the EU average in Hungary.
In
Budapest, 13.0% of employment is in high-tech
sectors, and the figure is also high in Pest (8.5%),
Közép-Dunántúl
(6.6%),
Észak-Magyarország
(5.0%) and Észak-Alföld (4.7%), all higher or close
to the EU average (5.2%), demonstrating these
regions' strong position in these sectors.
Employment in knowledge-intensive services
lags behind the EU average but is still near
the national average (37.2%) in the four
least developed regions, which reveals
promising opportunity for growth.
Participation
in education and training also exceeded the
national average in the four least developed
regions, which can contribute to improving their
competitiveness.
Graph A17.1:
Labour productivity per hour worked
45
40
2015 EUR per hour worked
35
30
25
20
15
10
5
0
Competitiveness
Regional economic disparities are primarily
driven by differences in productivity
performance
across
counties.
While
productivity per hour worked in Budapest and Pest
reached 75-80% of the EU average, other regions
were below the national average with Észak-Alföld
laging significantly behind Despite these gaps, the
post-2013 period has seen most counties
achieving productivity growth rates above the EU
average, with Dél-Alföld and Pest performing
particularly strongly, while performance was lower
in Dél-Dunántúl and Észak-Alföld.
2015
2012
2013
2014
2016
2017
2018
2019
2020
2021
Other NUTS2 regions
Capital region
National average
2022
EU27
Unit: Real GDP per hour worked (EUR, 2015 prices)
Source:
ARDECO (JRC)
Despite progress, outside of Budapest and
Pest county, less than 25% of the population
aged 25-64 had a high level of education in
2024 (EU: 36.1%).
The number of people having
a low level of education was significantly above
the national average in Észak-Magyarország,
(
252
) Human capital encompasses knowledge, skills and
competences, highlighting the importance of education,
training and experience in building a workforce that drives
economic growth, innovation and productivity.
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Table A17.1:Selected
indicators at regional level in Hungary
GDP per
head
(PPS)
Real
Employment
Productivity - productivity
in high-
GDP per hour
growth
technology
worked (PPS) (per hour
sectors
worked)
Population
Participation
with low
in lifelong
educational
learning
attainment
At-risk-of-
poverty or
social
exclusion
Population
growth
Index
EU-27 = 100
Index
EU-27 = 100
Average
annual
% change
% of total
employment
Average
annual
change
per 1000
residents
2014-2023
% of
population
aged 25-64
% of
population
aged 25-64
% of total
population
2023
European Union (27 MS)
Hungary
Budapest
Pest
Közép-Dunántúl
Nyugat-Dunántúl
Dél-Dunántúl
Észak-Magyarország
Észak-Alföld
Dél-Alföld
100
77
168
65
67
68
51
48
49
54
2022
100
70
75
80
65
68
65
64
62
64
2013-2022
0.9
1.7
1.1
2.8
1.7
1.8
1.4
1.9
1.5
2.3
2024
5.2
6.7
13.0
8.5
6.6
4.0
3.3
5.0
4.7
2.6
2024
13.3
11.8
15.5
10.8
9.3
7.4
11.2
12.3
12.0
13.0
2024
19.6
11.9
3.3
8.0
12.1
10.0
16.8
20.1
17.9
13.1
2024
21.0
20.2
12.7
20.3
11.6
13.4
23.3
29.9
26.8
24.8
1.7
-2.7
-2.8
9.1
-1.2
0.2
-7.3
-8.2
-5.6
-6.9
Source:
Eurostat and JRC
Észak-Alföld and Dél-Dunántúl, indicating a barrier
to productivity growth. This indicates that targeted
investments in education and skills in these
regions would be beneficial to lay the foundations
for improving their competitiveness.
On the digital transformation of enterprises,
whereas most regions lag behind the EU
average, the rate of businesses using
advanced digital technologies reached or
exceeded the EU average in certain fields.
These included data analytics in all regions and
the use of AI in Dél- and Közép-Dunántúl. In
addition, the high rate of access to broadband
connection across the country provides an
opportunity for growth based on digital
technologies, including in services.
Budapest was the only region with higher
investments in R&D (2.3% of GDP) than the
EU average (2.28%) in 2022.
Közép-Dunántúl
and Dél-Alföld also surpassed the other regions in
terms of R&D expenditure, pointing to their
potential in innovation-driven growth. The other
five regions lag significantly behind in terms of
R&D expenditure, which constrains their growth
potential.
There is significant potential in regional
specialisation, building on the competitive
advantages of regions.
Industry already makes
a significantly above-average contribution to
regional GVA in Komárom-Esztergom,
Fejér, Győr-
Sopron-Moson, Heves and Borsod-Abaúj-Zemplén
counties (between 33% and 42%, compared to
20.1% in the EU). This can positively impact real
productivity growth, provided these regions can
also move towards higher value-added activities,
advanced technologies and promoting business
R&D and innovation in these sectors.
Some counties
–
Pest, Csongrád-Csanád,
Győr-Moson-Sopron,
Hajdú-Bihar, Baranya
and Borsod-Abaúj-Zemplén - show potential
to develop growth trajectories built around
knowledge-based activities, including the
development
of
ecosystems
and
internationalisation.
This
includes
electromobility (inter alia in Győr-Moson-Sopron),
the pharmaceutical industry and agriculture
(Hajdú-Bihar), the health and biotechnology
industry (Csongrád-Csanád) and ICT (Veszprém). In
the remainder of counties, improving the
innovation activities of small to medium-sized
enterprises could pave the way towards improving
their productivity.
Green technology has the potential to drive
growth in several regions, with the potential
to scale up at the level of the single market,
drawing
on
these
regions'
natural
endowments and human and technological
capacities.
All regions except Nyugat-Dunántúl
and Közép-Dunántúl have unique potential at
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global level for geothermal energy production and
associated activities, which is a strategic
opportunity. Észak-Alföld has a relatively stronger
profile in green transition, as do Dél-Alföld, Dél-
Dunántúl and Pest in digital transition, indicating
focuses for investment. In addition, green
agriculture and energy technology companies have
already demonstrated promising results in several
regions, for example in Észak- and Dél-Alföld, as
have environmental technology (e.g. waste or
water management) companies in Budapest, Pest
and Közép-Dunántúl.
However, one-sided specialisation also
entails risks.
These include high exposure to
sector-specific crises, especially as regards the car
industry, and potentially increased pressure on the
environment, as is the case with the recently
opened battery factories, especially in Észak-
Alföld, Pest and Nyugat-Dunántúl. This highlights
the importance of diversification in the regions
concerned.
Disparities in demographical trends also
affect the growth potential of regions.
With
the exception of Pest, population declined is all
regions between 2014 and 2023 - reaching a
significant contraction of 8.2 per 1 000 residents
in Észak-Magyarország, 7.3 in Dél-Dunántúl, 6.9
Dél-Alföld and 5.6 in Észak-Alföld.
Map A17.1:
Regional Competitiveness Index 2.0,
2022 edition
Index 2024 (
253
)), in particular in Észak-
Magyarország and Észak-Alföld.
This is also
reflected in the challenges affecting the
subnational business environment (
254
), especially
as concerns utility services and the effective
implementation of regulations in place.
Furthermore, the decreasing autonomy of
municipalities significantly reduces their ability to
create a competitive local business environment.
All regions except Budapest fall below the
EU-27 average in terms of competitiveness.
Hungary lags behind European peers when it
comes to competitiveness in a broad sense,
including and beyond quality of government, as
measured by the Regional Competitiveness Index
2.0. Nevertheless, the Western regions of Közép-
Dunántúl and Nyugat-Dunántúl outperform other
regions, rooted in higher levels of education and
labour market efficiency
Social fairness
Labour market conditions are generally
better or comparable to the EU average in all
Hungarian regions.
In 2024, the unemployment
rate varied from 2.6% in Budapest to 7.3% in Dél-
Dunántúl. Regional youth unemployment rates
ranged from 7.9% in Közép-Dunántúl to 22.8% in
Dél-Dunántúl in 2024. In addition, unemployment
and youth unemployment rates reflect urban-rural
divides.
The risk of poverty and social exclusion
varies across regions and is more
pronounced in rural areas (see Annex 11).
In
2024, 29.9% of the population in Észak-
Magyarország were at risk of poverty or social
exclusion, and the figure was also well above the
national average (20.2%) in Észak-Alföld (26.8%)
and Dél-Dunántúl (23.3%). In these regions, the
number of people receiving regular child benefits
is 4-5 times higher than in Nyugat-Magyarország
and Pest.
Source:
DG REGIO, JRC based on Eurostat
Institutional quality remains well below the
EU average (European Quality of Government
(
253
)
European Quality of Government Index 2024| University of
Gothenburg
(
254
) World Bank. 2024.
Subnational Business Ready in the
European Union 2024: HUNGARY.
Washington, DC: World
Bank. Licence: Creative Commons Attribution CC BY 3.0 IGO.
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Access to healthcare is very limited in rural
areas, where only 12% of the rural
population live within 10 minutes' drive from
the nearest hospital.
Disparities in access to
quality basic services - social, educational,
healthcare, and childcare services - affect the
capacity of rural areas to retain their population
(
255
), especially in the case of young people and
families, affecting especially Észak-Magyarország
and Észak-Alföld, and inner peripheries.
The incidence of housing cost overburden has
increased since 2021.
The proportion of
households spending more than 40% of their
income on rent (at 8.5% in 2024) has quadrupled
since 2021 in cities and tripled in towns and
suburbs and rural areas. The quality of housing
and living conditions are least favourable among
the lowest income quintile, especially the Roma. In
addition, the supply of affordable housing cannot
keep up with the growing concentration of
economic activities, resulting in pressure on
regional housing markets and in an increase in
commuting.
The proportion of people facing
energy
poverty increased in
all
regions in 2023 or
2024.
Overall in Hungary, the proportion of the
population unable to keep their home sufficiently
warm increased from 4.7% in 2022 to 7.2% in
2023 before easing to 6.1% in 2024. Észak-
Magyarország (11.7%) and Észak-Alföld (9.0%)
recorded the highest rates and the sharpest
deterioration in the past two years.
Adoption of sustainable transportation is
slow, particularly passenger rail transport.
Outside Budapest and Pest, less than 10% of the
population in a 120-km radius can be reached
within 1.5 hours by train. This highlights the
country’s high car dependency and investment
needs in public transportation.
is high for all regions, particularly Észak-Alföld,
Dél-Alföld and Dél-Dunántúl, due to the strong
reliance on transitioning sectors, such as
agriculture. The impact of climate change on
regional GDP is especially significant in Dél-Alföld
and in Baranya County. The occurrence of droughts
has increased in Észak- and Dél-Alföld, aggravated
by the lack of adequate water retention measures.
The area of Homokhátság in Dél-Alföld is a
particularly vulnerable region, struggling with
water scarcity, which has created various
economic and social problems, also attributable to
the lack of comprehensive measures (
256
). Larger
cities experience urban heat island effects.
Hungary is prone to flooding, especially along the
Danube and Tisza rivers, and flash floods occur on
the hilly and mountainous area
–
including in
Észak-Magyarország. Climate change is coupled
with excess mortality in the four least developed
regions.
The health of natural ecosystems is at risk in
several regions.
This is because of habitat
fragmentation and loss of biodiversity, resulting
from urban sprawl, unsustainable agricultural
practices
–
although IPM practices have been
applied by farmers - and re-industrialisation.
Natura 2000 sites and protected areas, such as
Hortobágy National Park in the Észak-Alföld
region, are under pressure, whereas wetland
habitats along the Dráva River are threatened by
reduced water flows.
Air quality in Hungary is below the EU
average.
Annual average concentrations of both
particulate matters (PM 2.5 and 10) exceeded the
EU average for all regions, peaking in Budapest,
Baranya,
Borsod-Abaúj-Zemplén,
Szabolcs-
Szatmár-Bereg and Heves counties, as a result of
transportation and using solid fuels for industrial
activity and for residential heating.
Several regions display untapped potential
for
renewable
energy
production.
Municipalities in Észak-Alföld, Dél-Alföld and Dél-
Dunántúl have a high untapped potential for solar
energy production, while other regions have
potential for onshore wind energy, with more
favourable wind capacity factors in the regions in
Nyugat-Dunántúl.
(
256
) Kovacs, Andras & Farkas, Jeno & Vasárus, Gábor & Lennert,
József. (2024). A duna-tisza közi homokhátság területés
vidékfejlesztési kihívásai. Földrajzi Közlemények. 148. 1-17.
Sustainability
Hungarian regions face specific challenges
and opportunities concerning sustainability.
The Regional Green Transition Vulnerability Index
( ) Field Consulting
Services Zrt (2020): A helyi életminőség
javulása terán elért eredmények értékelése.
255
117