Hungary: Economic and Political Overview
For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.
Resuming the trends observed in recent years, Hungary's GDP rebounded sharply after the softening of the COVID-19 pandemic. Hungary’s economy maintained strong momentum in the first half of 2022, driven mainly by domestic demand; but showed signs of pressure towards the end of the year as high energy prices and the slowdown of partner economies impacted household disposable income. Overall, the IMF estimated GDP growth at 5.7% over the year, whereas growth will be restrained in 2023 (1.8%) amid weaker external demand, lower investment and an eroded household income. As inflation pressures fade and the global situation normalizes, the Hungarian economy is expected to pick up again to 2.8% in 2024 (IMF).
The country’ public finances have been affected by COVID-related measures first and then by increased spending in response to high energy prices, therefore the public budget deficit stood at 6% of GDP in 2022 despite robust revenue growth. The deficit is expected to narrow to 3.6% in 2023 (driven by additional windfall profits and sectoral tax revenues) and to 3% the following year. The total net budgetary cost of measures to mitigate the impact of high energy prices is estimated at 0.9% of GDP in 2022, 2.5% in 2023 and 1.8% in 2024 (EU Commission). The public debt-to-GDP ratio stood at 74.8% last year and is expected to follow a downward trend over the forecast horizon (73.7% and 71.9% in 2023 and 2024, respectively – IMF), although sharply worsening financing conditions are projected to increase the debt-servicing costs substantially (reaching 3.4% of GDP by 2024). Inflation was extremely high in 2022, reaching 13.9% as it was driven not only by high energy prices but also by domestic inflationary pressure and currency depreciation (resulting in the highest non-energy inflation in the EU). Despite the tightening of monetary conditions by the Central Bank, inflation is set to remain high in 2023 (13.3%), before easing to 5.6% in 2024 (IMF).
Employment reached its pre-pandemic level already in the first half of 2021, and the labour market was robust also during 2022 when the unemployment rate fell to 3.4%. However, the economic slowdown will have repercussions on job creation, contributing to slower wage growth and higher unemployment (3.8% in 2023 – IMF), although the rise in unemployment will be limited by the shortages of skilled workers. Overall, GDP per capita in Hungary was estimated at USD 42,132 in 2022, still below the EU average (USD 53,960 – IMF).
| Main Indicators | 2020 | 2021 | 2022 (E) | 2023 (E) | 2024 (E) |
| GDP (billions USD) | 157.18 | 181.85 | 168.29 | 188.51 | 203.32 |
| GDP (Constant Prices, Annual % Change) | -4.5 | 7.1 | 4.9 | 0.5 | 3.2 |
| GDP per Capita (USD) | 16,089 | 18,688 | 17,301 | 19,386 | 20,917 |
| General Government Balance (in % of GDP) | -6.9 | -6.0 | -4.5 | -2.9 | -2.4 |
| General Government Gross Debt (in % of GDP) | 79.3 | 76.8 | 76.4 | 73.2 | 70.0 |
| Inflation Rate (%) | 3.3 | 5.1 | 14.5 | 17.7 | 5.4 |
| Unemployment Rate (% of the Labour Force) | 4.2 | 4.1 | 3.6 | 4.1 | 3.8 |
| Current Account (billions USD) | -1.78 | -7.61 | -13.71 | -8.74 | -3.88 |
| Current Account (in % of GDP) | -1.1 | -4.2 | -8.1 | -4.6 | -1.9 |
Source: IMF – World Economic Outlook Database, October 2021
The agricultural sector, which used to be the dominant force in the Hungarian economy for many years, now represents 3.4% of GDP and employs 5% of the working population (World Bank, latest data available). The country has an agricultural area of 5,278k ha, around 56.7% of its territory. Cereals, fruits, maize, vegetables and wine are the main crops. More specifically, major crops include wheat (1 million ha), corn (1 million ha), and oilseeds (1 million ha) - mostly sunflower and rapeseed (0.9 million ha). In November 2022 the EU Commission approved the Common Agricultural Policy Plan for Hungary, with a budget of EUR 8.4 billion, including EUR 2 billion dedicated to environmental and climate objectives and eco-schemes, and EUR 186 million for young farmers.
Industry accounts for 24.3% of the country's GDP and employs 32% of the working population. Hungarian industry is very open to foreign investment, with manufacturing almost consistently ranking top receiver of foreign direct investment. The automotive and electronics sectors are the two main industrial sectors, and the manufacturing sector alone accounts for 17% of the country’s GDP. The electronics industry is one of the largest industrial sectors in Hungary, accounting for one-fifth of total manufacturing production. According to the latest figures by the Hungarian Central Statistical Office, industrial output grew by 5.1% in the first semester of 2022 compared to the same period one year earlier.
The services sector contributes 57% of GDP and employs almost 63% of the labour force. Trade, tourism and finance account for the largest share of activity and employment within the tertiary sector. In recent years the added value produced by the ICT sector increased by more than one-fifth, to USD 20 billion, with the digital economy currently making up more than 20% of Hungary's overall gross value added. The banking sector consists of 40 institutions: 21 commercial banks, 11 specialised credit institutions (mortgage banks, building societies, development and trade finance banks) and 8 foreign bank branches (European Banking Federation). Data by the Hungarian Central Statistical Office shows that in 2021 the services sector grew 5.9% y-o-y, showing a gross value-added increase of 11%.
| Breakdown of Economic Activity By Sector | Agriculture | Industry | Services |
| Employment By Sector (in % of Total Employment) | 4.7 | 32.1 | 63.2 |
| Value Added (in % of GDP) | 3.4 | 24.3 | 57.0 |
| Value Added (Annual % Change) | -1.9 | 6.6 | 8.5 |
Source: World Bank, Latest Available Data. Because of rounding, the sum of the percentages may be smaller/greater than 100%.
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The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.}}
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Source: Index of Economic Freedom, Heritage Foundation
The business rankings model measures the quality or attractiveness of the business environment in the 82 countries covered by The Economist Intelligence Unit’s Country Forecast reports. It examines ten separate criteria or categories, covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure.
Source: The Economist Intelligence Unit - Business Environment Rankings 2021-2025
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Latest Update: September 2023
