Recommendation for a COUNCIL RECOMMENDATION on the 2022 National Reform Programme of Hungary and delivering a Council opinion on the 2022 Convergence Programme of Hungary
Date: 2022-05-23
Institutions: European Commission, Secretariat-General
Subjects: Hungary, economic policy, economic recovery, economic reform, energy policy, independence of the judiciary, investment, labour market, public finance, stability pact, stability programme

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 23.5.2022  COM(2022) 614 final  Recommendation for a COUNCIL RECOMMENDATION on the 2022 National Reform Programme of Hungary and delivering a Council opinion on the 2022 Convergence Programme of Hungary {SWD(2022) 614 final} - {SWD(2022) 640 final}  
 
Recommendation for a 

COUNCIL RECOMMENDATION 

on the 2022 National Reform Programme of Hungary and delivering a Council opinion 
on the 2022 Convergence Programme of Hungary 

THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  on  the  Functioning  of  the  European  Union,  and  in  particular 
Articles 121(2) and 148(4) thereof, 

Having regard to Council Regulation (EC) No 1466/97 of 7 July 1997 on the strengthening of 
the  surveillance  of  budgetary  positions  and  the  surveillance  and  coordination  of  economic 
policies1, and in particular Article 9(2) thereof, 

Having regard to the recommendation of the European Commission, 

Having regard to the resolutions of the European Parliament, 

Having regard to the conclusions of the European Council, 

Having regard to the opinion of the Employment Committee, 

Having regard to the opinion of the Economic and Financial Committee, 

Having regard to the opinion of the Social Protection Committee, 

Having regard to the opinion of the Economic Policy Committee, 

Whereas: 

(1) 

(2) 

Regulation  (EU)  2021/241  of  the  European  Parliament  and  of  the  Council2,  which 
established  the  Recovery  and  Resilience  Facility,  entered  into  force  on  19  February 
2021.  The  Recovery  and  Resilience  Facility  provides  financial  support  for  the 
implementation of reforms and investment, entailing a fiscal impulse financed by the 
Union.  It  contributes  to  the  economic  recovery  and  to  the  implementation  of 
sustainable and growth-enhancing reforms and investment, in particular to promote the 
green and digital transition, while strengthening the resilience and potential growth of 
the Member States’ economies. It also helps strengthen sustainable public finances and 
boost growth and job creation in the medium and long term. The maximum financial 
contribution  per  Member  State  under  the  Recovery  and  Resilience  Facility  [was] 
updated on [XX] June 2022, in line with Article 11(2) of Regulation (EU) 2021/241. 

On  24  November  2021,  the  Commission  adopted  the  Annual  Sustainable  Growth 
Survey,  marking  the  start  of  the  2022  European  Semester  for  economic  policy 
coordination.  It  took  due  account  of  the  reaffirmed  joint  commitment  of  the  Porto 
Social Summit of May 2021 to further implement the European Pillar of Social Rights 
proclaimed  by  the  European  Parliament,  the  Council  and  the  Commission  on  17 
November  2017.  The  European  Council  endorsed  the  priorities  of  the  2022  Annual 

1 
2 

OJ L 209, 2.8.1997, p. 1. 
Regulation  (EU)  2021/241  of  the  European  Parliament  and  of  the  Council  of  12  February  2021 
establishing the Recovery and Resilience Facility (OJ L 57, 18.2.2021, p. 17). 

EN 

1 

  EN 

                                                 
Sustainable Growth Survey on 25 March 2022. On 24 November 2021, on the basis of 
Regulation  (EU)  No  1176/2011,  the  Commission  also  adopted  the  Alert  Mechanism 
Report, in which it did not identify Hungary as one of the Member States for which an 
in-depth  review3  would  be  needed.  On  the  same  date,  the  Commission  also  adopted 
the proposal  for the 2022 Joint Employment Report analysing the implementation  of 
the Employment Guidelines and the principles of the European Pillar of Social Rights, 
which was adopted by the Council on 14 March 2022. 

Russia’s  invasion  of  Ukraine,  in  the  wake  of  the  global  pandemic,  has  significantly 
altered the geopolitical and economic context. The impact of the invasion on Member 
States’ economies has been felt for example through higher energy and food prices and 
weaker  growth  prospects.  The  higher  energy  prices  weigh  particularly  on  the  most 
vulnerable households experiencing or at risk of energy poverty. The EU is also seeing 
an unprecedented inflow of people fleeing Ukraine. In this context, on 4 March 2022, 
the  Temporary  Protection  Directive  was  triggered4    for  the  first  time,  granting 
displaced persons from Ukraine the right to legally stay in the EU, as well as access to 
education  and  training,  labour  market,  healthcare,  housing  and  social  welfare. 
Exceptional  support  is  made  available  to  Hungary  under  the  Cohesion’s  Action  for 
Refugees in Europe (CARE) initiative and through the additional pre-financing under 
the  Recovery  Assistance  for  Cohesion  and  the  Territories  of  Europe  (REACT-EU) 
programme  to  urgently  address  reception  and  integration  needs  for  those  fleeing 
Ukraine. 

Taking  account  of  the  rapidly  changing  economic  and  geopolitical  situation,  the 
European Semester resumes its broad economic and employment policy coordination 
in 2022, while evolving in line with the implementation requirements of the Recovery 
and  Resilience  Facility,  as  outlined  in  the  2022  Annual  Sustainable  Growth  Survey. 
The  implementation  of  the  adopted  recovery  and  resilience  plans  is  essential  for  the 
delivery of the policy priorities under the European Semester, as the plans address all 
or a significant subset of the relevant country-specific recommendations issued in the 
2019  and  2020  Semester  cycles.  The  2019  and  2020  country-specific 
recommendations  remain  equally  relevant  also  for  recovery  and  resilience  plans 
revised, updated or amended in accordance with Articles 14, 18 and 21 of Regulation 
(EU) 2021/241, in addition to any country-specific recommendations issued up to the 
date of submission of the modified plan.  
The General Escape Clause has been active since March 20205. In its Communication 
of  3  March  20216,  the  Commission  set  out  its  view  that  the  decision  on  the 
deactivation or continued application of the general escape clause should be  taken as 
an overall assessment of the state of the economy, with the level of economic activity 
in the EU or euro area compared to pre-crisis levels (end-2019) as a key quantitative 
criterion. Heightened uncertainty and strong downside risks to  the economic outlook 

Regulation (EU) No 1176/2011 of the European Parliament and of the Council of 16 November 2011 
on the prevention and correction of macroeconomic imbalances, OJ L 306, 23.11.2011, p. 25. 
Council Implementing Decision (EU) 2022/382 of 4 March 2022 establishing the existence of a mass 
influx of displaced persons from Ukraine within the meaning of Article 5 of Directive 2001/55/EC, and 
having the effect of introducing temporary protection, OJ L 71, 4.3.2022, p. 1 
Communication from the Commission to the Council on the activation of the general escape clause of 
the Stability and Growth Pact, Brussels, 20.3.2020, COM(2020) 123 final. 

Communication  from  the  Commission  to  the  Council  on  one  year  since  the  outbreak  of  COVID-19: 
fiscal policy response, Brussels, 3.3.2021, COM(2021) 105 final. 

(3) 

(4) 

(5) 

3 

4 

5 

6 

EN 

2 

  EN 

                                                 
(6) 

(7) 

in  the  context  of  war  in  Europe,  unprecedented  energy  price  hikes  and  continued 
supply  chain  disturbances  warrant  the  extension  of  the  general  escape  clause  of  the 
Stability and Growth Pact through 2023. 

Following  the  approach  in  the  Council  opinion  of  18  June  2021  on  the  2021 
Convergence Programme, the fiscal stance is currently best measured as the change in 
primary  expenditure  (net  of  discretionary  revenue  measures),  excluding  COVID-19 
crisis-related  temporary  emergency  measures  but  including  expenditure  financed  by 
non-repayable  support  (grants)  from  the  Recovery  and  Resilience  Facility  and  other 
EU funds, relative to medium-term potential growth7. Going beyond the overall fiscal 
stance, in order to assess whether national fiscal policy is prudent and its composition 
is conducive to a sustainable recovery consistent with the green and digital transitions, 
attention  is  also  paid  to  the  evolution  of  nationally  financed8  primary  current 
expenditure  (net  of  discretionary  revenue  measures  and  excluding  COVID-19  crisis-
related temporary emergency measures) and investment. 

On  2  March  2022,  the  Commission  adopted  a  Communication  providing  broad 
guidance  for  fiscal  policy  in  2023,  aiming  at  supporting  the  preparation  of  Member 
States’  Stability  and  Convergence  Programmes  and  thereby  strengthening  policy 
coordination9.  The  Commission  noted  that,  based  on  the  macroeconomic  outlook  of 
the  2022  winter  forecast,  transitioning  from  an  aggregate  supportive  fiscal  stance  in 
2020-2022  to  a  broadly  neutral  aggregate  fiscal  stance  would  appear  appropriate  in 
2023,  while  standing  ready  to  react  to  the  evolving  economic  situation.  The 
Commission announced that the fiscal recommendations for 2023 should continue to 
differentiate  across  Member  States  and  take  into  account  possible  cross-country 
spillovers. The Commission invited the Member States to reflect the guidance in their 
Stability  and  Convergence  Programmes.  The  Commission  committed  to  closely 
monitor  the  economic  developments  and  adjust  its  policy  guidance  as  needed  and  at 
the latest in its Semester spring package of late May 2022. 

(8)  With  respect  to  the  fiscal  guidance  provided  on  2  March  2022,  the  fiscal 
recommendations  for  2023  take  into  account  the  worsened  economic  outlook,  the 
heightened uncertainty and further downside risks, and the higher inflation compared 
to the winter forecast. Against these considerations, the fiscal response has to expand 
public investment for the green and digital transition and energy security, and sustain 
the purchasing power of the most vulnerable households so as to cushion the impact of 
the energy price hike and help limit inflationary pressures from second round effects 
via targeted and temporary measures; fiscal policy has to remain agile so as to adjust 
to the rapidly evolving circumstances, and be differentiated across countries depending 
on their fiscal and economic situation, including as regards the exposure to the crisis 
and the inflow of displaced persons from Ukraine. 

7 

8 

9 

The  estimates  on  the  fiscal  stance  and  its  components  in  this  recommendation  are  Commission 
estimates  based  on  the  assumptions  underlying  the  Commission  2022  spring  forecast.  The 
Commission’s estimates of medium-term potential growth do not include the positive impact of reforms 
that are part of the Recovery and Resilience Plan and that can boost potential growth.  

Not financed by grants from the Recovery and Resilience Facility and other EU funds. 

Communication  from  the  Commission  to  the  Council:  Fiscal  policy  guidance  for  2023,  Brussels, 
2.3.2022, COM(2022) 85 final. 

EN 

3 

  EN 

                                                 
(9) 

On  29  April  2022,  Hungary  submitted  its  2022  National  Reform  Programme  and  its 
2022  Convergence  Programme.  To  take  account  of  their  interlinkages,  the  two 
programmes have been assessed together.  

(10)  The Commission published the 2022 country report for Hungary10 on 23 May 2022. It 
relevant  country-specific 
in  addressing 
assessed  Hungary’s  progress 
recommendations  adopted  by  the  Council  in  2019,  2020  and  2021.  It  also  assessed 
Hungary's  progress  on  implementing  the  European  Pillar  of  Social  Rights  and  on 
achieving  the  EU  headline  targets  on  employment,  skills  and  poverty  reduction,  as 
well as progress in achieving the UN’s Sustainable Development Goals.  

the 

(11)  On 29 April 2022, Hungary submitted its 2022 Convergence Programme, in line with 

the deadline established in Article 4 of Regulation (EC) No 1466/97.  

(12)  On  23  May  2022,  the  Commission  issued  a  report  under  Article  126(3)  TFEU.  This 
report discussed the budgetary situation of Hungary, as its general government deficit 
in 2021 exceeded the 3% of GDP Treaty reference value, while its general government 
debt  exceeded  the  60%  of  GDP  Treaty  reference  value  and  did  not  respect  the  debt 
reduction benchmark. The report concluded that the deficit and debt criteria were not 
fulfilled.  In  line  with  the  Communication  of  2  March  2022,  the  Commission 
considered, within its assessment of all relevant factors, that compliance with the debt 
reduction benchmark would imply a too demanding frontloaded fiscal effort that risks 
to jeopardise growth. Therefore, in the view of the Commission, compliance with the 
debt  reduction  benchmark  is  not  warranted  under  the  current  exceptional  economic 
conditions.  As  announced,  the  Commission  did  not  propose  to  open  new  excessive 
deficit  procedures  in  spring  2022  and  it  will  re-assess  the  possible  opening  of 
excessive deficit procedures in autumn 2022.   

the  economy  and  support 

(13)  On  20  July  2020,  the  Council  recommended  Hungary  to  take  in  2020  and  2021  all 
necessary measures, in line with the general escape clause, to  effectively address the 
pandemic,  sustain 
the  ensuing  recovery.  It  also 
recommended  Hungary  to  pursue,  when  economic  conditions  allow,  fiscal  policies 
aimed  at  achieving  prudent  medium-term  fiscal  positions  and  ensuring  debt 
sustainability,  while  enhancing  investment.  In  2021,  based  on  data  validated  by 
Eurostat,  Hungary’s  general  government  deficit  fell  from  7.8%  of  GDP  in  2020  to 
6.8%  in  2021.  The  fiscal  policy  response  by  Hungary  supported  the  economic 
recovery in  2021, while temporary emergency support measures  declined from  4.0% 
of GDP in 2020 to 0.8% in 2021. The measures taken by Hungary in 2021 have been 
in  line  with  the  Council  Recommendation  of  20  July  2020.  The  discretionary 
budgetary  measures  adopted  by  the  government  in  2020  and  2021  were  mostly 
temporary  or  matched  by  offsetting  measures.  At  the  same  time,  some  of  the 
discretionary measures adopted by the government over the period 2020 to 2021 were 
not temporary or matched by offsetting measures, mainly consisting of a reduction of 
employers’  social  security  contributions,  an  abolition  of  the  training  levy,  an 
exemption  of  employees  under  the  age  of  25  from  personal  income  tax,  a 
reintroduction of 13th  monthly pension,  and an increase in  doctors’ wages. Based on 
data validated by Eurostat, general government debt stood at 76.8 % of GDP in 2021. 

(14)  The  macroeconomic  scenario  underpinning  the  budgetary  projections  in  the  2022 
Convergence Programme is favourable. The government projects real GDP to grow by 
4.3%  in  2022  and  4.1%  in  2023.  By  comparison,  the  Commission’s  2022  spring 

10 

SWD(2022) 614 final. 

EN 

4 

  EN 

                                                 
forecast projects a lower real GDP growth of 3.6% in 2022 and 2.6% in 2023, mainly 
due  to  the  assumption  about  more  persistent  macroeconomic  impact  of  the  Russia’s 
war of aggression in Ukraine. The Commission’s forecast projects a weaker growth of 
private consumption, especially in 2023, and a slower investment growth both in 2022 
and  2023.  In  its  2022  Convergence  Programme,  the  Government  expects  that  the 
headline  deficit  will  decrease  to  4.9%  of  GDP  in  2022  and  to  3.5%  in  2023.  The 
decrease  in  2022  mainly  reflects  continued  dynamic  growth  in  nominal  GDP. 
According to the Programme, the general government debt-to-GDP ratio is expected to 
decrease to 76.1% in 2022, and to decline to 73.8% in 2023. Based on policy measures 
known  at  the  cut-off  date  of  the  forecast,  the  Commission  2022  spring  forecast 
projects  a  government  deficit  for  2022  and  2023  of  6.0%  of  GDP  and  4.9% 
respectively.  This  is  higher  than  the  deficit  projected  in  the  2022  Convergence 
Programme,  mainly  due  to  the  projected  less  favourable  macroeconomic  outlook, 
especially  in  2023,  and  higher  growth  of  expenditure,  which  incorporates  capital 
injections to utility companies amounting to 1.1% of GDP in 2022 and a further 0.7% 
in 2023. The Commission 2022 spring forecast projects a higher general government 
debt-to-GDP  ratio,  of  76.4%  in  2022  and  76.1%  in  2023.  The  difference  is  due  to 
higher primary balance and less favourable nominal GDP dynamics.  

Based  on  the  Commission  spring  2022  forecast,  the  medium-term  (10-year  average) 
potential output growth is estimated at 3.2%. However, this estimate does not include 
the  impact  of  the  reforms  that  are  part  of  the  Recovery  and  Resilience  Plan  and  can 
boost Hungary’s potential growth. 

In 2022, the government phased out the measures taken in response to the COVID-19 
crisis,  such  that  the  temporary  emergency  support  measures  are  projected  to  decline 
from 0.8% of GDP in 2021 to  0.0% in 2022. The government deficit is impacted by 
the  measures  adopted  to  counter  the  economic  and  social  impact  of  the  increase  in 
energy prices, which in the Commission spring 2022 forecast are estimated at 1.2% of 
GDP in 2022 and 0.7% of GDP in 2023.11 These measures consist of compensations to 
utility  companies  by  the  government  with  capital  transfers  for  expected  losses 
resulting from  regulated energy prices, a temporary cut  in  excise duties on fuels  and 
compensations for small petrol stations. All measures other than the permanent price 
caps on retail gas and electricity prices have been announced as temporary. However, 
in case energy prices remain elevated also in 2023, some of these measures could be 
continued. Some of these measures are not targeted in nature, notably the general price 
caps on retail prices of energy and the cut in excise duties. The government deficit is 
also  impacted  by  the  costs  to  offer  temporary  protection  to  displaced  persons  from 
Ukraine, which in the Commission 2022 spring forecast are projected at 0.2% of GDP 
in 2022 and 0.3% in 2023.12  

(15) 

11 

12 

The figures represent the level of annual budgetary costs of those measures taken since autumn 2021, 
including current revenue and expenditure as well as – where relevant – capital expenditure measures. 
The total number of displaced persons from Ukraine to the EU is assumed to gradually reach 6 million 
by  the  end  of  2022,  and  their  geographical  distribution  is  estimated  based  on  the  size  of  the  existing 
diaspora, the relative population of the receiving Member State, and the actual distribution of displaced 
persons from Ukraine across the EU as of March 2022. For budgetary costs per person, estimates are 
based on the Euromod microsimulation model of the Commission’s Joint Research Centre, taking into 
account both cash transfers people may be eligible for as well as in-kind benefits such as education and 
healthcare. 

EN 

5 

  EN 

                                                 
(16)  On  18  June  2021,  the  Council  recommended  that  in  2022  Hungary13  maintain  a 
supportive  fiscal  stance,  including  from  the  impulse  provided  by  the  Recovery  and 
Resilience  Facility,  and  preserves  nationally-financed 
It  also 
recommended  Hungary  to  pursue,  when  economic  conditions  allow,  a  fiscal  policy 
aimed  at  achieving  prudent  medium-term  fiscal  positions  and  ensuring  fiscal 
sustainability  in  the  medium  term,  and  at  the  same  time,  to  enhance  investment  to 
boost growth potential. 

investment. 

(17) 

In  2022,  based  on  the  Commission’s  2022  spring  forecast  and  including  the 
information  incorporated  in  Hungary’s  2022  Convergence  Programme,  the  fiscal 
stance  is  projected  to  be  broadly  neutral  at  -0.1%  of  GDP,  while  the  Council 
recommended a supportive fiscal stance.14 Hungary plans to provide continued support 
to  the  recovery  by  making  use  of  the  Recovery  and  Resilience  Facility  to  finance 
additional  investment  as  recommended  by  the  Council.  The  positive  contribution  to 
economic activity of expenditure financed by Recovery and Resilience Facility grants 
and other EU funds is projected to decrease by 1.0 percentage point of GDP compared 
to 2021 due to expected slowdown in the EU funds absorption15. Nationally-financed 
investment is projected to provide an expansionary contribution to the fiscal stance of 
0.2  percentage  points  in  2022.16  Therefore,  Hungary  plans  to  preserve  nationally 
financed investment, as recommended by the Council. At the same time, the growth in 
nationally-financed  primary  current  expenditure  (net  of  new  revenue  measures)  in 
2022 is projected to provide an expansionary contribution of 0.4 percentage points to 
the overall fiscal stance. This includes the additional impact of the measures to address 
the economic and social impact of the increase in energy prices (0.1% of GDP) as well 
as the costs to offer temporary protection to displaced persons from Ukraine (0.2% of 
GDP).  Several  discretionary  measures  also  contribute  to  the  growth  in  nationally-
financed  primary  current  expenditure  (net  of  new  revenue  measures),  such  as  the 
reintroduction  of  the  13th  monthly  pension,  wage  benefits  for  law  enforcement  and 
military officers, a  reduction of employers’ social  security  contributions  and training 
levy. 

(18) 

In 2023, the fiscal stance is projected in the Commission 2022 spring forecast at 1.9% 
of GDP on a no-policy  change assumption.17  Hungary is  projected to  continue using 
the  grants  from  the  Recovery  and  Resilience  Facility  in  2023  to  finance  additional 
investment in support of the recovery. The positive contribution to economic activity 
of  expenditure  financed  by  Recovery  and  Resilience  Facility  grants  and  other  EU 
funds  is  projected  to  increase  by  0.3  percentage  points  of  GDP  in  2023.  Nationally 
financed investment is projected to provide an expansionary contribution to the fiscal 

13 

14 

15 

16 

17 

Council  Recommendation  of  18  June  2021  delivering  a  Council  opinion  on  the  2021  Convergence 
Programme of Hungary, OJ C 304, 29.7.2021, p. 78.  
A negative (positive) sign of the indicator corresponds to an excess (shortfall) of primary expenditure 
growth  compared  with  medium-term  economic  growth,  indicating  an  expansionary  (contractionary) 
fiscal policy. 
These are Commission projections. The Commission has not yet assessed the Recovery and Resilience 
Plan for Hungary. 
Other  nationally-financed  capital  expenditure  is  projected  to  provide  an  expansionary  contribution  of 
0.4  percentage  points  of  GDP,  which  is  largely  driven  by  the  fiscal  impact  of  the  recapitalisations  to 
utility companies.  
A negative (positive) sign of the indicator corresponds to an excess (shortfall) of primary expenditure 
growth  compared  with  medium-term  economic  growth,  indicating  an  expansionary  (contractionary) 
fiscal policy. 

EN 

6 

  EN 

                                                 
stance of 0.4 percentage points in 2023.18 At the same time, the growth in nationally-
financed  primary  current  expenditure  (net  of  new  revenue  measures)  in  2023  is 
projected  to  provide  a  contractionary  contribution  of  1.9  percentage  points  to  the 
overall  fiscal  stance.  This  includes  the  impact  from  the  phasing  out  of  the  measures 
addressing  the  increased  energy  prices  (0.1%  of  GDP)  and  additional  costs  to  offer 
temporary protection to displaced persons from Ukraine (0.1% of GDP). 

(19) 

In  the  2022  Convergence  Programme,  the  general  government  deficit  is  expected  to 
gradually decline to 2.5% of GDP in 2024 and to 1.5% by 2025. Therefore, the general 
government  deficit  is  planned  to  go  below  3%  of  GDP  by  2024.  According  to  the 
Programme,  the  general  government  debt-to-GDP  ratio  is  expected  to  decrease  by 
2025, specifically with a decrease to 70.4% in 2024, and a decline to 66.9% in 2025. 
Based on the Commission’s analysis, debt sustainability risks appear medium over the 
medium term. 

(20)  The impact of population ageing and the increase of public debt during the COVID-19 
crisis are set to intensify the long-term fiscal sustainability challenges in Hungary. The 
pension  expenditure  is  projected  to  rise  substantially,  from  around  8%  in  2019  to 
above  12%  of  GDP  in  2070.  The  fiscal  sustainability  indicators  point  to  medium 
sustainability risks in the medium term and high risks in the long term. Recent policy 
measures  exacerbate  the  sustainability  challenge  by  increasing  government’s  long-
term  pension  liabilities.  The  13th  month  pension  reintroduced  in  2021  and  2022  is 
expected to increase the expenditure on pensions. Changes to tax and pension systems 
in the last decade are projected to increase expenditure on the pensions of high-wage 
retirees  and  amplify  inequalities  among  pensioners.  Those  measures  include  the 
removal of the ceiling on pensionable income and pensions and the introduction of the 
flat  personal  income  tax  that  boosts  pensionable  income  of  high  earners.  The 
minimum  pension  has  remained  nominally  unchanged  since  2008,  which  affects  the 
situation  of  those  with  interrupted  employment  history  and  low  average  earnings 
during their career. 

(21)  Hungary  submitted  the  cohesion  policy  programming  documents19  -  Partnership 
agreement  on  30  December  2021  and  the  Economic  Development  and  Innovation 
Programme Plus on 26 January 2022 [add more OPs if submitted until the publication 
of  the  Spring  Package].  In  line  with  Regulation  (EU)  2021/1060  of  the  European 
Parliament  and  of  the  Council  of  24 June  2021, Hungary  shall  take  into  account  the 
relevant  country-specific  recommendations  in  the  programming  of  the  2021-2027 
cohesion  policy  funds.  This  is  a  prerequisite  for  improving  the  effectiveness  and 
maximising  the  added  value  of  the  financial  support  to  be  received  from  cohesion 
policy  funds,  while  promoting  the  coordination,  complementarity  and  coherence 
between  these  funds  and  other  Union  instruments  and  funds.  The  successful 
implementation  of  the  cohesion  policy  programmes  also  depends  on  the  removal  of 

18 

19 

Other  nationally-financed  capital  expenditure  is  projected  to  provide  a  contractionary  contribution  of 
0.6 percentage points of GDP, which is largely driven by the phase out of the renovation subsidies for 
families and lower estimated recapitalisations to utility companies than in 2022. 
Regulation  (EU)  2021/1060  of  the  European  Parliament  and  of  the  Council  of  24  June  2021  laying 
down  common  provisions  on  the  European  Regional  Development  Fund,  the  European  Social  Fund 
Plus,  the  Cohesion  Fund,  the  Just  Transition  Fund  and  the  European  Maritime,  Fisheries  and 
Aquaculture Fund and financial rules for those and for the Asylum, Migration and Integration Fund, the 
Internal  Security  Fund  and  the  Instrument  for  Financial  Support  for  Border  Management  and  Visa 
Policy. PE/47/2021/INIT. OJ L 231, 30.6.2021, p. 159.  

EN 

7 

  EN 

                                                 
bottlenecks  to  investment  to  support  the  green  and  digital  transition  and  balanced 
territorial development.  

(22)  Hungary’s  labour  market  is  overall  in  a  good  shape,  however,  challenges  remain  in 
relation to the low employment rate of women and of disadvantaged groups. Mothers 
with  young  children  tend  to  stay  away  from  work  for  a  long  time,  partly  due  to  the 
scarcity  of  childcare  places  for  children  under  the  age  of  three.  The  number  of 
childcare  places  is  gradually  increasing  thanks  to  dedicated  programmes,  but  these 
institutions  also  face  staff  shortages.  There  is  significant  room  to  increase  the 
employment rate of  certain  disadvantaged  groups, such as  the low-skilled, long term 
unemployed,  persons  with  disabilities  and  Roma.  These  groups  could  be  better 
mobilised  by  equipping  them  with  skills  and  actively  helping  them  to  find  jobs. 
Assistance during the job search is limited, and only half of the registered unemployed 
receive  financial  benefits.  The  duration  of  the  unemployment  benefit  is  among  the 
shortest  in  the  EU.  Joblessness  is  concentrated  in  the  less  developed  regions  and  in 
rural areas. 

(23)  The risk of poverty has decreased markedly, but many people are still unable to afford 
basic necessities. Material and social deprivation rates remain among the highest in the 
EU, especially for children. Poverty and social exclusion are concentrated in specific 
groups  and  territories.  Poverty  rates  are  three  to  four  times  higher  for  the  Roma, 
related  to  their  more  limited  access  to  the  labour  market  and  public  services.  The 
social  safety  net  has  weakened  for  families  without  stable  employment  over  the  last 
decade and poverty gap widened recently. The tax system disproportionately burdens 
the lower-paid  workers.  Low-income families are also  less likely to  benefit  from  the 
income  tax  allowance  per  child.  Their  major  sources  of  income,  such  as  the  public 
works wage, the minimum income and the family allowance did not keep up with the 
cost of living. Regulated prices for residential energy have remained unchanged, thus 
partly  shielding  households  from  recent  commodity  price  increases.  However,  this 
does not help poor rural households using solid fuels for heating. Rising house prices 
pose further challenge to low-income families, which have difficulty accessing public 
housing  support  schemes.  Meanwhile,  social  housing  has  become  scarce  and  often 
run-down. 

(24)  Education  outcomes  in  Hungary  are  below  the  EU  average.  By  the  age  of  15,  basic 
skills  are significantly  below the  EU  and regional  averages and have decreased over 
the last decade. Contrary to European trends, early school leaving increased in the last 
decade  to  12.0%  in  2021,  above  the  EU  average  of  9.7%.  Early  school  leaving  is 
higher in the least developed districts, and six times higher among the Roma than the 
non-Roma. The share of 25-34 year old people with a tertiary diploma rose since 2010, 
but  remains  among  the  lowest  in  the  EU.  Participation  in  adult  learning  is  just  over 
half of the EU average. Digital skills are lacking, especially among poorer people. In 
the lowest two income quartiles, only 13% and 18% of Hungarians have at least basic 
digital  skills,  which  are  among  the  lowest  percentage  in  the  EU.  Disadvantaged 
students  have  low  chances  of  entering  the  higher  educational  tracks.  Inequality  in 
education narrows the possibility for social mobility. The low effectiveness and equity 
in the school system are likely to be linked to the low level of curricular autonomy, the 
lack of socioeconomic diversity within schools and low teacher salaries. The shortage 
of teachers is increasingly a problem. While aggregate indicators, such as the teacher-
pupil ratio, do not signal acute shortages, more detailed analysis shows that shortages 
exist for specific subjects such as mathematics, science and foreign languages. Teacher 
shortages  are  also  linked  to  the  fragmentation  of  the  school  system,  as  half  of  all 

EN 

8 

  EN 

primary and lower secondary schools have fewer than 150 pupils. Schools with a high 
proportion  of  disadvantaged  pupils  tend  to  suffer  particularly  from  the  lack  of 
qualified teachers. More than half of the graduates from  teacher education end up in 
other  careers  due  to  the  high  workload  and  low  pay  of  teachers,  especially  at  the 
beginning  of  their  career.  Moreover,  the  centralised  management  of  schools  leaves 
school heads with limited autonomy and tools to improve teaching quality. 

(25)  Health  outcomes  lag  behind  most  other  Member  States,  reflecting  both  unhealthy 
lifestyles  and  the  limited  effectiveness  of  healthcare  provision.  The  prevalence  of 
smoking,  alcohol  use  disorder  and  obesity  is  one  of  the  highest  in  the  Union. 
Hungarians are among the most likely in the Union to suffer premature death due to 
bad  air  quality.  The  number  of  avoidable  deaths  is  one  of  the  highest  in  the  Union, 
partly  due  to  inadequate  screening  and  primary  care  management.  There  are 
significant  socioeconomic  disparities  in  access  to  quality  care,  due  to  a  sizeable 
shortage of healthcare staff, in particular general practitioners and nurses. The hospital 
network  is  fragmented  and  has  a  high  number  of  hospital  beds.  Hungarian  patients 
spend the longest time in hospitals across the EU, because the take-up of day surgery 
procedures  has  remained  low  in  EU  comparison.  Recent  reforms  have  encouraged 
general  practitioners  to  cooperate,  which  would  improve  the  service  provision. 
Significant measures were taken to eradicate gratuity payments and address shortages 
of doctors.  

(26)  Deficient independent control mechanisms and tight interconnections between politics 
and  certain  businesses  are  conducive  to  corruption.  When  serious  allegations  arise, 
there  is  systematic  lack  of  determined  action  to  investigate  and  prosecute  corruption 
cases  involving  high-level  officials  or  their  immediate  circle.  Accountability  for 
decisions to close investigations remains a matter of concern as there are no effective 
remedies against decisions of the prosecution service not to prosecute alleged criminal 
activity. The shrinking possibilities of civic oversight in the context of restrictions to 
media  freedom,  a  hostile  environment  for  civil  society  organisations  and  recurrent 
challenges in the application of the transparency and access to public information rules 
further  weaken  the  anti-corruption  framework.  In  December  2021,  the  government 
postponed the implementation of most measures in its anti-corruption strategy for the 
years 2020-22.20 

(27)  The independence, efficiency and quality of the justice system are crucial to attracting 
business  and  enabling  economic  growth.  Concerns  regarding  judicial  independence 
persist.  The  National  Judicial  Council  continues  to  face  difficulties  in  counter-
balancing  the  powers  of  the  President  of  the  National  Office  for  the  Judiciary.  The 
rules on electing the President of the Supreme Court create risks of political influence 
over  the  top  court  of  the  country.  The  lack  of  transparency  of  the  case  allocation 
scheme  does  not  allow  parties  to  verify  whether  any  undue  discretion  has  been 
applied.  Questions  have  been  raised  regarding  the  role  of  the  Constitutional  Court, 
composed of members elected by Parliament without the involvement of the judiciary, 
in reviewing judgments of the ordinary courts. 

(28)  Hungary  scores  low  among  the  Member  States  in  social  dialogue,  stakeholder 
engagement in developing primary law, consultation with social partners, civil society, 

20 

The Commission sent a notification letter to Hungary on 27 April pursuant to Article 6(1) of Regulation 
(EU, Euratom) 2020/2092 of the European Parliament and of the Council, of 16 December 2020, on a 
general regime of conditionality for the protection of the Union budget. 

EN 

9 

  EN 

                                                 
and  the  use  of  evidence-based  instruments.  National  rules  on  the  obligatory  public 
consultation of draft legal acts and their impact assessments have been systematically 
disregarded. The number of laws subject to consultation has significantly declined in 
recent years.  

(29)  Measures  have  been  taken  to  further  improve  the  tax  system  but  some  challenges 
remain.  The  tax  burden  on  labour  has  decreased  but  remains  high  for  low-income 
earners.  Sector-specific  taxes  and  a  large  number  of  small  taxes  complicate  the  tax 
system and raise compliance costs, in particular for smaller firms. 

(30)  Regulatory barriers and State involvement in product markets hinder the selection of 
efficient enterprises and limit competition. Ad hoc exemptions of business transactions 
from  competition  scrutiny  hinder  the  functioning  of  the  market  and  hamper 
investment.  The  unpredictability  of  the  legal  framework  is  a  further  problem, 
especially  in  the  retail  sector,  which  in  recent  years  has  faced  frequent  changes  in 
regulations. Regulations and taxes might prevent businesses from growing, especially 
in  retail  and  utilities.  Regulation  of  professions  also  remains  restrictive.  Slow  and 
costly insolvency procedures might hinder the restructuring of failing businesses. The 
procurement  market  remains  vulnerable  to  anticompetitive  practices.  The  proportion 
of contracts awarded in procedures where there was just one bidder remains among the 
highest in the EU. The authorities improved the supervision of the regularity of public 
procurement in response to the findings of the Commission’s successive audits in the 
field  of  EU  funds  management,  which  identified  serious,  systemic  deficiencies  and 
irregularities, in particular related to the use of framework agreements. Whether all of 
the previously identified deficiencies have been fully addressed remains to be seen in 
practice.  Recently,  new  risks  emerged  with  the  apparent  exclusion  of  public  interest 
trusts from  public procurement rules.  In February  2021, the  government  set  itself an 
ambitious  target  of  reducing  the  percentage  of  public  procurement  procedures  with 
only a single bid to less than 15%, although without a fixed timeline.  

(31)  The transition to a climate neutral economy is still at an early stage. Half of Hungary’s 
territory is significantly exposed to climate change risks including drought and floods. 
This  creates  the  need  for  sustainable  climate  adaptation  solutions,  notably  through 
nature-based  water  retention,  including  by  restoring  natural  hydrology,  adapting 
agricultural practices, and carefully monitoring ground- and surface water abstractions 
for  irrigation.  Air  and  water  quality  remain  a  concern.  The  main  sources  of  air 
pollution are residential solid fuel combustion, agriculture and transport emissions. A 
large  share  of  the  drinking  water  supply  network  is  in  poor  shape  and  regulatory 
environment creates barriers to investment. The circular economy is still in an initial 
phase, recycling of municipal waste is underdeveloped and economic instruments are 
insufficient to address environmental challenges. Waste management was reorganised 
by  the  government  in  several  steps.  The  changes  limited  competition  in  the  sector, 
with the side effect of declining efficiency and recycling rates. Sectors that are likely 
to  decline  or  transform  due  to  the  green  transition  provide  jobs  for  nearly  4%  of  all 
workers,  who  could  particularly  need  up-  and  reskilling.  Labour  shortages  in  the 
energy sector could hinder the transition to climate neutrality. 

(32)  Transport  infrastructure  is  characterised  by  a  dense  motorway  and  electrified  rail 
network.  Hungary  has  experienced  a  strong  increase  in  emissions  in  the  transport 
sector,  which  is  rapidly  becoming  the  largest  emitting  sector.  Hungary  is  among  the 
most  congested  Member  States  with  increasing  number  of  hours  lost  per  driver  in 
urban  areas.  The  share  of  zero-emission  passenger  cars  in  new  registrations  and  the 

EN 

10 

  EN 

number of charging points grow steadily. While the corresponding indicators show a 
leading position among regional peers, it still remains under the EU average.  

(33)  Research and innovation is a critical driver for long-term growth and competitiveness. 
Hungary  ranks  as  an  emerging  innovator.  Spending  on  research  and  development  is 
increasing and reached 1.61% of GDP in 2020. The shortage of highly skilled workers 
is  a  key  obstacle  to  innovation.  Tertiary  education  attainment  rates  are  among  the 
lowest in the EU. The recent exemption of  young workers from personal income tax 
and  other  structural  changes  hindering  academic  freedom  decrease  the  attractiveness 
of  higher  education.  Digital  skills  and  the  use  of  digital  technologies  by  firms  and 
public services remain below the Union average. 

(34) 

In  response  to  the  mandate  by  the  EU  Heads  of  State  or  Government  set  out  in  the 
Versailles Declaration, the REPowerEU plan aims to phase out the European Union’s 
dependence on fossil fuels import from Russia as soon as possible. For this purpose, 
the most suitable projects, investments and reforms at national, regional and EU level 
are being identified in dialogue with the Member States. These measures aim to reduce 
overall reliance on fossil fuels and shift fossil fuel imports away from Russia. 

(35)  Hungary’s  energy  sector  depends  strongly  on  Russia  for  fossil  fuels.  According  to 
2020 data21, nearly all imported natural gas comes from Russia (95% compared to the 
EU average of 44%). The dependency on Russia for oil is also above the EU average 
(61% compared to 26%), but for coal it is below (22% compared to 54%). The share 
of  natural  gas  in  the  energy  mix  is  higher  than  the  EU  average  (35%  compared  to 
24%), while the shares of oil (30% compared to 33%) and coal (7% compared to 11%) 
are lower. The 13.9% share of renewable sources in gross final energy consumption is 
one of the lowest in the EU. Hungary intends to rely more on solar energy while the 
potential  of  wind  and  geothermal  energy  remains  underutilised.  The  electricity  grid 
investments,  such  as  smart  metering,  prosumers  schemes,  energy 
requires 
communities  and  dynamic  pricing  to  accommodate  more  renewable  energy.  In 
addition,  permitting  procedures  for  installing  plants  using  renewable  energy  sources 
could  be  simplified.  Regional  gas  interconnections  could  allow  diversification  of 
imports. New infrastructure and network investments related to gas are recommended 
to  be  future-proof  where  possible,  in  order  to  facilitate  their  long-term  sustainability 
through  future  repurposing  for  sustainable  fuels.  To  decrease  further  dependency, 
there is a large potential to improve energy efficiency in the residential building sector. 
The application of stricter environmental standards for new housing was postponed by 
18  months  until  June  2022.  The  current  residential  renovation  programme  does  not 
focus on energy efficiency and excludes in practice the most vulnerable families. The 
uniformly  low  level  of  regulated  energy  prices,  regardless  of  household  income  or 
consumption  level,  increases  income  inequalities  and  does  not  create  incentives  for 
energy saving. Further increase in ambition for reducing greenhouse gas emissions and 

21 
Eurostat (2020), share of Russian imports over total imports of natural gas, crude oil and hard coal. For 
the EU27 average, the total imports are based on extra-EU27 imports. For Hungary, total imports include intra-
EU  trade.  Crude  oil  does  not  include  refined  oil  products.  It  should  be  noted  that,  while  Hungary’s  import 
dependence on Russian gas is high, Hungary exports an important amount of gas to neighbouring countries. As 
such,  its  gas  dependence  for  domestic  consumption  is  likely  lower  than  the  figures  reported,  albeit  still 
significant.  

EN 

11 

  EN 

                                                 
 
increasing renewables and energy efficiency will be needed for Hungary to be in line 
with the ‘Fit for 55’ objectives.  

(36)  While  the  acceleration  of  the  transition  towards  climate  neutrality  and  away  from 
fossil  fuels  will  create  significant  restructuring  costs  in  several  sectors,  Hungary  can 
make  use  of  the  Just  Transition  Mechanism  in  the  context  of  cohesion  policy  to 
alleviate  socio-economic  impact  of  the  transition  in  the  most  affected  regions.  In 
addition,  Hungary  can  make  use  of  the  European  Social  Fund  Plus  to  improve 
employment opportunities and strengthen social cohesion. 

(37) 

In  light  of  the  Commission’s  assessment,  the  Council  has  examined  the  2022 
Convergence Programme and its opinion is reflected in recommendation (1) below. 

HEREBY RECOMMENDS that Hungary take action in 2022 and 2023 to:  

1. 

2. 

3. 

4. 

5. 

In 2023, ensure that the growth of nationally-financed current expenditure is in line 
with  an  overall  neutral  policy  stance,  taking  into  account  continued  temporary  and 
targeted support to 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  transition  and  for 
energy  security,  including  by  making  use  of  the  RRF,  RePowerEU  and  other  EU 
funds. For the period beyond 2023, pursue a fiscal policy aimed at achieving prudent 
medium-term  fiscal  positions.  Improve  the  long-term  sustainability  of  the  pension 
system,  while  preserving  adequacy  in  particular  through  addressing  income 
inequalities. 

Swiftly  finalise  the  negotiations  with  the  Commission  of  the  2021-2027  cohesion 
policy programming documents with a view to starting their implementation. 

Continue  the  labour  market  integration  of  the  most  vulnerable  groups,  in  particular 
through upskilling, and extend the duration of unemployment benefits.  Improve the 
adequacy  of  social  assistance  and  ensure  access  to  essential  services  and  adequate 
housing  for  all.  Improve  education  outcomes  and  increase  the  participation  of 
disadvantaged groups, in particular Roma in quality mainstream education. Improve 
access to quality preventive and primary care services. 

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,  engagement  with  other  stakeholders  and  regular  impact 
assessments. Continue simplifying the tax system. Improve regulatory predictability 
and  competition  in  the  services  sector  in  particular  in  retail  and  utilities, and  apply 
competition scrutiny systematically in business transactions. Improve competition in 
public procurement. 

Promote reform and investment on sustainable water and waste management and the 
circularity of the economy, the digitalisation of  businesses, green  and digital  skills, 
and research and innovation.  

EN 

12 

  EN 

6. 

Reduce overall reliance on fossil fuels by accelerating the deployment of renewables, 
in  particular  by  streamlining  the  permitting  procedures  and  the  upgrading  of  the 
electricity  infrastructure.  Diversify  imports  of  fossil  fuels  in  particular  by 
strengthening interconnection with other countries. Reduce the dependency on fossil 
fuels in buildings and transport by stepping up efforts on energy efficiency measures 
for all, especially in residential houses and on the electrification of transport. 

Done at Brussels, 

For the Council 
The President 

EN 

13 

  EN