COMMISSION STAFF WORKING DOCUMENT Analysis of the recovery and resilience plan of Hungary Accompanying the document Proposal for a Council implementing Decision on the approval of the assessment of the recovery and resilience plan for Hungary
Date: 2022-11-30
Institutions: European Commission, Secretariat-General
Subjects: EU aid, Hungary, coronavirus disease, economic and social cohesion, economic recovery, economic reform, epidemic, investment, structural adjustment

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 30.11.2022  SWD(2022) 686 final  COMMISSION STAFF WORKING DOCUMENT Analysis of the recovery and resilience plan of  Hungary Accompanying the document Proposal for a Council implementing Decision on the approval of the assessment of the recovery and resilience plan for Hungary {COM(2022) 686 final}  
 
 
Table of contents 
1. 

Executive summary ............................................................................................................................... 2 

2.  Recovery and resilience challenges: scene-setter ................................................................................ 6 

2.1.  Macroeconomic outlook ............................................................................................................... 6 

2.2. 
Challenges related to sustainable growth, cohesion, resilience and policies for the next 
generation ................................................................................................................................................. 9 

2.3. 

Challenges related to the green and digital transition ............................................................... 15 

3.  Objectives, structure and governance of the plan.............................................................................. 24 

3.1.  Overall strategy of the plan ........................................................................................................ 24 

3.2. 

Implementation aspects of the plan ........................................................................................... 26 

4. 

Summary of the assessment of the plan ............................................................................................ 32 

4.1. 

Comprehensive and adequately balanced response to the economic and social situation ...... 32 

4.2. 

Link with country-specific recommendations and the European Semester ............................... 38 

4.3.  Growth potential, job creation, economic, institutional and social resilience, European Pillar of 
Social Rights, mitigating the impact of the crisis, and social territorial cohesion and convergence ...... 48 

4.4. 

The principle of ‘do no significant harm’ .................................................................................... 54 

4.5.  Green transition .......................................................................................................................... 56 

4.6. 

Digital transition .......................................................................................................................... 61 

4.7. 

Lasting impact of the plan ........................................................................................................... 63 

4.8.  Milestones, targets, monitoring and implementation................................................................ 65 

4.9. 

Costing ........................................................................................................................................ 67 

4.10.  Controls and audit ....................................................................................................................... 70 

4.11.  Coherence ................................................................................................................................... 74 

1 

 
 
 
 
 
 
 
 
1.  EXECUTIVE SUMMARY 

Hungary’s  recovery  and  resilience  plan1  contains  a  significant  number  of  reforms  and 
investments,  worth  EUR  5.8  billion  (3.8%  of  2021  GDP),  which  are  important  for  the 
economy. In the years before COVID-19, the Hungarian economy was growing rapidly, by 4.6% 
in 2019, supported by stimulative fiscal and monetary policies. Employment indicators were also 
improving, in line with the good economic situation, with the employment rate reaching 75.3% in 
2019.  The  pandemic  led  to  a  sharp  fall  of  economic  activity  in  spring  2020,  but  the  economy 
rebounded quickly  once  sanitary measures were  eased. While the  pandemic  halted  the positive 
trend of employment indicators, the employment rate remained above the EU average and the low 
unemployment  rate  only  increased  slightly.  The  budget  deficit  increased  significantly  in  2020, 
reaching  8.1%  of  the  GDP,  as  a  result  of  measures  mitigating  the  impact  of  the  crisis  on  the 
economy. The high deficit and a depreciating currency contributed to the substantial increase in 
the public debt, from 65.5% of GDP in 2019 to 79.3% in 2020.  

Hungary’s  economy  and  society  face  a  number  of  long-term  challenges,  which  have  been 
reflected in EU country-specific recommendations. The economy has caught up with the EU 
average over the years, but ensuring sustainable productivity growth will require sustained reforms 
and investments in education, skills, healthcare and the quality of public institutions. In particular, 
a more skilled workforce and a more robust institutional framework are essential to move away 
from a model based on low labour costs, towards a more knowledge-based, sustainable economy 
producing  advanced  products.  Strengthening  the  research  and  innovation  capacity  of  domestic 
firms  is  also  key  to  secure  long-term  growth  and  competitiveness.  While  the  overall  poverty 
situation has improved markedly in the last years, there is still room to address material deprivation 
and related challenges by improving social assistance, facilitating access to the labour market for 
disadvantaged  groups  and  providing  equal  access  to  quality  education  and  healthcare  for  all. 
Hungary also faces important challenges related to the green and digital transition, in areas such 
as energy efficiency, sustainable transport, water and waste management, and digitalisation in both 
the public and private sectors. 

The plan pursues the general objective of the Recovery and Resilience Facility to promote 
the Union’s economic, social and territorial cohesion and is balanced in its response to the 
six policy pillars referred to in Article 3 of the Regulation2. The plan includes a broad mix of 
reforms and investments, with a particular focus on the green transition, digital transformation, 
building economic, social and institutional resilience, and on policies for the future generations. 
The plan also includes measures to support sustainable and inclusive growth, as well as social and 
territorial cohesion. The plan primarily addresses the green transition with measures promoting 
low-carbon  public  transport,  energy  grid  developments,  renewable  energy  generation,  water 
management  and  the  circular  economy.  The  pillars  linked  to  the  digital  transformation  and  to 
smart, sustainable and inclusive growth  are addressed  across various components, and the plan 

1 Hungary published its draft Recovery and Resilience Plan at: 
Helyreállítási és Ellenállóképességi Eszköz (RRF) | Széchenyi Terv Plusz (gov.hu)  
2  Regulation  (EU)  2021/241 of  the  European  Parliament  and  of  the  Council  of  12  February  2021  establishing  the 
Recovery and Resilience Facility. 

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includes  several  measures  to  promote  the  digitalisation  of  public  administration,  education, 
healthcare  and  transport.  The  pillar  on  resilience  is  addressed  through  a  significant  number  of 
measures, in particular through a comprehensive reform and investment package to modernise the 
healthcare sector, as well as to improve its efficiency and access for all. Institutional reforms are 
also expected to improve the resilience of the economy through strengthening the fight against 
corruption, competition in public procurement and the independence of the justice system. Policies 
for the next generation are notably covered by measures in the component on demography and 
public  education  and  the  component  on  disadvantaged  settlements,  notably  through  measures 
promoting digital education and improved access to quality education and childcare. Long-term 
growth challenges are mainly addressed through measures in the field of education, healthcare and 
research and development. Measures promoting the development of a qualified and competitive 
workforce and supporting disadvantaged settlements provide the main contributions to the pillar 
on social and territorial cohesion. 

The  plan  is  expected  to  contribute  to  effectively  addressing  a  significant  subset  of  the 
structural  challenges  identified  in  the  country-specific  recommendations  addressed  to 
Hungary  in  2019,  2020  and  2022.  The  plan  contains  important  measures  addressing  the 
challenges related to ensuring a swift and smooth green and digital transition. In particular, a 
series  of  actions  promote  the  clean  and  efficient  production  and  use  of  energy,  sustainable 
transport,  water  management  and  the  transition  to  the  circular  economy.  In  addition,  various 
measures aim at improving digital infrastructure and skills, as well as the reinforcement of digital 
public administration. The plan includes a number of measures in the area of education, which 
contribute to addressing important challenges. It places emphasis mainly on the digitalisation of 
education,  the  improvement  of  digital  skills,  the  modernisation  of  vocational  education  and 
training institutions,  as well as on improving  the attractiveness  of the teaching profession by a 
reform foreseeing steady increases in the wages of teachers. The plan also includes measures to 
increase the quality of learning environments in higher education and to improve the ecosystem 
for  research  and  development.  The  plan  includes  measures  that  contribute  to  addressing  the 
challenges related to poverty and social exclusion by strengthening basic services and providing 
comprehensive  support  for  those  living  in  the  300  most  disadvantaged  settlements,  including 
measures  to  promote  employment  and  skills  development.  The  creation  of  additional  childcare 
places will facilitate the labour market participation of parents. The plan sets out an ambitious 
agenda  to  address  key  challenges  of  the  healthcare  system  such  as  unequal  access  to  health 
services,  a  high  prevalence  of  gratuity  payments,  excessive  reliance  on  hospital-level  care  and 
regional  disparities  stemming  from  staff  shortages  and  an  uneven  distribution  of  active  health 
workforce across the country.  

The Hungarian plan also includes a comprehensive range of measures in many areas related 
to  rule  of  law  issues,  aiming  to  overhaul  existing  practices  and  lead  to  structural 
improvements. These measures also contribute to addressing a significant subset of the structural 
challenges  identified  in  the  country-specific  recommendations.  The  plan  includes  a  number  of 
measures  to  reinforce  the  anti-corruption  framework  and  to  strengthen  the  legislative, 
institutional  and  practical  arrangements  to  more  effectively  prevent,  detect  and  correct  fraud, 
corruption,  conflict  of  interest  and  other  risks  in  the  use  of  Union  support  in  Hungary.  Such 

3 

 
 
measures include, among others, the establishment of an Integrity Authority and enabling a judicial 
review of decisions by the prosecution service or the investigating authority to dismiss a crime 
report  or  terminate  criminal  proceedings.  A  number  of  reforms  aim  to  strengthen  judicial 
independence in particular by eliminating undue influences and making sure that the position of 
the  judges  in  terms  of  appointments,  secondments  and  in  other  decisions  is  secured  against 
arbitrary  decisions.  To  this  end,  the  plan  includes  measures  in  particular  on  significantly 
strengthening the role and powers of the National Judicial Council, reforming the functioning of 
the  Supreme  Court,  removing  the  possibility  for  public  authorities  to  challenge  final  judicial 
decisions before the Constitutional Court, and removing obstacles to preliminary references to the 
Court of Justice of the European Union. The plan includes an ambitious set of measures aiming to 
improve competition in public procurement, with targets to significantly decrease the currently 
high share of public procurements resulting in single bids. To achieve this, Hungary plans to set 
up a comprehensive performance measurement framework and enhance the participation of small 
and medium-sized companies in tenders. The plan also includes reforms to improve the quality 
and transparency of the decision-making process and to ensure a more systematic involvement 
of  social  partners  and  stakeholders.  The  plan  also  includes  reform  steps  to  tackle  the  risks  of 
aggressive tax planning and to simplify the tax system. Finally, the plan includes a reform of the 
pension system, which aims to address challenges related to fiscal sustainability and population 
ageing, and envisages a number of spending reviews to improve the quality of public finances.  

The green transition is a key priority of the plan, with 48.1% of its allocation dedicated to 
climate-related measures. The measures included in the plan are expected to contribute to the 
decarbonisation and energy objectives as identified in the National Energy and Climate Plan 2021-
2030,  and  they  are  important  steps  to  move  towards  the  2030  and  2050  climate  targets,  in  the 
context of the European Green Deal. Investments in residential solar power systems  and in the 
strengthening of the electricity grid, combined with comprehensive reforms aimed at facilitating 
the development and connection of renewable energy sources, including wind power generation, 
are  expected  to  contribute  to  Hungary  achieving  its  2030  renewable  energy  production  target. 
Renovations of buildings will decrease their impact on greenhouse gas emissions and improve air 
quality.  Measures  to  make  transport  more  sustainable,  such  as  railways  investments,  the 
deployment of electric buses and a reform of the tariff system, are expected to result in a cleaner, 
smarter, safer and more efficient transport sector. The plan also includes reforms and investments 
on water management systems, as well as measures supporting the transition to a circular economy 
by supporting the use of secondary raw materials. None of the measures are expected to cause 
significant harm to the environment. 

With 29.8% of its allocation dedicated to digital measures, the plan includes a comprehensive 
package to promote the digital transformation of the economy and society. Most components 
contain measures relating to the digital transition. In particular, significant measures are foreseen 
to improve the digital equipment and skills in primary, vocational and higher education. The plan 
also contains measures relating to the digitalisation of public administration as well as of the health, 
transport and energy sectors. 

4 

 
 
The plan envisages changes to a number of institutions and policies, which can be expected 
to  address  root  causes  of  existing  challenges,  and  have  a  lasting  impact.  The  plan  aims  to 
achieve structural changes and efficiency gains in particular in the healthcare and energy sectors 
and in public procurement. The far-reaching reform in the field of healthcare aims to modernise 
the sector and eradicate the practice of gratuity payments, which hampers access of the low-income 
population to quality care and creates inefficiencies in the treatment pathways. The elimination of 
gratuity payments could  be also expected to contribute to reducing low-level corruption. These 
reforms are supported by investments in e-health. Reforms in the energy sector aim to create a 
more effective administrative and legal framework to support the deployment of renewable energy 
projects and their connection to the electricity system, which is important for the green transition, 
as well as for improving the energy independence of the country. Measures to increase competition 
in public procurement and for the digitalisation of certain procedures are expected to increase the 
efficiency  of  public  administration.  More  generally,  the  plan  is  expected  to  make  a  significant 
contribution  to  strengthening  the  institutional  resilience  of  Hungary,  by  reinforcing  the  anti-
corruption  framework,  strengthening  judicial  independence,  and  improving  the  quality  and 
transparency of the decision-making process.   

Hungary has established an adequate structure to implement the plan as well as to monitor 
and report on progress. The central coordinating body will be the Deputy State Secretariat for 
the  Implementation  of  the  Recovery  and  Resilience  Plan  in  the  ministry  responsible  for  the 
implementation  of  Union  support  (the  ‘National  Authority’).  The  National  Authority  will  be 
responsible for the overall coordination of the implementation of the plan, for monitoring progress 
on milestones and targets,  for  drawing up payment  requests  and  for signing the accompanying 
management declarations. It will also coordinate the reporting of milestones and targets, relevant 
indicators, as well as the provision of data, such as on final recipients, based on information in a 
monitoring  information  system  developed  to  fit  the  purposes  of  the  plan.  The  milestones  and 
targets  of  the  plan  constitute  an  appropriate  system  for  monitoring  its  implementation:  the 
proposed  milestones  and  targets  are  clear  and  seem  realistic,  and  the  proposed  indicators  are 
relevant, acceptable and robust, allowing for proper monitoring during the implementation. The 
monitoring  indicators  are  in  general  sufficiently  clear  and  comprehensive  to  ensure  that  their 
completion can be traced and verified. The milestones and targets chosen represent key steps of 
the measures and concrete achievements directly linked to the implementation of the measures and 
under the control of Hungary. Overall, the milestones and targets reflect adequately the overall 
level of ambition of the plan and are considered relevant for its implementation.  

Hungary has provided detailed breakdowns of individual cost estimates for investments and 
reforms  with  an  associated  cost  included  in  the  plan.  Cost  breakdowns  and  supporting 
documents show that most of the costs are sufficiently justified, reasonable, plausible, in line with 
the principle of cost efficiency, and commensurate to the expected national economic and social 
impact. Hungary provided sufficient information and evidence that the amount of the estimated 
total costs is not covered by existing or planned Union financing. 

The arrangements in place to audit and control the implementation of the plan are adequate 
to contribute to prevent, detect and correct corruption, fraud and conflicts of interests, provided 

5 

 
 
that specific measures contained in the proposal for the Council implementing decision are put in 
place. Taking into account the systemic irregularities, deficiencies and weaknesses identified for 
Hungary in the procedure under Article 6 of Regulation (EU, Euratom) 2020/2092 on a general 
regime of conditionality for the protection of the Union budget (‘the Conditionality Regulation’), 
a significant number of measures to be fulfilled prior to the submission of the first payment request 
under the plan have been identified, in order to strengthen the arrangements related to audit and 
control.  These  are  in  line  with  the  remedial  measures  which  Hungary  committed  to  undertake 
under  the  Conditionality  Regulation  process.  Taking  into  account  that  effective  judicial 
independence  is  a  prerequisite  for  the  functioning  of  an  internal  control  system,  reforms  to 
strengthen judicial independence are also included. The correct, full and effective implementation 
of all these measures will be essential for ensuring that the financial interests of the Union are 
adequately protected during the implementation of the plan. As regards the specific arrangements 
for the plan, Hungary  has  committed to adopt  a government  decree  to  set  out  the precise legal 
mandates, roles and responsibilities of different bodies involved in the implementation, audit and 
control of the plan. Targeted audits by the authorities are expected to confirm that arrangements 
concerning  the  use  of  the  Arachne  system  to  effectively  prevent  and  detect  fraud,  corruption, 
conflict of interest and double funding are appropriate, that the arrangements to prevent, detect 
and correct conflict of interest at any level are effective, and that the necessary functionalities of 
the  monitoring  information  system,  which  will  be  crucial  for  the  regular  implementation  and 
control of the plan, are fully functioning and operational as well as tailored to the requirements of 
the Recovery and Resilience Facility. Finally, the Hungarian audit authority will be expected to 
put  in  place  an  effective  audit  strategy,  in  line  with  the  approach  described  in  the  plan  and 
internationally accepted audit standards, to allow for effective audits to be carried out in time for 
the audit summary to be submitted together with the first payment request. 

Overall,  the  plan  represents  a  consistent  and  comprehensive  package  of  reforms  and 
investments, mutually reinforcing each other. Synergies are ensured in thematic components as 
well as horizontally across a number of components.  

Table  1:  Summary  of  the  Hungarian  recovery  and  resilience  plan  assessment  for  the  11 
criteria set by the Recovery and Resilience Facility regulation 

(1) 
Balanced 
Response 

(2) 
CSRs 

(3) 
Growth, 
jobs… 

(4) 
DNSH 

(5) 
Green 
target 

(6) 
Digital 
target 

(7) 
Lasting 
impact 

(8) 
M & T 

(9) 
Costing 

(10) 
Control 
Systems 

(11) 
Coherence 

A 

A 

A 

A 

A 

A 

A 

A 

B 

A 

A 

2.  RECOVERY AND RESILIENCE CHALLENGES: SCENE-SETTER 

2.1. Macroeconomic outlook  

A period of high growth was interrupted by the pandemic. In the years before COVID-19, the 
Hungarian economy was growing rapidly, supported by stimulative fiscal and monetary policies. 
GDP grew by 4.9% in 2019 and capacity constraints and a shrinking working-age population were 

6 

 
 
 
pointing towards a slowdown in the years ahead. These supply bottlenecks also manifested in high 
wage growth, rising inflation and rapid house price increases. 

Hungary’s  economy  bounced  back  from  the  COVID-19  crisis.  The  COVID-19  pandemic 
resulted in a 4.5% drop of GDP in 2020. The sharp fall of economic activity in spring 2020 was 
followed by a quick rebound as sanitary measures were eased. Real GDP grew by 7.1% in 2021 
and surpassed its pre-pandemic level by 2.3%. While unemployment rose from 3.3% in 2019 to 
4.1% in 2021, its increase was mitigated by various government programmes, also benefitting from 
EU financial support through the SURE scheme. Employment rose as the economy recovered, and 
the employment rate in the 15-64 age group reached 73.1% in 2021, above the EU average. GDP 
growth remained strong up to the first half of 2022, boosted by expansionary economic policies. 
The economy even showed signs of overheating again, including rising inflation and a widening 
current account deficit.  

The pandemic had a strong negative impact on public finances. The budget deficit increased 
significantly in 2020, reaching 8.1% of the GDP, as a result of spending on measures mitigating 
the impact of the crisis on the economy. The high deficit and a depreciating currency contributed 
to  the  substantial  increase  in  the  public  debt,  from  65.5%  of  GDP  in  2019  to  79.3%  in  2020, 
followed by a reduction to 76.8% in 2021. 

The difficult external environment in the wake of Russia’s war of aggression against Ukraine 
and the ensuing energy crisis created new challenges for Hungary. The external environment 
has become more challenging since spring 2022 due to tighter external financing conditions, as 
well as persistently increasing energy prices and the risk of supply disruptions.  The Hungarian 
forint depreciated by some 11% relative to the euro since the beginning of 2022, while the 10-year 
government bond yield rose by some 300 basis points to 7.6% (on 22 November 2022).  

Overall, the Commission’s 2022 Autumn Economic Forecast projects a sharp slowdown of 
economic  growth  amid  high  inflation.  Higher  inflation  and  energy  prices,  as  well  as  tighter 
financing conditions, are set to constrain economic activity in the coming years, with real GDP 
growth projected to slow down from 5.5% in 2022 to 0.1% in 2023 and recover only to 2.6% in 
2024. Inflation is projected to remain high in 2022 and 2023, at 14.8% and 15.7% respectively, 
driven by increasing material, energy and wage costs for companies. After the higher production 
costs feed into consumer prices, inflation is projected to recede to 3.9% in 2024.  

The  labour  market  remains  tight  despite  the  economic  slowdown.  The  labour  market  was 
robust in the first half of 2022 with unemployment falling to 3.3% and nominal wages growing by 
14.9% in Q2-2022. Shortages of skilled workers are expected to mitigate the rise in unemployment 
and to support the nominal wage growth in the coming years. The unemployment rate is expected 
to rise marginally from 3.6% in 2022 to 4.2% in 2023-2024.  

Public finances enter a challenging period. In 2022, the deficit is forecast to remain high at 6.2% 
of GDP despite robust revenue  growth  in  the first  half of the  year. The introduction of several 
expansionary measures at the beginning of the year and increased spending in response to high 
energy prices are forecast to put pressure on the public finances in 2022 and beyond. The deficit 

7 

 
 
is expected to narrow to 4.4% in 2023 (notably due to additional windfall profits and sectoral tax 
revenues) before rising again to 5.2% in 2024. Public debt is projected to decrease slightly from 
76.8% of GDP in 2021 to 75.1% in 2024. Government gross financing needs are high and the share 
of  government  debt  denominated  in  foreign  currencies  or  held  by  non-residents  is  elevated. 
Sovereign bond yields have increased for all maturities especially since summer last year. Based 
on the Fiscal Sustainability Report 2021, fiscal sustainability risks are medium in the medium term 
and high in the long term, also due to population ageing. 

External sustainability risks have increased amid deteriorating external flows.  The current 
account deficit widened to 4% of GDP in 2021, with a clear further widening underway in 2022. 
Hungary’s large net energy imports make the external balance sensitive to international energy 
price developments.  

Cost  competitiveness  concerns,  which  existed  already  before  the  COVID-19  pandemic, 
persist. Continued nominal depreciations of the forint have partially offset the large increases in 
nominal unit labour costs (ULCs) in recent years. ULCs increased again in 2021, in context of a 
tight labour market, and are forecast to increase strongly in 2022 and 2023.  

House prices have grown rapidly until recently. Nominal house price growth accelerated from 
4.9% to 16.5% in 2021 and grew at one of the highest paces in the EU. Nominal year to year house 
price growth accelerated to 22.8% in the second quarter of 2022. House prices were estimated to 
be 20% overvalued in 2021. At the same time, dwelling investment was well below the EU average 
at 3.9% of GDP in 2021. 

The  banking  sector  remains  overall  sound  but  faces  challenges  ahead.  Profitability  has 
recently been one of the highest in the EU, the Tier-1 capital ratio is close to the EU average and 
the share of non-performing loans has remained low. Yet a recently introduced windfall tax for 
2022  and  2023  and  a  regulatory  cap  on  flexible  mortgage  rates  until  mid-2023  are  likely  to 
significantly reduce banks’ profits. The holdings of government debt accounts for almost one fifth 
of  bank  assets.  The  private  sector  debt-to-GDP  ratio  is  low  but  borrowing  by  households  and 
corporations has increased strongly since 2020 and loans in foreign currency have significance, 
notably for commercial real estate. 

The macroeconomic scenario contained in Hungary’s Recovery and Resilience Plan expects 
robust  economic  activity  in  2022-2023.  This  scenario  is  in  line  with  Hungary’s  2022 
Convergence  Programme  published  in  April  2022,  which  do  not  take  into  account  economic 
developments since spring 2022. The forecast projects high real GDP growth of 4.3% in 2022, 
driven by a strong pick-up in private consumption. Growth is then expected to remain above 4% 
in 2023-2025. According to this scenario, inflation is set to fall from 8.9% in 2022 to 5.2% in 2023, 
before reverting to the central bank’s target of 3% in 2024.  

The forecast underpinning the plan is more favourable than the Commission’s forecast, as it 
does not fully include the implications of Russia’s war against Ukraine and the energy crisis. 

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Table 2: Comparison of macroeconomic developments and forecasts 

2019 

2020 

2021 

2022 

2023 

2024 

2025 

2026 

COM  COM  COM  COM  RRP  COM  RRP  COM  RRP  RRP  RRP 

Real GDP (% 
change) 
Employment (% 
change) 
Unemployment rate 
(%) 

HICP inflation (%) 

4.9 

-4.5 

7.1 

5.5 

4.3 

0.1 

4.1 

2.6 

4.2 

4.3 

4.3 

1.1 

-1.0 

1.0 

1.9 

0.7 

0.0 

0.3 

0.4 

0.2 

0.1 

0.1 

3.3 

3.4 

4.1 

3.4 

4.1 

5.2 

3.6 

14.8 

3.6 

8.9 

4.2 

15.7 

3.3 

5.2 

4.2 

3.9 

3.1 

3.0 

2.9 

3.0 

2.8 

3.0 

-2.0 

General government 
balance (% of GDP) 
Gross debt ratio (% 
of GDP) 
Source: European Commission’s 2022 Autumn Economic Forecast and Hungary’s Recovery and 
Resilience Plan 

76.4 

75.1 

65.3 

76.8 

79.3 

75.2 

-6.2 

-4.4 

-5.2 

-7.5 

-7.1 

2.2. Challenges  related  to  sustainable  growth,  cohesion,  resilience  and  policies  for  the 

next generation  

Smart, sustainable and inclusive growth 

The  Hungarian  growth  model  relies  extensively  on  participation  in  global  value  chains. 
Economic policy has focused on attracting foreign direct investment in the tradable sector through 
comparatively low labour cost, flexible labour market legislation, large investment subsidies and 
a competitive corporate tax system. While Hungary achieved some income convergence to the EU 
average over the last decade, the decreasing availability of skilled labour, low investment in human 
capital  and  deteriorating  institutional  quality  have  become  constraints  for  growth.  In  the  years 
before  the  COVID-19  pandemic,  the  government  aimed  to  speed  up  income  convergence  by 
administrative  wage  increases  and  pro-cyclical  fiscal  and  monetary  expansion.  The  supportive 
fiscal  and  monetary  policy  mix  continued  during  the  COVID-19  crisis.  However,  without 
productivity-improving structural reforms, this policy resulted in high inflation, rapid house price 
growth,  currency  depreciation  and  a  deteriorating  external  balance.  This  created  vulnerabilities 
before the significant increase of energy prices hit the economy in 2022. 

Hungary has significant room for catching up in productivity. While productivity growth has 
picked up since 2016, thanks to the strong cyclical upturn before the COVID-19 pandemic, the 
labour productivity gap compared to the EU has not decreased since 2010. A Hungarian worker 
produces on average 32% less value added than an average worker in the EU, after accounting for 
the lower price level and longer working hours in Hungary. While demand conditions were rather 
supportive  in  the  last  decade,  there  remain  supply-side  barriers  to  investment  and  productivity 
growth,  especially  for  smaller  firms.  The  development  of  the  economy  has  so  far  relied  on 
increasing  labour  supply  and  pursuing  integration  into  the  more  cost-sensitive  mid-stream 

9 

 
 
  
 
 
 
 
 
 
 
 
 
 
 
activities of global value chains. Hungary’s future economic development depends on its capacity 
to implement structural and institutional reforms which effectively remove obstacles to sustainable 
productivity  growth.  In  particular,  a  more  skilled  workforce  and  a  more  robust  institutional 
framework  are  required  to  move  away  from  a  model  based  on  low  labour  costs,  towards  a 
knowledge-based, sustainable economy producing advanced products.  

Strengthening  academia-business  linkages  and  the  research  and  innovation  capacity  of 
domestic  firms  is  key  for  long-term  growth  and  competitiveness.  Hungary  is  an  “emerging 
innovator” and its performance relative to the EU has deteriorated in recent years according to the 
2022 edition of the European Innovation Scoreboard. Spending on R&D is increasing slowly from 
0.98%  of  GDP  in  2008  to  1.6%  of  GDP  in  2020.  This  value  is  high  among  Central  Eastern 
European countries, but lower than the EU average of 2.31%. The increase over the years took 
place in the business sector, while R&D spending in the public sector decreased. The shortage of 
talent and skills limits the innovative activity of enterprises. Only 49% of Hungarians possess at 
least basic digital skills, against an EU average of 54% in 2021. Tertiary education attainment rates 
are among the lowest  in the EU.  The academia-business  cooperation is  mostly limited to  large 
companies due to the lack of demand and capacity of smaller firms. 

Barriers to competition hinder productivity growth, especially in services. Manufacturing and 
services face different environments. The authorities tend to sign strategic agreements with large 
manufacturing firms and their investment projects benefit from significant government support. 
Service  activities,  however,  face  more  barriers  to  competition.  Frequent  introduction  and 
subsequent  repeals  of  administrative  measures  have  contributed  to  an  unstable  business 
environment in retail trade. Restrictions on large units hold back efficiency gains in the retail sector 
and  raise  consumer  prices.  The  government  can  exempt  business  merger  and  acquisition 
transactions from the examination of the Competition Authority so that such an examination never 
takes place. The criteria for these exemptions are not laid out transparently in the legislation, and 
no  formal  procedure  exists  to  contest  the  decision  of  the  government  on  these  exemptions. 
Moreover, the provision of several services is entrusted to state-owned or private firms specifically 
created for these purposes, which operate without competition. Moreover, Hungary has the highest 
number of regulated professions in the EU. Slow and costly insolvency procedures may also 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 lack of competition in public procurement decreases incentives to innovate for companies 
which  cannot  enter  the  procurement  market,  as  well  as  for  companies  benefitting  from  the 
situation.  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.  In  February  2021,  the  government  set  itself  an 
ambitious target of reducing the percentage of public procurement procedures with only a single 

10 

 
 
bid to less than 15%. However, the recent apparent exclusion of public interest trusts from public 
procurement rules remains a concern. 

Social and territorial cohesion 

Employment recovered after the COVID-19 crisis but the situation of women and vulnerable 
groups, in particular low skilled and young people, is still to be improved. The employment 
and  social  situation  improved  in  the  last  decade  in  line  with  the  good  economic  situation.  The 
COVID-19 pandemic halted this positive trend but the labour market regained its strength quickly 
after the peak of the crisis. The employment rate in the 20-64 age group rose from 62% in 2010 to 
80.2% in Q2 2022, well above the EU average of 74.9%. However, not all groups benefited equally 
and employment rates remain low for various vulnerable groups. In particular, mothers with young 
children tend to stay out of work for a long time, partly due to the scarcity of childcare places in 
nurseries. Some other groups struggle to remain in the labour market: by design, the tax and benefit 
system provides limited cushion in difficult economic times and the unemployment benefit scheme 
is one of the least generous in the EU in terms of benefit and duration of support.  

Although the overall poverty situation has improved markedly, challenges remain. In 2021, 
the share of population at risk of poverty or social exclusion was lower in Hungary than the EU 
average.  However,  material  and  social  deprivation  rates  remain  among  the  highest  in  the  EU, 
especially  for  children,  and  risks  are  concentrated  in  specific  groups  and  territories.  Based  on 
national  data,  poverty  rates  are  3-4  times  higher  for  Roma,  a  situation  which  reflects  regional 
disparities in terms of access to the labour market and quality public services.  

Income  inequality  has  increased  over  the  past  decade  and  inequalities  in  access  to  public 
services remain high. In 2021, the incomes of the richest 20% of the population were 4.4 times 
higher than those of the bottom 20%, up from 3.6 times higher in 2008. This increase has been one 
of  the  highest  in  the  EU,  although  the  ratio  still  remains  below  the  EU  average  (5.2  in  2021). 
Similarly, the poverty gap increased significantly in recent years. Inequalities persist in access to 
public services, including basic services such as water supply and sanitation, and a high proportion 
of people experience difficult living conditions. The low and shrinking supply of social housing is 
becoming  a  challenge  against  the  backdrop  of  high  residential  property  prices.  Disadvantaged 
groups face limitations in access to the labour market and quality education and healthcare. More 
inclusive education and healthcare systems are seen as key to improve social cohesion. 

Population ageing and the increase of public debt during the COVID-19 crisis  intensified 
long-term  fiscal  sustainability  challenges.  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 this sustainability challenge by increasing the government’s 
long-term pension liabilities. In particular, the reintroduction of the 13th-month pension in 2021 
and 2022 increases expenditure on pensions. The system also faces challenges related to fairness: 
changes to tax and pension systems in the last decade are projected to increase expenditure on the 

11 

 
 
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.  At the same time, 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. 

Regional  disparities  are  significant  in  terms  of  economic  development,  labour  market, 
education outcomes and demographic trends, as well as in terms of access to infrastructure 
and public services. Since 2008, GDP per capita has converged to the EU average in every region. 
However,  this  process  was  uneven  between  the  regions  and  at  county  level,  thus  significant 
disparities between and within regions remain. The rate of households that have broadband access 
has significantly improved in the last five years, but there is still a gap between the best (Budapest) 
and  worst  (Dél-Alföld)  connected  regions.  The  more  developed  regions  benefit  from  a 
concentration of skilled workers, good transport connections and proximity to main trade partners, 
which attracted significant foreign direct investment and created local agglomeration effects. Rural 
areas suffer from shortages and degradation of infrastructure and public services, including public 
education and health care. 

Health and economic, social and institutional resilience 

Health  outcomes,  although  improving,  remain  worse  than  in  most  other  EU  countries, 
reflecting both lifestyles leading to health risks and the limited effectiveness of public health 
care.  The  life  expectancy  of  Hungarians  lags  behind  that  of  most  other  Europeans  and  differs 
significantly according to gender and levels of education. In particular, Hungary has one of the 
highest mortality rates from preventable causes in the EU. This is also correlated with an above-
average  prevalence  of  risk  factors,  low  spending  on  prevention  and  a  public  share  of  health 
spending below the EU average, which all indicate substantial scope to strengthen public health 
interventions. In this context, individuals are increasingly pushed to turn to private care to access 
health services, with repercussions on social equity as well as health outcomes. At the same time, 
the  health  system  remains  excessively  reliant  on  hospitals  to  provide  care  services,  with 
insufficient focus on primary care and prevention, and a too limited role for general practitioners 
as gatekeepers to higher levels of care. The low number of practitioners, their age composition, 
geographical  distribution,  limited  formal  competencies,  as  well  as  the  lack  of  performance 
incentives to avoid unnecessary referrals, also hinder the effectiveness of primary care and reduce 
the  attractiveness  of  the  profession.  Recent  reforms  have  encouraged  general  practitioners  to 
cooperate  more  with  each  other,  which  could  make  primary  care  more  efficient.  The  obsolete 
hospital payment system, together with low decision-making autonomy at institutional level, has 
contributed to rising hospital debt which continues to accumulate. Moreover, the hospital network 
is  excessively  fragmented,  hindering  efficiency  and  quality  of  care.  In  2020,  the  reform  of  the 
hospital  network  started  by  centralising  several  care  services  and  administrative  functions  at 
county level. 

12 

 
 
Although  authorities  started  addressing  the  issue  of  health  workforce  shortages,  regional 
disparities remain. Compared to the EU average, Hungary has a lower number of doctors and 
nurses per 1 000 inhabitants. Large outflows of skilled health professionals seeking better working 
conditions  abroad  or  in  the  fast-growing  domestic  private  sector  have  exacerbated  the  issue  of 
shortages of adequate staff in the public health care sector. To retain physicians, the government 
took steps to increase the salaries of doctors working in state and municipal healthcare facilities. 
Salary increases were also accompanied by provisions limiting doctors' capacity to simultaneously 
work in public and private facilities, and introducing stricter penalties for health workers accepting 
gratuity payments. Although wages remain low from an EU perspective, the recent increases may 
contribute to stemming or slowing down outflows of medical personnel. 

Sound public finances and quality public spending are crucial to address current and future 
challenges. While the inflow of EU funds is expected to decrease over time as Hungary catches 
up with  the EU average  income levels,  the investment  needs will remain sizable.  In particular, 
Hungary will face high spending pressures to support the green transition and the move towards a 
more knowledge-based growth model. In the short and medium term, this warrants a systematic 
review  of  the  expenditure  side  of  the  budget,  with  a  view  to  identifying  potential  savings  and 
efficiency  gains,  and  scope  for  reallocation  within  the  budget  to  promote  growth-friendly 
spending, including on the green and digital transitions.  

The  tax  system  is  highly  competitive,  but  it  might  also  facilitate  aggressive  tax  planning. 
Hungarian companies can benefit from the lowest corporate tax rate in the EU and the tax burden 
on labour decreased significantly (while remaining high for low-income earners). However, sector-
specific taxes and a large number of small taxes complicate the tax system and raise compliance 
costs, in particular for smaller firms. At the same time, Hungary is one of only two EU Member 
States that do not apply any withholding tax on royalty, dividend or interest payments to non-EU 
jurisdictions.  Royalty  and  interest  payments  leaving  the  EU  are  not  taxable  in  Hungary,  even 
though  they  can  be  deducted  from  a  company’s  tax  base.  As  a  result,  the  outflows  of  royalty, 
interest and dividend payments from Hungary to offshore financial centres are well above the EU 
average. Reforms that tackle the risk of aggressive tax planning and increase the transparency of 
the tax system  are expected to  result in  higher  government  revenues and stronger job creation, 
while  ensuring  that  companies  do  not  avoid  paying  their  fair  share  of  taxes  in  the  EU.  The 
introduction of rules aimed at ensuring that payments towards low- or no-tax jurisdictions are non-
deductible, as well as stronger conditionality for companies on fiscal residence, are expected to 
contribute to these objectives.  

Weak  quality  of  institutions,  including  an  insufficient  anti-corruption  framework,  holds 
back  productivity  growth.  In  recent  years,  institutional  quality  has  been  relatively  weak  and 
deteriorating in comparison with the EU average. Deficient independent control mechanisms and 
tight interconnections between politics and certain businesses are conducive to corruption. When 
serious allegations arise, there is a recurrent lack of determined action to investigate and prosecute 
corruption  cases  involving  high-level  officials  or  their  immediate  circle.  Accountability  for 

13 

 
 
decisions to close investigations has been a matter of concern as there were no effective remedies 
against  decisions  of  the  prosecution  service  not  to  prosecute  alleged  criminal  activities. 
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 have also 
further weakened the anti-corruption framework. In December 2021, the government postponed 
the implementation of most measures in its anti-corruption strategy for the years 2020-2022. 

Low  transparency  of  the  policy-making  process  may  affect  the  business  environment. 
Hungary  scores  low  among  the  Member  States  in  social  dialogue,  stakeholder  engagement  in 
developing primary law, consultation with social partners, civil society, 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 been very low in recent years3. 

Concerns regarding judicial independence also exist. The National Judicial Council continues 
to face difficulties in counter-balancing the powers of the President of the National Office for the 
Judiciary. Concerns are also centered around the functioning of the Supreme Court. In particular, 
the rules on electing the President of the Supreme Court create risks of political influence over the 
top court of the country, including through the possibility for members of the Constitutional Court 
to  be  appointed  as  judges  at  the  Supreme  Court.  Further,  the  lack  of  transparency  of  the  case 
allocation scheme does not allow parties to verify whether any undue discretion has been applied. 
Questions  have  also  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 court. Concerns have also been raised by procedural rules allowing to challenge 
before the Supreme Court the necessity of a preliminary reference. 

Policies for the next generation, children and the youth 

Education can play a key role in unlocking the growth potential of the economy. According 
to the Social Scoreboard, educational outcomes are below the EU average and the impact of the 
socio-economic background of pupils on their educational outcomes is one of the strongest in the 
EU. Contrary to European trends, early school leaving increased in Hungary in the last decade to 
12.0% in 2021, which is above the EU average of 9.7%. Early school leaving is higher in the least 
developed  districts,  and  six  times  higher  among  the  Roma  population  than  the  non-Roma. 
Performance-based selection into different education tracks starts at the age of 10 and this leads to 
the  early  separation  of  underachieving  pupils  from  their  high-achieving  peers.  Disadvantaged 
students  have  low  chances  of  entering  the  higher  educational  tracks.  Entrants  to  three-year 
vocational education and training (VET) programmes have scarce opportunities to improve their 
already low basic skills,  due to  the limited basic skills  content of the curricula. Disadvantaged 

3 See European Semester 2022 country report, Annex 11 (SWD(2022) 614 final), and 2022 Rule of Law Report, 
Country Chapter on the rule of law situation in Hungary (SWD(2022) 517 final). 

14 

 
 
                                                           
pupils are attracted to VET programmes by a generous VET scholarship scheme as from the 2020-
2021 school year. The 2019 reform of vocational education and training removed the possibility 
for students in the three-year VET schools to obtain the upper-secondary-school leaving certificate 
in  formal  day-time  education,  which  is  needed  for  enrolling  in  higher  education.  The  low 
effectiveness  and  equity  of  the  school  system  are  partly  linked  to  the  lack  of  socioeconomic 
diversity within schools, the low level of curricular autonomy and the low salaries of teachers. The 
latter also translates in a low attractiveness for the profession. While aggregate indicators, such as 
the teacher pupil ratio, do not signal acute shortages, a 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 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 the profession, 
especially at the beginning of their career. Moreover, the centralised management of schools leaves 
school heads with limited autonomy and tools to improve the quality of teaching. As regards higher 
education, the share of 25-34 year old people with a tertiary diploma has risen since 2010, but it 
remains among the lowest in the EU. The number of entrants in tertiary education has even been 
shrinking  over  the  past  decade,  reflecting  demographic  trends,  poor  school  outcomes  and  the 
reduction of state-funded places. Since 2022, all workers below the age of 25 have been exempted 
from personal income tax, a measure which may increase employment but could further reduce 
the pool of applicants to tertiary education. Against this backdrop, the gap between the basic skills 
level of high- and low-educated adults is one of the largest in the EU. At the same time, adult 
participation in lifelong learning is about half of the EU average. This results in skills shortages 
and a low innovation potential. 

2.3. Challenges related to the green and digital transition  

Green dimension  

The recovery and resilience plan should contribute to the green transition and at least 37% of the 
financial allocation needs to contribute to climate objectives. According to the RRF Regulation, 
the  measures  in  the  plan  are  expected  to  contribute  to  achieving  the  2050  climate  neutrality 
objective, and the 2030 energy and climate targets, taking into account Hungary’s National Energy 
and  Climate  Plan  (NECP),  which  was  notified  to  the  Commission  on  22  January  2020.  The 
measures  should  also  contribute  to  meeting  environmental  targets  for  waste,  pollution  control, 
sustainable  mobility,  biodiversity  protection  and  restoration,  water  resources,  and  support  the 
transition to sustainable food systems as well as to a circular economy, while ensuring that nobody 
is left behind.  

Greenhouse gas emissions 

In  its  NECP,  Hungary  targets  a  modest  reduction  in  greenhouse  gas  emissions  by  2030. 
Hungary has a national economy-wide target of cutting greenhouse gas emissions by at least 40% 

15 

 
 
 
by 2030 compared to 1990. Additional measures are needed to attain this target. Hungary’s NECP 
sets targets for renewable energy sources and energy efficiency for 2030 that show low ambition 
with regard to the attainment of the EU targets, and provides no information about an estimated 
trajectory of annual emission levels for 2020-2030.  

In its NECP, Hungary intends to contain emissions in the transport sector by 2030,  while 
noting that energy demand in transport and industry cannot be constrained in a growing 
economy. Hungary’s NECP sets forth the objective of ensuring that the consumption of petroleum 
products  in  transport does not  increase by more  than 10% by 2030. Greenhouse  gas emissions 
from  transport  have  increased  strongly  over  the  last  five  years  and  emissions  are  projected  to 
continue increasing under current policies. The government intends to address transport emissions 
by promoting electromobility, sustainable public transport and freight transport by rail. As regards 
the  building  sector,  greenhouse  gas  emissions  reductions  would  be  achieved  through  energy 
efficiency measures and by taking up clean energy technology to replace gas for heating. 

The  European  Green  Deal  set  out  new  ambitious  targets  for  the  EU  to  reach  climate 
neutrality by 2050, with a reduction of emissions by at least 55% by 2030. Important pieces of 
legislation have been or are in the process of being approved by the EU legislator to reach these 
goals. Member States will be expected to present updated NECPs in 2023.  

Renewable sources of energy 

The  2020  Hungarian  NECP  aims  at  a  renewable  share  of  21%  in  its  gross  energy 
consumption, which the Commission considers unambitious compared to the 23% resulting 
from the formula4 used by the Commission to assess proportionate efforts in light of EU targets. 
In  2020,  the  renewable  share  (13.9%)  in  gross  final  energy  consumption  slightly  overachieved 
Hungary’s target (13%).  

According to its latest National Energy Strategy, presented in January 2020, Hungary aims 
to increase electricity generation from low-carbon sources to 90% of the total by 2030. In 
addition  to  nuclear,  Hungary  intends  to  rely  more  on  renewable  energy  sources,  mainly  solar 
energy,  while  wind  energy  plays  only  a  small  role  in  the  government’s  plans.  The  share  of 
renewables in heating is expected to be increased from 18.2% in 2020 to 28.7% by 2030. 

Energy efficiency 

Hungary’s energy efficiency target in its 2020 NECP is unambitious compared to the EU’s 
2030  objective.  It  is  set  at  maximum  18.8 Mtoe  of  final  energy  consumption,  translating  into 
30.7 Mtoe for primary energy consumption. Moreover, the indicative trajectories and translation 
of the contribution into primary energy consumption are not clearly outlined. In 2020, the primary 
energy consumption indicator (23.9 Mtoe) was below the 2020 target (24.1 Mtoe), but the final 
energy consumption indicator (18 Mtoe) was above the 2020 target (14.4 Mtoe). 

4 Annex II to Regulation (EU) 2018/1999 on the Governance of the Energy Union and Climate Action. 

16 

 
 
                                                           
There is still a large potential for renovating the existing housing stock, public buildings and 
district heating networks as well as for increasing energy efficiency of small firms. Housing 
deprivation is among the highest in the EU: it is estimated that 20.4% of the population lives in a 
dwelling with a leaking roof, damp walls, floors or foundation, or rot in window frames or floor5, 
which points to the important wider benefits of building renovation. Until the amendment of the 
regulated energy prices in summer 2022, the price for energy, including for gas, has been among 
the lowest in the EU for several years, which did not create incentives for energy savings and for 
improvement of energy efficiency. 

The low energy efficiency of housing and polluting residential heating methods  reduce air 
quality  and  there  are  large  potential  environmental  and  health  gains  to  be  achieved  by 
stepping  up  renovation  efforts.  Investment  in  energy  efficiency  in  residential  housing,  in 
particular in rural areas, would create local jobs, reduce air pollution, mitigate housing deprivation 
and  contribute  to  reaching  climate  neutrality.  However,  financial  incentives  for  households  to 
upgrade the energy efficiency of their homes and decarbonise heating systems appear insufficient 
at this point in time to trigger a larger uptake, also given the low financial capacity of many affected 
households.  

Sustainable transport 

In  recent  years,  Hungary  has  experienced  a  strong  increase  in  emissions  in  the  transport 
sector.  Hungary  also  remains  one  of  the  most  traffic-congested  EU  Member  States,  with  an 
increasing number of hours lost per driver per year, mainly in urban areas. A more attractive public 
transport  system  could  further  facilitate  labour  mobility  and  help  mitigate  the  environmental 
impact of transport. Although public transport in Hungary accounts for a larger share of trips than 
the  EU  average,  this  comes  mainly  from  a  lower  motorisation  rate.  As  income  growth  makes 
personal cars more affordable, and rising demand is expected to put further pressure on the low 
quality of transport infrastructures and services, the attractiveness of public transport will need to 
improve. While progressing, electro-mobility is also well below the EU average. 

Water management 

Water management remains a concern. Hungary’s water-supply and sanitation system are still 
not fully compliant with the Drinking Water Directive, and water affordability remains an issue 
for the poorest part of the population. A large share of the water supply network is in poor state. 
Because  of  leaks,  a  quarter  of  the  water  entering  the  system  generates  no  revenues.  Regulated 
tariffs do not cover the maintenance costs of many water and wastewater companies. The utility 
tax, levied on companies’ pipelines, poses another barrier to investment. Hungary’s water bodies 
are  exposed  to  pressures  from  human  activities.  With  climate  change  expected  to  reduce  flow 
levels in the country’s rivers, there are plans to substantially expand crop irrigation but these raise 
concerns about possible harms to water quantity, water quality and biodiversity. At the same time, 
there is only limited attention to the central issues of water retention, restoring natural hydrology, 

5 Eurostat database on "Income and living conditions", in 2020. 

17 

 
 
                                                           
and  adapting  agricultural  practices.  Close  to  one  quarter  of  Hungary’s  territory  is  exposed  to 
floods, and the country’s flood risk management plan does not sufficiently address this issue. 

Circular economy 

Progress towards a circular economy is at an early stage. Hungary’s circular material use rate 
is with 8.7% far below the EU average (12.8%) (according to the latest data for the year 2020). 
The recycling rate (municipal waste) is with 33% considerably less than the 2025 EU target of 
55%. Hungary has recently started the development of a national circular economy strategy and of 
a  related  action  plan.  Resource  efficiency  is  low  in  comparison  with  the  EU  average.  Waste 
generation is modest, linked to the relatively low income level of Hungary, but landfilling remains 
predominant (around 50% of the total municipal waste) and conversely, recycling is limited. Waste 
management was reorganised by the government in recent years, limiting competition, which has 
resulted in declining efficiency.  

Air quality 

The low energy efficiency of housing and polluting residential heating methods, as well as 
road transport, deteriorate air quality. Hungary needs to undertake additional efforts to meet 
the targets set in the National Emissions Ceiling Directive for 2020-2029 and for any year from 
2030. Although emissions of key air pollutants in Hungary have decreased in recent years, they 
are still well above the EU average. In 2020, no exceedances above the EU limit values set by the 
Ambient Air Quality Directive were registered in Hungary. However, the European Commission 
is  monitoring  an  infringement  procedure  against  Hungary  for  persistent  breaches  of  air-quality 
standards with exceedances of fine particulate matter (PM10) and nitrogen dioxide (NO2) limit 
values in several air-quality zones. 

The  table  below  gives  an  overview  of  Hungary  objectives,  targets  and  contributions  under 
Regulation (EU) 2018/1999 of the European Parliament and of the Council of 11 December 2018 
on the Governance of the Energy Union and Climate Action. 

18 

 
 
 
 
Table 3. Overview of Hungary’s objectives, targets and contributions under Regulation 
(EU) 2018/1999 

National targets and contributions  

Binding target for greenhouse gas 
emissions compared to 2005 under the 
Effort Sharing Regulation (%) 

National target/contribution for 
renewable energy: Share of energy from 
renewable sources in gross final 
consumption of 
energy (%) 

Latest 
available 
data 

2020 

2030 

Assessment of 2030 
ambition level 

-10% 

+10% 

-7% 

As in the Effort 
Sharing Regulation 

12.5% 

13% 

21% 

Unambitious (the 
result of RES 
formula is 23%) 

National contribution for energy efficiency: 

Primary energy consumption (Mtoe) 

24.5 Mtoe 

Final energy consumption (Mtoe) 

18.5 Mtoe 

24.1 
Mtoe 

14.4 
Mtoe 

No 
target 
set 
785 PJ 
(18.7 
Mtoe) 

Very low 

Very low 

Level of electricity interconnectivity (%) 

50% 

55% 

60% 

n/a 

Source: Assessment of the final national energy and climate plan of Hungary, SWD (2020) 916 final. 

Digital dimension 

According to the RRF Regulation, the recovery and resilience plan should contribute to the 
digital transition and at least 20% of the financial allocation needs to contribute to digital 
objectives. The measures in the plan should, inter alia, contribute to the digital transformation of 
the economic and social sectors (including public administration, public services, and the justice 
and health systems). The objective of the measures in the plan should be to improve not only the 
competitiveness, but also the resilience, agility and security of companies and public actors, all 
while ensuring inclusiveness.  

19 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Figure 1. EU Digital Economy and Society Index (composite indicator) 

Note: EU aggregate corresponds to EU27, based on 2022 DESI report 

Hungary  ranked  22nd  amongst  Member  States  in  the  Digital  Economy  and  Society  Index 
(DESI) 2022, with performances below the EU average and objectives in several dimensions. 
In the past years, Hungary made some progress in some of the dimensions measured by the DESI 
index. Hungary performs best on broadband connectivity and worst on the integration of digital 
technology in enterprises’ activities. The COVID-19 pandemic highlighted existing weaknesses in 
the areas of digital skills, digitalisation of schools, digitalisation of enterprises and digital public 
services.  

In 2021, Hungary adopted a National Digitalisation Strategy 2021-2030 (NDS). The NDS is 
structured around four main pillars corresponding to the DESI dimensions: digital infrastructure, 
digital skills, digital economy and digital state. Its overarching objective is to identify and exploit 
the potential of digitalisation in the economy, education, research, development and innovation, 
and the public administration, thereby improving the country’s competitiveness and the well-being 
of its citizens. Hungary aims at exceeding the EU average in digital performance, as measures by 
DESI, by 2025, and be among the ten leading EU countries in terms of digitalisation by 2030.  

Connectivity 

Hungary ranked 13th in connectivity in the DESI 2022. According to most recent data (DESI 
2022), 83% of households have a fixed broadband connection and more than half (61%) have at 
least  100  Mbps  fixed  broadband  connection.  It  remains  a  leader  in  the  take-up  of  very  fast 
broadband (at least 1Gbps), with 22% of lines, which is far above the EU average (7.6%). Very 

20 

 
 
 
 
High Capacity Network (VHCN) coverage is increasing steadily and is now above EU average. 
4G coverage is close to 100%, 5G readiness is advanced, but 5G coverage is below EU average.  

Digital skills 

Digital  skills  remain  below  the  EU  average  across  almost  skill  indicators.  Half  of  the 
population has at least basic digital skills and only 22% has ‘above basic digital skills’. There is a 
shortage of ICT specialists in the workforce and the proportion of female ICT specialists is low, 
while the percentage of  ICT  graduates  also  stands below the EU  average.  There is  a clear  and 
urgent need to improve the general digital skills of the population. The NDS recognises this and 
identifies digital skills in education and digital competence of citizens as key fields to be improved. 

Digitalisation of enterprises 

Hungary ranked 25th in the integration of digital technologies by enterprises. Despite some 
improvements,  Hungarian  enterprises  continue  to  lag  behind  their  EU  peers.  The  country  still 
performs poorly on technology adoption indicators. The use of planning software, of social media 
and of e-invoices notably are well below the EU average. Hungarian enterprises are also slow in 
integrating advanced digital technologies in their business models. Big data is used by 7% of them, 
cloud by 21% and Artificial Intelligence by 3%, much lower than the EU average. In a recovery 
context, as well as to succeed in the shift of the economic model towards higher end products, it 
is a particular concern that few fast-growing enterprises make digitalisation an explicit part of their 
growth strategies. The NDS recognises that more support is needed for the digital transformation 
of enterprises, in particular small and medium-sized enterprises.  

Digital public administration 

The  digitalisation  of  public  services  shows  a  mixed  picture.  Practically  all  relevant  public 
services are available online (more than 3 000) and they are widely used. However, the quality and 
completeness  of  the  supply  of  services  for  both  people  and  businesses  remains  relatively  low, 
especially  for  cross-border  service  provision.  One  problematic  area  remains  open  data,  where 
Hungary is among the weakest performers in the EU. Hungary needs to make public data more 
readily available and reinforce the transparency of how the public administration operates. 

21 

 
 
 
Box 1: Progress towards the Sustainable Development Goals 

Sustainable Development Goals and the four dimensions underpinning the Annual Sustainable Growth Strategy 

The  objectives  of  the  Sustainable  Development  Goals  are  integrated  in  the  European 
Semester  since  the  2020  cycle.  This  provides  a  strong  commitment  towards  sustainability  in 
coordination of economic and employment policies in the EU. In that context, this box outlines 
Hungary’s performance with respect to the SDGs and looks at the four dimensions underpinning 
the  2023  Annual  Sustainable  Growth  Strategy  and  of  relevance  to  the  recovery  and  resilience 
plans: green transition, fairness, digital transition and productivity, and macroeconomic stability. 
It points at areas where further action could accelerate the progress on the SDGs. 

Green Transition 

Although Hungary is improving on several aspects related to environmental sustainability 
such as climate action and pollution (SDGs 2, 6, 11, 12 and 13), it still needs to progress on 
others, in particular clean energy (SDGs 7 and 9). Most indicators linked to the green transition 
remain below the EU average. Notably, while the recycling rate of municipal waste and the circular 
material use rate improved, they are still below the EU average. The share of renewable energy in 
total energy consumption decreased from 14.5% in 2015 to 13.9% in 2020, exceeding the target 
set for Hungary but remaining far below the EU average (22.09% in 2020). Energy productivity 
in the country only slightly increased between 2015 and 2020, leading to an increased gap with 
the EU average. The share of sustainable transport modes has declined in recent years, while still 

22 

 
 
 
above the EU average. The share of forest area has increased from 25.2% to 26.1% between 2015 
and  2018  but  it  remains  significantly  below  the  EU  average  (43.4%  in  2018).  The  surface  of 
terrestrial sites designated under Natura 2000 remained unchanged between 2014 and 2019 and 
was above the EU average. 

Fairness 

Hungary performs very well in some SDG indicators related to growth, employment and 
poverty  reduction  (SDGs  1  and  8).  There  has  also  been  some  improvement  in  health 
indicators  (SDG  3),  but  the  country  still  needs  to  catch  up  in  several  areas  related  to 
education and gender equality (SDGs 4, 5 and 10). Improvement has been particularly strong 
in the employment rate (from 73.7% in 2016 to 78.8% in 2021), the rate of severe material and 
social  deprivation  (from  24.1%  in  2015  to  10.7%  in  2020)  and  the  rate  of  severe  housing 
deprivation (from 15.5% in 2015 to 7.6% in 2020). The share of population unable to keep their 
homes adequately warm significantly decreased from 11.6% in 2014 to 5.4% in 2019, which is 
now below the EU average (8.2%). However, despite these improvements, Hungary still scores 
significantly below the EU average for the severe material and social deprivation rate (where the 
EU average is only 6.8%) and the severe housing-deprivation rate (where the EU average is 4.0%). 
Hungary also performs below the EU average in the area of education (SDG  4), with high and 
increasing rates of early school leaving (12.0% in Hungary compared to 9.7% in the EU) and low 
and decreasing tertiary education attainment (32.9% in Hungary against 41.2% in the EU) in 2021. 
Similarly,  Hungary  performs  below  than  the  EU  average  in  gender  equality  (SDG  5),  with 
worsening  gender  employment  gap  and  gender  pay  gap,  and  low  participation  of  women  in 
national parliaments, governments and senior management. 

Digital transition and productivity  

Hungary  shows  a  mixed  picture  when  compared  to  the  EU  average  in  targets  related  to 
digital transition and productivity, as reported under SDG 8 (Sustainable economic growth, 
employment  and  decent  work)  and  SDG  9  (Industry,  innovation  and  infrastructure). The 
share  of  households  with  high-speed  internet  connections  (48.6%)  has  moved  towards  the  EU 
average  of  59.3%  in  2020,  which  represents  significant  progress.  Hungary’s  gross  domestic 
expenditure on R&D is well below the EU average (1.61% of GDP against 2.32% in the EU) and 
Hungary has not made significant progress on this area over time. Participation in adult learning 
and  strengthening  digital  skills  remain  a  challenge.  In  Hungary,  with  only  5.9%  of  adults 
participating in learning programmes, which is far below the EU average (10.8% in 2021). Only 
49% of Hungarians possess at least basic digital skills, against an EU average of 54% in 2021. 

Macroeconomic stability 

Thanks  to  its  favourable  economic  situation  before  the  pandemic,  Hungary  performs 
relatively well in the indicators of SDG 8 (Sustainable economic growth, employment and 
decent  work).  Real  GDP  per  capita  in  Hungary  has  been  increasing  over  time,  reaching  EUR 
13 660  in  2021  but  it  is  still  substantially  below  the  EU  average  (EUR  27 810  in  2021),  and 
economic convergence with the rest of the EU is slowing down. The investment share of GDP 
(26.8%) has increased since 2015 and is above the EU average. Hungary also outperforms the EU 

23 

 
 
average on employment-related indicators (SDG 8). The long-term unemployment rate has fallen 
significantly since 2015 (from 2.3% in 2016 to 1.3% in 2020). However, Hungary is still below 
the EU average – and has a declining performance – on access to justice and trust in institutions 
(SDG 16). 

3.  OBJECTIVES, STRUCTURE AND GOVERNANCE OF THE PLAN 

3.1. Overall strategy of the plan  

The  recovery  and  resilience  plan  of  Hungary  is  a  comprehensive  response  to  the 
consequences of the COVID-19 crisis, as well as to the main structural challenges identified 
for the Hungarian economy. The plan is structured around three strategic objectives: 

  Establishing a smart, sustainable and inclusive growth path 
  Safeguarding and creating jobs 
  Competitiveness  of  enterprises  and  social  convergence,  covering  all  elements  of  the 

economic ecosystem and all groups of society. 

The plan comprises nine components addressing challenges in the areas of public education, 
higher  education  and  vocational  education  and  training,  social  inclusion  in  the  most 
disadvantaged settlements, water management, sustainable green transport, green energy, 
circular economy, health, and governance and public administration. The plan covers all six 
pillars  foreseen  in  the  RRF  Regulation  and  has  a  strong  focus  on  promoting  a  green-  and 
technology-driven economic development path. The nine components are the following: 

1.  Demography and public education, which focuses on increasing the attractiveness of the 
teaching  profession,  including  wages  of  teachers;  better  access  to  quality  and  inclusive 
public education with a particular attention to disadvantaged pupils, students with special 
education needs and pupils in low-performing lower secondary schools; the digitalisation 
of public education and digital equipment for pupils and teachers; reinforcing the skillset 
of  teachers  and  school  managers;  and  increasing  the  availability  of  early  childhood 
education and care facilities for children below 3 years old. The component also includes 
a reform to improve the medium and long-term fiscal sustainability and adequacy of the 
pension system. 

2.  Highly qualified, competitive workforce, which aims to strengthen the higher education 
system through digitalisation and infrastructure improvements; to increase the availability 
of skilled workers through investments in vocational education and training institutions; 
and to support the ecosystem for science, research, innovation and training. 

3.  Catching-up  settlements,  which  aims  to  secure  basic  services  in  the  300  most 
disadvantaged  settlements  and  offer  additional  support  to  their  inhabitants  in  terms  of 
employment, skills development, housing, energy renovation and heating.  

4.  Water management, which aims at providing water management solutions in agriculture 
through the upgrade of existing and the development of new water networks and systems, 
the  establishment  of  nature-based  water  retention  solutions,  the  strengthening  of  the 

24 

 
 
monitoring  system  and  the  establishment  of  new  sustainable  water  management 
communities. 

5.  Sustainable green transport, which aims to make public transport more attractive and the 
transport sector more sustainable through the creation of an integrated single tariff system, 
the  improvement  of  the  rail  network,  in  particular  in  the  capital  region,  as  well  as  the 
replacement of old fossil fuel buses by electric ones. 

6.  Energy –  green transition, which aims  at the creation of  additional  energy production 
capacities based on renewable energy sources, at improving the electricity grid, and at the 
integration  of  energy  production  capacities  from  weather-dependent  renewable  energy 
sources into the electricity network in a secure and flexible way, as well as at improving 
energy efficiency of buildings. 

7.  Transition  to  the  circular  economy,  which  contributes  to  the  uptake  of  innovative 

solutions such as chemical recycling. 

8.  Health, which aims to modernise hospital-level care, strengthen primary care, expand the 
use  of  digital  tools  in  health  and  long-term  care,  and  eradicate  the  practice  of  informal 
gratuity payments. 

9.  Governance  and  public  administration,  which  aims  to  address  the  deficiencies  and 
shortcomings  in  the  anti-corruption  framework,  including  through  the  establishment  of 
new bodies to ensure independence oversight, as well as increased prosecutorial effort and 
means to enforce the inaction of prosecutorial or investigative bodies; to address the lack 
of competition in public procurement; to strengthen the independence of the judiciary; to 
strengthen public oversight  through increased transparency of public data and means to 
access such data; to improve the quality and transparency of decision-making, including 
by  a  more  systematic  and  effective  involvement  of  social  partners  and  stakeholders;  to 
improve  the  efficiency  of  public  expenditure  through  a  set  of  spending  reviews;  and  to 
simplify the tax system and reinforce it against the risk of aggressive tax planning. 

1Table 4: Overview of components and associated costs 

Component 

1: Demography and public education 
2: Highly qualified, competitive workforce 
3: Catching-up settlements 
4: Water management 
5: Sustainable green transport 
6: Energy – green transition 
7: Circular economy 
8: Health 
9: Governance and public administration 
Total 

25 

Costs  
(EUR million) 

621 
692 
225 
145 
1 414 
1 246 
109 
1 306 
66 
5 824 

 
 
 
 
 
 
3.2. Implementation aspects of the plan  

Consistency with other programmes 

The relevant section of the plan describes in general how its measures are consistent with the main 
European strategic documents, in particular with the National Energy and Climate Plan (NECP) 
and relevant sectoral strategies. This is for instance the case for the measures aiming to increase 
energy  efficiency  and  renewable  energy  consumption  of,  among  others,  schools  and  higher 
education  institutions  and  social  housing  (in  components  1  and  2),  modernising  the  heating 
systems  of  residential  houses  and  increasing  the  share  of  renewable  energy  sources  for  private 
homes  through  solar  panels  and  the  necessary  upgrade  of  electricity  network  systems  (in 
component  6),  as  well  as  installing  solar  power  plants  to  benefit  households  of  disadvantaged 
settlements (in component 3). Investments in low-emission/zero emission vehicles as well as in 
sustainable  public  transport  (in  component  5)  will  also  have  a  positive  effect  on  reaching  the 
objectives of the NECP. 

Under the new EU-level programming period (2021-2027), the Just Transition Fund (JTF) will 
be a key tool to mitigate the negative impacts of the decarbonisation of the selected most affected 
regions, by financing the diversification and modernisation of the local economy. The plan briefly 
describes complementarities with the use of the JTF and how measures in the plan complement 
the efforts of the JTF in the most affected regions in realising their territorial just transition plans. 
Particular effort will need to be paid to ensure this complementarity and the mutually reinforcing 
synergies for the affected regions when implementing the related measures in the plan in parallel 
with the territorial just transition plans. 

The plan recognises the importance of continuing the Youth Guarantee in view of the situation 
of  young  people,  which  was  aggravated  by  the  COVID-19  pandemic.  It  generally  reflects  on 
ensuring consistency with such measures, which should be pursued mainly with funding under the 
cohesion policy programmes. The plan will help to implement a number of relevant measures to 
help the younger segment of the society, notably through its components on education, high-skilled 
workforce and catching up municipalities. 

The  plan  recognises  the  important  synergies  with  cohesion  policy  and  stresses  that 
complementarities  and  potential  overlaps  will  be  systematically  and  continuously  assessed  at 
different levels of implementation (e.g. strategic, programme and project levels). This should be 
done, in particular, through close monitoring (including through monitoring committees and their 
thematic sub-committees), a joint IT system, a dedicated mechanism to check for synergies and 
avoidance of double funding, as well as through a coordination committee that should be tasked 
to  explicitly  review  this  aspect.  Particular  emphasis  will  need  to  be  placed  on  ensuring 
complementarities, synergies and the prevention of double funding throughout the different phases 
and levels of implementation. The plan sets out detailed tables identifying the approach to build 
synergies and ensure complementarity with financing envisaged under the 2021-2027 Partnership 
Agreement and cohesion policy programmes at a strategic level. While these documents are still 
under finalisation, the approach presented, and the procedures described in the plan, suggest that 
arrangements are in place. These arrangements can ensure the necessary complementarities and 
the avoidance of double funding when implementing these programmes and the measures in the 

26 

 
 
plan.  Ensuring  complementarities  and  synergies  is  also  important  when  it  comes  to  the 
implementation  of  ongoing  cohesion  policy  programmes  (2014-2020)  and  additional  funding 
received from REACT-EU. 

The Technical Support Instrument (TSI) provides expertise in building capacities to implement 
the  plan  in  a  number  of  areas.  These  areas  may  concern  the  green  and  digital  transformation, 
revenue administration and public financial management, governance and public administration, 
sustainable growth and business environment, labour market, education, health and social services, 
the financial sector and access to finance. 

Administrative organisation of the implementation of the RRP 

The plan sets out the administrative organisation for the implementation of the measures it 
contains. The Hungarian implementation structure largely builds on the management and control 
system applied for the implementation of cohesion policy funding. This is seen as an effective 
way to build on the experience acquired in the management of EU funds. This should ensure 
close coordination and complementarity between the two funding streams and to avoid the risks 
of overlaps and double funding. 

The main strategic decisions are taken by the government, which relies on its Development 
Policy  Coordination  Committee  (a  preparatory  committee  of  relevant  high-level  officials 
responsible  for  the  implementation  of  different  types  of  Union  support)  to  ensure  the  proper 
coordination of the programming and implementation of Union funding, including that under the 
RRP. 

The  overall  responsibility  for  the  implementation  of  the  RRP  lies  with  the  minister 
responsible  for  the  implementation  of  Union  support,  who  is  also  responsible  for  the 
implementation of cohesion policy funding. The minister will be responsible for coordinating and 
monitoring  the  implementation  of  the  RRP  as  a  whole  and  for  informing  the  government  on 
progress in implementation, as well as for ensuring the avoidance of double funding. The minister 
will  be  responsible  for  ensuring  the  effective  implementation  of  the  RRP,  including  for  the 
effective  protection  of  the  financial  interests  of  the  Union,  putting  in  place  and  implementing 
effective  policies  to  prevent,  detect  and  correct  fraud,  corruption,  conflict  of  interest,  double 
funding and other irregularities.  

The National Authority in charge of the day-to-day implementation of the RRP is the 71-
staff  strong  office  of  the  Deputy  State  Secretary  in  the  ministry  responsible  for  the 
implementation of Union support. The National Authority will be acting as the single contact 
point  for  the  RRP  and  liaising  with  the  European  Commission.  It  will  support  the  minister 
responsible  for  the  implementation  of  Union  support  in  its  above  tasks  by  monitoring  the 
implementation of the plan, notably the fulfilment of milestones and targets, by ensuring sound 
financial management and performing controls on implementing bodies and final recipients, and 
by implementing effective policies to prevent, detect and correct serious irregularities like fraud, 
corruption, conflict of interest and double financing. The National Authority will be responsible 
for communicating with the European Commission on the implementation of the plan and for the 
drawing up and submission of payment requests and the accompanying management declarations. 
Implementation of investment measures will generally take place in the form of providing grants 

27 

 
 
based on calls for proposals, in a similar manner as under the cohesion policy funds. These are 
either directly carried out by the National Authority or through implementing bodies (and in one 
case through a sub-granting body). 

In order to strengthen the effectiveness of the prevention and detection of conflict of interest, 
reinforced rules have been put in place and their application will be controlled regularly by 
a newly set-up Directorate for Internal Audit and Integrity, established within the ministry 
responsible  for  the  implementation  of  Union  support.  The  work  of  this  Directorate  will  be 
supervised by a new Integrity Authority that Hungary committed to establish, and confirmed in 
the RRP. The work of this Directorate will be part of the internal control system and thus will be 
subject to audits from the audit authority of the RRP (see below). 

The implementation tasks of the National Authority will be supported by the work of sectoral 
ministries, which will ensure the alignment and consistency of the implementation of measures 
with sectoral policies and provide professional expertise in assessing their quality. Line ministers 
also  have  the  responsibility  of  ensuring  the  complementarity  of  measures  in  the  RRP  with 
measures  financed  from  other  sources,  as  well  as  to  ensure  their  consistency  with  the  relevant 
Union and national strategies. All ministers will be supported by a dedicated staff dealing with 
RRP-related matters under their responsibility amounting to a total of 50 staff altogether.  

The National Authority will also be supported in the implementation and monitoring process 
of the plan by implementing bodies which operate under the supervision and responsibility of 
the National Authority. These bodies include for instance the Hungarian State Treasury, and the 
National  Research,  Development  and  Innovation  Office.  The  National  Authority  will  provide 
methodological support and guidance to implementing bodies. Implementing bodies need to have 
sufficient  resources  and  adequate  professional  experience  to  effectively  carry  out  the  tasks 
assigned to them and they need to have effective internal control arrangements in place. 

The Directorate General for the Audit of Union Support (EUTAF) will be the audit authority 
of the RRP. EUTAF has relevant audit experience from auditing cohesion policy programmes in 
Hungary. The independence of the EUTAF will be reinforced through legislative  provisions  to 
ensure that it has sufficient resources to effectively carry out its responsibilities in a timely manner. 
Moreover, the plan already envisages a number of dedicated audits to be carried out by EUTAF to 
confirm  the  adequate  fulfilment  of  certain  relevant  measures.  In  addition,  a  dedicated  measure 
aims to strengthen the cooperation with the European Anti-Fraud Office (OLAF) and to ensure 
that OLAF has all the means at its disposal to effectively conduct its investigations in Hungary. 

Independent oversight of the implementation of the RRP is envisaged through the setting up 
of a monitoring committee in which at least half of the members will be provided by independent 
civil society organisations that have sufficient and relevant expertise in the main areas relevant for 
the  measures  in  the  RRP.  The  committee  will  have  strong  oversight  powers  and  the  National 
Authority will be obliged by law to provide it with all data relevant for it to carry out its tasks. 

The detailed tasks and responsibilities of the different bodies involved in the coordination, 
implementation,  monitoring,  control  and  audit  of  the  RRP  are  set  out  in  a  government 
decree. The necessary functionalities of the monitoring system ensuring the collection of and the 

28 

 
 
reliability of data necessary for the implementation of the plan are expected to be fully functioning 
and operational at the latest before the submission of the first payment request. 

Gender equality and equal opportunities for all  

The  RRP  includes  measures  expected  to  help  address  challenges  in  the  area  of  gender 
equality and equal opportunities for all. The plan contains a short chapter with reference to the 
European Pillar of Social Rights and its three pillars (equal opportunities, fair working conditions 
and social protection and social inclusion). The needs of disadvantaged groups, such as Roma, are 
specifically targeted in component 3. Other measures, such as in terms of access to education and 
skills, and the creation of new childcare places for the 0 to 3 age group (nurseries), are expected 
to  contribute  to  gender  equality  and  equal  opportunities  for  all.  Transport  measures  are  also 
expected  to  facilitate  access  to  services  while  new  transport  infrastructures  and  vehicles  are 
expected to be accessible to persons with disabilities. The plan does not include references to data 
disaggregated by equality grounds, with the exception of the gender employment gap.  

Stakeholder consultation  

Hungary described a number of consultation activities in its plan. At the end of 2020, the first 
outline of the RRP was presented in press briefings, and a summary of the draft RRP was published 
on the government’s website. In January 2021, a media campaign with targeted ads and banners 
was launched to direct the public’s attention to the  government website, inviting for comments 
from the general public on the development plans of Hungary to be financed from the RRF and 
cohesion policy funds. Draft components were published for comments in March 2021, and the 
entire draft RRP was published for comments on the website of the government in April 2021. The 
government  also  reached  out  directly  to  461  organisations,  such  as  municipalities,  non-
governmental organisations, higher education organisations, trade unions or science organisations 
to encourage them to provide their views and suggestions. Of those, 88 submitted input, with over 
1 260  different  proposals.  Most  comments  concerned  sustainable  transport,  energy,  education, 
circular economy and healthcare. Certain comments led to amendments of the RRP, for instance 
to better focus the scope of the measure supporting sustainable heating systems for households. 
However, some stakeholders criticised the process, arguing that the detailed contents of the RRP 
was not made public early enough to allow for them to make meaningful comments and that their 
comments  could  not  be  taken  into  account.  In  addition  to  the  formal  consultation,  several 
stakeholder conferences were held at regional and national levels, with different thematic focus, 
over the year 2021. Hungary published a new version of the draft RRP in August 2021, but did not 
make  public  any  amended  version  since  then,  and  did  not  engage  in  additional  consultation 
processes to cover amendments made to the RRP in 2022. 

To ensure ownership by the relevant actors, success on the ground and a lasting impact, it is 
crucial to involve all public authorities and stakeholders, including social partners,  in the 
design and implementation of the measures included in the RRP. To this end, the plan contains 
a  measure  to  develop  a  strategy  for  ensuring  the  effective  involvement  of  stakeholders  in  the 
implementation  of  the  RRP,  as  well  as  the  setting  up  a  monitoring  committee  with  strong 
participation from independent civil society organisations to closely follow the implementation of 
the  RRP  and  provide  recommendations  to  the  National  Authority.  Hungary  may  also  receive 

29 

 
 
support  from  the  Technical  Support  Instrument  to  strengthen  this  central  aspect  of  the  RRP 
delivery.  

Security self-assessment  

The Hungarian plan does not include a security self-assessment for  investments in digital 
capacities  and  connectivity.  Hungary  intends  to  fund  digital  connectivity  investments  mostly 
from  cohesion  policy  funds.  However,  a  number  of  projects,  in  particular  related  to  the 
digitalisation of critical infrastructures in healthcare, public administration and the energy sector, 
will  have  high  requirements  in  terms  of  data  and  infrastructure  security.  The  security-related 
provisions of the plan would therefore have to be closely monitored during the implementation of 
the plan.  

Cross-border and multi-country projects  

The RRP does not contain any cross-border or multi-country projects. The renovation of the 
railway sections Almásfüzitő-Komárom and Békéscsaba-Lőkösháza (Component 5 – Sustainable 
Green Transport) will have a cross-border dimension as it will allow for the removal of bottlenecks 
in the relevant TEN-T corridor and improve long-distance freight and passenger transport in the 
region. 

Communication strategy 

The communication related to the RRP aims to raise awareness on the objectives and added 
value of the RRF, demonstrating it through the reforms and investments implemented within 
the framework of the RRP. The RRP outlines the overall approach to communication, including 
as  regards  the  preparation  and  implementation  of  the  different  measures.  The  RRP  envisages 
communication to the wider public on the progress of implementation, fulfilment of milestones 
and  targets,  and  achievements.  Communication  activities,  essentially  awareness-raising,  have 
already been launched by the authorities during the preparatory phase of the RRP and in relation 
to certain already ongoing measures. Besides informing the general public on the measures of the 
RRP,  there  are  also  dedicated  tools  targeting  the  applicants  to  provide  them  with  practical 
information, such as tutorial videos used for facilitating the application.  

Messages  are  placed  on  multiple  channels  so  that  communication  activities  are  mutually 
reinforcing. A dedicated website for the RRP has been created on the platform used for Union 
support: palyazat.gov.hu. The website serves as the basic platform for all communications on the 
RRP. It contains information on the plan, measures, tenders and calls, and related results. Social 
media is also expected to be used to inform the general public on implementation. While electronic 
communication  channels  are  gaining  in  importance,  the  traditional  channels  and  tools  such  as 
paper-based publications or leaflets will still be used. Informative events, such as information days, 
workshops  and  conferences,  will  be  organised.  It  is  expected  that  public  events  presenting  the 
results of the RRP will be organised at least once per year.  

The  RRP  sets  out  the  general  arrangements  under  which  final  recipients  need  to 
acknowledge the use of Union support and ensure the visibility of Union funding. Hungary 
aims to exploit joint communication efforts with cohesion policy which may result in increased 

30 

 
 
visibility  highlighting  the  benefit  of  Union  support.  To  ensure  a  standardised  and  adequate 
presentation  of  the  funding,  a  Communications  Handbook  and  a  Design  Handbook  for  final 
recipients  have  been  issued  and  are  available  on  the  website  for  EU  development  funds.  The 
emblem of the Union and an appropriate funding statement that reads ‘funded by the European 
Union  –  NextGenerationEU’  is  to  appear  on  projects  funded  by  the  RRF,  according  to  the 
handbooks.  In  order  to  support  the  final  beneficiaries  in  their  communication  obligations,  a 
“display maker” is available on the website, which is to help them prepare the sign displaying the 
Union funding. While Hungary acknowledges the source of Union support, it uses the branding of 
‘Széchenyi Terv Plusz’ (Széchenyi Plan Plus – an umbrella term used by the government to cover 
all Union support in Hungary) to communicate on funding from the RRF as well as from cohesion 
policy funds. This branding prominently features in the logo, which also presents the Union flag 
with the funding statement and the Hungarian coat of arms are also presented. 

A detailed communication strategy is expected to be developed by Hungary with the involvement 
of experts’ support in the context of the Technical Support Instrument. 

State aid 

State  aid  and  competition  rules  fully  apply  to  the  measures  funded  by  the  Recovery  and 
Resilience Facility. Union funds channelled through the authorities of Member States, like the 
RRF funds, become State resources and can constitute State aid if all the other criteria of Article 
107(1)  TFEU  are  met.  When  this  is  the  case  and  State  aid  is  present,  these  measures  must  be 
notified and approved by the Commission before Member States can grant the aid, unless those 
measures are covered by an existing aid  scheme or comply  with  the applicable conditions  of a 
block  exemption  regulation,  in  particular  the  General  Block  Exemption  Regulation  (GBER) 
declaring certain categories of aid compatible with the internal market in application of Articles 
107 and 108 TFEU6. When State aid is present and it requires notification, it is the duty of the 
Member State to notify State aid measures to the Commission before granting them, in compliance 
with Article 108(3) TFEU. In this respect, the State aid analysis carried  out by Hungary in the 
recovery  and  resilience  plan  cannot  be  deemed  a  State  aid  notification.  In  as  far  as  Hungary 
considers that a specific measure contained in the recovery and resilience plan entails de minimis 
aid or aid exempted from the notification requirement, it is the responsibility of Hungary to ensure 
full  compliance  with  the  applicable  rules.  In  addition  to  complying  with  EU’s  State  aid  rules, 
measures  taken  under  this  framework  should  be  compatible  with  the  EU’s  international 
obligations, in particular under World Trade Organization rules. 

6 Commission Regulation 651/2014, OJ L 187, 26.6.2014, p. 1. 

31 

 
 
 
                                                           
4.  SUMMARY OF THE ASSESSMENT OF THE PLAN 

4.1. Comprehensive  and  adequately  balanced  response  to  the  economic  and  social 

situation 

The Hungarian recovery and resilience plan aims to provide a comprehensive and balanced 
response  to  the  consequences  of  the  pandemic  crisis,  while  tackling  important  structural 
socio-economic challenges. It makes an explicit reference to the six pillars of the Recovery and 
Resilience Facility pursuant to Article 3 of the RRF Regulation, namely: (i) green transition, (ii) 
digital  transformation,  (iii)  smart,  sustainable  and  inclusive  growth,  (iv)  social  and  territorial 
cohesion, (v) health and economic, social and institutional resilience, and (vi) policies for the next 
generation.  The  plan  presents  a  global  vision  for  an  innovative  and  competitive  economy, 
supporting economic growth through the green transition and digital transformation. All pillars are 
covered by at least one component and all components contribute to several pillars. The range of 
actions of the plan corresponds to those of the Facility with an appropriate overall balance between 
pillars. The coverage of the components compared to the six pillars of the RRF is summarised in 
Table 5. 

Table  5:  Coverage  of  the  six  pillars  of  the  Facility  by  the  components  of  the  Hungarian 
recovery and resilience plan  

Green 
transition 

Digital 
transition 

Smart, 
sustainable 
& inclusive 
growth 

Social and 
territorial 
cohesion 

1. Demography and public 
education 

2. Highly qualified, competitive 
workforce 

3. Catching-up settlements 

4. Water management 

5. Sustainable green transport 

6. Energy - green transition 

7. Transition to the circular 
economy 

8. Health 

9. Governance and public 
administration 

○ 

○ 

○ 

● 

● 

● 

● 

○ 

● 

○  

○ 

○ 

○ 

○ 

● 

○ 

● 

○ 

○ 

○ 

● 

● 

○ 

○ 

Key:  

‘●’ investments and reforms of the component significantly contribute to the pillar 
‘○’ the component partially contributes to the pillar 

Policies for 
the next 
generation 

● 

○ 

○ 

Health, and 
economic, 
social and 
institutional 
resilience 
○ 

○ 

○ 

● 

● 

32 

 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Green transition 

The  Hungarian  recovery  and  resilience  plan  seeks  to  tackle  key  challenges  of  Hungary 
related to climate and environment. It underlines the contribution of reforms and investments 
contained  in  the  plan  to  achieving  the  EU’s  carbon  neutrality  target  by  2050.  This  calls  for 
measures aiming at additional renewable energy capacity and reduced greenhouse gas emissions. 
Hungary  faces  challenges  with  removing  bottlenecks  in  grid  capacities,  making  grid  operation 
smarter and ensuring the flexible and secure integration of renewable energy capacities. Due to the 
lack of necessary network capacities and administrative barriers, there is a risk that investors may 
postpone investments in renewable electricity generation.  

Given  the  scale  of  green  challenges  in  Hungary,  the  share  of  48.1%  of  the  plan’s  total 
allocation attributed to climate-related actions appears appropriate.  

The plan features a number of measures in the energy sector. Hungary’s ambition is to increase 
the share of carbon-free electricity production, to decrease its dependence on fossil fuels and to 
increase the security of supply through actions both on the regulatory and on the investment side. 
The plan envisages a comprehensive set of reforms and investments to promote the green transition 
and to address the challenges of the energy crisis, in particular through a complete overhaul of 
legislation  in  the  electricity  sector,  to  ensure  that  very  significant  additional  capacities  of 
renewable energy production will be available in Hungary by the end of the RRF period. In order 
to promote the deployment of power plants relying on renewable energy sources, the plan includes 
measures  to  remove  obstacles  to  the  development  of  wind  energy,  to  improve  permitting 
procedures for renewable energy production, to simplify the grid connection of small renewable 
power plants, to increase transparency and predictability of the grid connection procedure, and to 
introduce separate accounting rules for the electricity fed into the grid and electricity consumed 
from the grid. These measures are complemented by significant investments into additional solar 
energy  capacity,  mainly  in  residential  buildings  and  in  disadvantaged  settlements.  Major 
investments into the electricity grid and storage facilities are expected to ensure the flexible and 
secure integration of additional electricity generated by renewable energy sources. Smart meters 
financed from the RRF are expected to contribute to the optimisation of electricity demand. With 
the support of these measures, the total capacity of renewables energy production authorised to be 
connected to the grid is expected to reach at least 10 000 MW by 2026. A reform and investments 
in renovation of public buildings, in particular in education and healthcare facilities, as well as of 
residential  buildings,  notably  with  the  replacement  of  windows  and  the  modernisation  of 
residential  heating,  is  expected  to  contribute  to  increasing  energy  efficiency  and  reducing 
greenhouse gas emissions.  

The plan includes substantial investments for the greening of the transport sector. Transport 
is  one  of  the  sectors  with  the  highest  growth  in  greenhouse  gas  emissions  in  Hungary.  The 
measures in the plan are expected to lead to a reduction of emissions by encouraging the use of 
environmentally friendly modes of transport and more generally by strengthening alternatives to 
individual cars and road freight. The transport infrastructure networks should in particular benefit 

33 

 
 
from an upgrade of railways and from new electric buses. In parallel, the use of public transport 
should be facilitated by the setting up of a single tariff, ticketing and passenger information system.  

The  plan  also  comprises  reforms  and  investments  aiming  at  promoting  sustainable  water 
management. The proposed measures should contribute to restoring water supply and to improve 
water  retention  in  the  areas  affected  by  water  scarcity  through  the  development  of  new  water 
networks and the reconstruction of existing systems, as well as nature-based solutions for water 
retention. The development of an effective monitoring system at local and national levels should 
contribute to contain the risk of excessive use and depletion of water resources, with damaging 
consequences  for  the  affected  ecosystems.  Awareness-raising  measures  are  also  planned  for 
farmers  to  support  a  shift  to  a  more  sustainable  use  of  water  in  the  agricultural  sector.  These 
awareness-raising  measures  include  targets  to  establish  new  sustainable  water  management 
communities  and  to  have  50  000  hectares  of  arable  land  undergone  changes  to  water  saving 
agricultural practices, which are expected to be met through a combination of EU and national 
financial sources, which could include the Rural Development Programme (RDP) and the CAP 
Strategic  Plan.  The  plan  contains  safeguards  to  avoid  significant  impact  on  the  relevant  water 
bodies and ensure that the good ecological status of the relevant surface and groundwater bodies 
will be achieved.  

The plan contains a dedicated component on the transition to the circular economy, aiming 
at establishing an overarching circular economy strategy and waste management plan, revising the 
legislative framework and paving the way for a modern waste management system. This will be 
supplemented  by  investments  into  chemical  recycling,  which  are  expected  to  contribute  to 
increased  recycling.  The  transition  to  a  circular  economy  is  expected  to  make  a  significant 
contribution  to  the  efficient  management  of  waste,  serving  both  sustainability  and  economic 
competitiveness objectives. 

Digital transformation 

With an overall contribution to digital priorities at 29.8% of the total allocation, the plan 
includes a significant set of actions supporting the digital transformation of the economy. 
The  plan  focuses  on  improving  digital  skills,  digital  curricula  and  infrastructure  in  public 
education, as well as accelerating the digitalisation of public administration and of the healthcare, 
transport,  energy  and  water  sectors.  Almost  all  components  include  measures  relevant  for 
digitalisation.  

Significant measures are envisaged to improve digital skills in education and training. These 
include  measures  related  to  the  training  of  students  and  teachers  and  the  provision  of  digital 
equipment  to  pupils  and  staff.  The  plan  also  supports  digital  skills  development  in  higher 
education,  digital  curricula  in  vocational  education  and  training,  as  well  as  digital  and  green 
transition in scientific research. 

34 

 
 
Another set of measures relates to new ICT solutions and services for the modernisation of 
the public administration. To ease compliance by firms, the plan includes measures for the digital 
transformation of tax procedures. The plan also contains measures for the further development of 
the electronic procurement system and for the file management system of the prosecution service. 

The plan also aims at the digitalisation of the healthcare sector, notably through the creation 
and linking of new and existing health information databases. This data will be analysed with a 
view  to  informing  health  policy  interventions  and  improve  prevention  and  early  detection  of 
diseases,  as  well  as  for  the  development  of  personalised  services.  The  plan  also  includes 
investments  in  the  development  of  telemedicine  and  remote  patient  monitoring  tools  targeting 
elderly people. 

Relevant  actions  are  also  planned  in  the  transport,  energy  and  water  sectors.  The  plan 
includes measures that will contribute to the digitalisation of the railway network. These consist 
of investments  into centralised traffic management  and digital  control equipment  of the rolling 
stock as well as the introduction of a single national tariff, ticketing and passenger information 
system for bus and rail. In the energy sector, the plan also includes the development of smart grids 
and  smart  meters,  thus  contributing  to  create  the  necessary  conditions  for  better  integration  of 
weather-dependent  renewable  energy  production  in  the  electricity  system.  Finally,  the  plan 
features measures to improve the monitoring system for water management.  

Smart, sustainable and inclusive growth  

The  plan  features  actions  across  various  policy  areas  related  to  smart,  sustainable  and 
inclusive growth. The plan contains measures that support the establishment of R&D consortia 
(national  laboratories)  and  the  development  of  R&D  cooperation  within  and  across  sectors  to 
enhance  innovation  performance.  A  measure  on  increasing  the  number  of  places  in  childcare 
facilities aims to improve the possibilities for parents to return to the labour market and decrease 
the gender employment gap. 

The plan also sets ambitious, binding targets to improve competition in public procurement 
and  decrease  the  share  of  procedures  resulting  in  single  bids  significantly,  by  attracting  more 
micro-, small and medium-sized enterprises to apply to tenders, and developing a comprehensive 
performance  measurement  framework.  These  measures  are  expected  to  contribute  to  a  higher 
productivity. 

The plan also puts forward measures that  strengthen a smart, innovative and sustainable 
waste management industry and secondary raw materials market. These measures include the 
completion and entry into operation of a chemical recycling and green hydrogen production plant.  

Social and territorial cohesion  

The  plan  includes  actions  contributing  to  social  and  territorial  cohesion,  in  particular 
through integrated social policy support in the most disadvantaged settlements. Component 
3 of the plan includes measures for the construction of social housing, the improvement of housing 
conditions  and  community-oriented  pedagogy  in  the  300  most  disadvantaged  settlements  in 
Hungary.  Further  measures  aim  to  foster  labour,  social  and  skills  development  based  on  local 

35 

 
 
specificities and the strengthening of the local economic culture in the settlements, notably through 
training, personal mentoring, personalised services and employment opportunities. Such actions 
are expected to lead to higher employment of disadvantaged groups living in those settlements 
(including Roma), among other results.  

The plan aims to increase the availability of qualified labour force by enhancing accessibility 
to  modern  education  and  training,  including  for  disadvantaged  students  and  vulnerable 
groups.  The  plan  includes  several  measures  to  strengthen  higher  education,  adult  learning  and 
vocation  education  and  training.  To  this  end,  the  plan  envisages  a  reform  on  reviewing  and 
improving study fields in  higher education by including more practice-oriented elements in the 
training requirements. New training courses offering micro-credential certificates are expected to 
be  developed  in  higher  education.  The  plan  includes  measures  to  improve  the  quality  of  the 
learning environment in universities, including better digital equipment, new trainings, renovated 
buildings and new or modernised learning spaces. Measures in vocational training are also planned 
to increase the availability of skilled workers. The plan envisages to develop new digital learning 
materials, digital equipment and renovated classrooms for  students in vocational education and 
training. The plan envisages the development of a central examination centre (located in Budapest) 
to create the conditions for high-quality professional examination in certain professions for which 
the network of  examination  centres does  not  ensure appropriate territorial  coverage  at  regional 
level.  

The plan includes  a reform for improving the sustainability  and adequacy of the pension 
system.  The  reform  puts  in  place  a  transparent  process  with  involvement  of  stakeholders  and 
international  experts,  which  is  expected  to  help  the  authorities  to  design  effective  measures  to 
address challenges of the pension system. The proposed measure aims to ensure adequate pensions 
for lower-income pensioners and should thus improve the fairness of the pension system.  

The plan also includes actions to improve access to healthcare services. These measures should 
result  in  more  comprehensive  primary  care  services,  thanks  to  a  greater  role  for  general 
practitioners’ communities and focus on prevention. Measures to reorganise and modernise the 
hospital  network  are  also  expected  to  address  challenges  related  to  unequal  access  to  care,  in 
particular for disadvantaged groups and those living in disadvantaged areas. 

In  addition,  the  plan  also  includes  measures  to  develop  urban,  suburban  and  regional 
sustainable mobility, contributing to improving social and territorial cohesion.  

Health and economic, social and institutional resilience  

The plan is expected to improve resilience in the health sector through measures to modernise 
the infrastructure and network of hospital care, improve primary care service, expand the use of 
digital health tools and strengthen health information systems. Another relevant measure aims to 
eradicate the practice of informal gratuity payments in healthcare services while creating better 
financial and working conditions for doctors, thereby also contributing to addressing the shortage 
of staff in the healthcare sector. 

36 

 
 
The plan is also expected to improve social resilience. Investments are planned to increase the 
construction and renovation  of social housing, improve housing conditions  and establish  social 
solar  power  plants  in  the  300  most  disadvantaged  settlements  in  Hungary.  Investments  in 
digitalisation of equipment, teaching and learning methods are expected to contribute to enhancing 
social resilience. Developing digital skills and modernising adult training are expected to facilitate 
the upskilling and reskilling of the population and improve the adaptability of the labour force. 

The simplification of the tax system, together with measures to address the risk of aggressive 
tax planning, is expected to contribute to economic resilience. The reduction in the number of 
taxes  will  improve  the  work  of  the  tax  administration  and  should  facilitate  tax  compliance  by 
companies. The plan also includes measures to tackle the risk of tax avoidance, by introducing 
stronger rules on minimum conditions for companies to prove the performance of a real activity, 
aimed at  preventing  them from attracting  profits without corresponding  economic activity, and 
broadening the non-deductibility rules for outbound royalty and interest payments towards zero- 
and  low-tax  jurisdictions.  On  the  expenditure  side,  several  spending  reviews  are  planned  to 
facilitate savings and efficiency gains. 

The  plan  also  puts  forward  measures  to  increase  institutional  resilience  by  improving  the 
quality of decision-making, more informed administrative decisions and increasing the efficiency 
of the public administration. Reforms to strengthen judicial independence are expected to raise the 
standard  of  judicial  protection  and  also  improve  the  investment  climate  by  eliminating  undue 
influences and making sure the position of judges is secured against discretionary decisions. The 
introduction  of  regular  checks  on  compliance  with  access  to  public  information  obligations  of 
public bodies, improved cooperation between the prosecution and other bodies in the field of anti-
corruption,  as  well  as  measures  aiming  to  increase  competition  in  public  procurement  are  also 
expected to contribute to improving the quality of governance and institutions.  

Policies for the next generation, children and young people  

The plan contains measures to equip the next generation with the right knowledge and skills, 
improve  access  to  quality  public  education  and  support  availability  of  early  childhood 
education  and  care  places  for  children  below  3.  The  plan  includes  measures  to  raise  the 
attractiveness  of  the  teacher  profession  by  increasing  the  wages  of  all  teachers  in  the  public 
education  system,  with  particular  attention  to  teachers  working  with  disadvantaged  pupils  and 
entry-level  teachers.  The  plan  envisages  legislative  changes  to  support  the  integration  of 
disadvantaged pupils into the mainstream education by financially penalising schools where the 
proportion of disadvantaged students is lower than the average proportion in the settlement where 
the  school  is  located.  The  plan  includes  measures  to  integrate  small,  low-performing  lower 
secondary  classes  into  larger  schools  in  the  neighbouring  settlements  to  improve  the  access  of 
students to quality education in lower secondary schools and  thus address challenges related to 
shortages  of  teachers  and  quality  of  teaching.  The  plan  also  includes  measures  to  improve  the 
quality  of  specialised  services  provided  to  schools  integrating  students  with  special  education 
needs, those in long-term care and children who require specialised pedagogical services. The plan 
also includes measures on improving the managerial skills of school heads and their deputies and 

37 

 
 
providing  qualifications  in  additional  disciplines  for  teachers.  Another  measure  relates  to  the 
expansion and modernisation of early childhood education and care services and facilities.   

A strong focus of the plan is to improve access to digital education and digital skills. At least 
579 000 digital notebooks should be purchased and distributed, of which at least 55 000 should be 
provided for teachers and at least 10 000 for schools to develop their IT classrooms. In addition, 
3 100 schools should be provided with interactive display tools  and devices to  develop student 
creativity,  problem-solving  capacity  and  algorithmic  and  programming  competences,  such  as 
robots, drones and special computers.  

The  plan  also  contains  measures  to  strengthen  universities  and  vocational  education  and 
training.  The  plan  includes  measures  to  develop  micro-credential  courses  and  digital  learning 
content and infrastructure in higher education and vocational education. It also envisages support 
for research, development and innovation, in particular for entities engaging in cooperation with 
businesses. 

Taking into consideration all reforms and investments envisaged by Hungary, its Recovery and 
Resilience plan represents, to a large extent, a comprehensive and adequately balanced response 
to the economic and social situation, thereby contributing appropriately to all six pillars referred 
to in Article 3 of the RRF Regulation, taking the specific challenges and the financial allocation 
of Hungary into account. This would warrant a rating of A under the assessment criterion 2.1 in 
Annex V to the RRF Regulation. 

4.2. Link with country-specific recommendations and the European Semester 

The plan contributes to effectively addressing a significant subset of the structural challenges 
identified in the Country-Specific Recommendations (CSRs) of 2019, 2020 and 2022. The plan 
contains  an  extensive  set  of  mutually  reinforcing  reforms  and  investments  addressing  the 
challenges related to ensuring a swift and smooth green and digital transition. In particular, a series 
of actions is expected to promote the clean and efficient production and use of energy, sustainable 
transport, water and waste management and transition to the circular economy. In addition, various 
measures  aim  at  improving  digital  infrastructure  and  skills,  as  well  as  the  modernisation  and 
digitalisation  of  public  administration.  Long-standing  challenges  in  the  areas  of  healthcare, 
education and training are also addressed with significant measures. Important reform steps and 
investments are envisaged on the fight against corruption, judicial independence, the quality of 
decision-making, public procurement, the pension system, taxation and aggressive tax planning. 
These are expected to contribute to addressing underlying challenges to a large extent. Taking into 
account the size of the financial contribution, the plan satisfactorily addresses most of the 2019, 
2020 and 2022 country-specific recommendations.  

38 

 
 
 
 
 
Table  6:  Mapping  of  country  challenges 
recommendations and Hungary’s RRP components  

identified 

in  2019-2020-2022  country-specific 

Country challenges 

Associated CSR 
(2019-2020-2022) and 
European Semester 
recommendations 

Renewable energy, 
energy 
infrastructure & 
networks 

Energy efficiency 

Environmental 
policy & resource 
management 

Digitalisation of 
public 
administration and 
public services 
Digitalisation of 
businesses 

Transport 

Single market, 
competition & state 
aid 

Public procurement 
& concessions 

Research & 
innovation 

2019.3.2,  
2020.3.4, 
2022.6.1, 
 2022.6.2,  
2022.6.3, 
2022.6.4 
2019.3.5, 
2020.3.4, 
2022.6.5 
2019.3.4, 
2019.3.5, 
2020.3.6, 
2022.5.1 

2020.3.8 

2022.5.2 

2019.3.3, 
2020.3.5, 
2022.6.6 

2019.4.5, 
2022.4.5 

2019.3.6, 
2020.4.3,  
2022.4.6 
2019.3.1, 
2020.3.7, 

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39 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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1

○ 

● 

s
t
n
e
m
e
l
t
t
e
s
p
u
g
n
i
h
c
t
a
C
–
3

○ 

○ 

● 

○ 

○ 

Country challenges 

Associated CSR 
(2019-2020-2022) and 
European Semester 
recommendations 

Active labour 
market policies, 
incentives to work 
& labour market 
participation 
Pension systems and 
active ageing 
Poverty, social 
inclusion & social 
protection 

Healthcare 

Taxation policy 

Tax administration, 
tax evasion & tax 
avoidance 

Corruption 

Justice system 

Quality of law 
making 

Education 

2022.5.4 

2019.2.1, 
2020.2.1, 
2022.3.1 

2022.1.4 

2019.2.2, 
2020.2.2, 
2022.3.2 
2019.2.1, 
2020.1.3, 
2022.3.4 
2019.4.4, 
2022.4.4 

2019.4.4, 
2020.5.1 

2019.4.1, 
2022.4.1 

2019.4.2, 
2022.4.2 
2019.4.3, 
2020.4.2, 
2022.4.3 
2019.2.3, 
2020.2.3, 
2022.3.3 

y
m
o
n
o
c
e

r
a
l
u
c
r
i
c

e
h
t
o
t
n
o
i
t
i
s
n
a
r
T
–
7

t
r
o
p
s
n
a
r
t
n
e
e
r
g
e
l
b
a
n
i
a
t
s
u
S
–
5

t
n
e
m
e
g
a
n
a
m
r
e
t
a
W
–
4

y
g
r
e
n
E
–
6

h
t
l
a
e
H

-
8

○ 

● 

n
o
i
t
a
r
t
s
i
n
i
m
d
a
c
i
l
b
u
p
d
n
a

e
c
n
a
n
r
e
v
o
G
–
9

● 

● 

● 

● 

● 

 Key:   “●” investments and reforms of the component significantly address the challenge  

“○” the component partially addresses the challenge 

40 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The Hungarian recovery and resilience plan presents the links of the plan’s nine components 
with  the  challenges  identified  by  the  CSRs.  In  particular,  a  summary  table  displays  the 
components  and  measures  of  the  plan  and  their  correspondence  to  the  2019-2020-2022  CSRs. 
Overall,  the  table  illustrates  a  high  degree  of  CSR  coverage  envisaged  to  be  achieved  by  the 
Hungarian RRP.  

The  plan  contains  significant  measures  in  response  to  the  challenges  posed  by  the  green 
transition, notably by promoting the clean and efficient production and use of energy as well 
as energy and resource efficiency (2019 CSR 3, 2020 CSR  3  and 2022 CSR  6).  In order to 
promote  the  green  transition  and  in  light  of  the  energy  crisis  provoked  by  Russia’s  war  of 
aggression against Ukraine, a comprehensive set of reforms to the legal framework of Hungary’s 
electricity sector is envisaged, aiming to establish a supportive regulatory environment for creating 
significant additional capacities based on renewable energy sources. The plan includes in particular 
significant reforms to encourage the development of wind power plants, to facilitate the permitting 
procedures for renewable energy production and to increase the transparency and predictability of 
grid  connection  procedures.  Moreover,  the  plan  supports  investments  related  to  the  grid 
development and storage facilities, with  a view  to integrating the renewable energy production 
capacities  into  the  electricity  network  in  a  secure  and  flexible  way.  It  also  provides  financial 
support  to  the  creation  of  additional  renewable  energy  production  capacity  by  supporting  the 
installation of residential solar panel systems. In parallel, the construction of photovoltaic power 
plants in some of the 300 most disadvantaged settlements is expected to contribute to the clean 
and  efficient  production  of  energy.  Finally,  several  measures  aim  at  improving  the  energy 
efficiency of buildings. A reform is expected to introduce minimum standards requiring at least 
30% energy consumption reduction for building renovation support schemes financed from EU 
funds. Investments are also envisaged to support households for installing electric heating systems 
and storage units, as well as for the replacement of windows, complemented by investment in the 
energy-efficient  renovation  and  construction  of  buildings  in  the  education  (early  childcare, 
schools, universities), vocational education and training and healthcare sectors.  

The  plan  contains  significant  measures  to  address  challenges  related  to  transport 
infrastructure and sustainable transport (2019 CSR 3, 2020 CSR 3 and 2022 CSR 6). They 
include the modernisation of suburban railways in the region of Budapest, the upgrade of railways 
section in the TEN-T, the purchase of zero emission buses for public transport, the modernisation 
of the management system of railway lines, and the introduction of a single price- and information 
system  for  public  transport.  These  measures  are  expected  to  lead  to  a  reduction  of  emissions 
originating from transport by encouraging the use of environmentally friendly urban and suburban 
modes of transport and more generally by strengthening alternatives to individual cars and road 
freight. 

The plan includes dedicated components to address challenges related to the water and waste 
management sectors (2019 CSR 3, 2020 CSR 3 and 2022 CSR 5). A component aims to improve 
sustainable water management, including through the promotion of nature-based water retention. 
Another component has the strategic objective to facilitate the transition to a circular economy in 
Hungary,  notably  through  reforms  and  investments  in  the  field  of  waste  management  and 

41 

 
 
recycling. The plan aims at reforming the legal framework for waste management and to support 
the implementation of chemical recycling investments. 

The plan includes various measures to support digital transformation (2020 CSR 3 and 2022 
CSR  5).  They  target  improved  e-government  solutions  in  a  number  of  areas,  digital  skills  in 
education and training, as well as digital connectivity. Digital investments are planned in public 
education, water management, sustainable transport, energy, healthcare as well as in the public 
administration sector. 

The  plan  includes  an  ambitious  set  of  measures  to  improve  competition  in  public 
procurement (2019 CSR 3, 2020 CSR 4 and 2022 CSR 4). Hungary committed to significantly 
reduce  the  share  of  public  procurements  resulting  in  single  bids  for  procedures  financed  either 
fully or partially from Union support or solely from national resources to below 15% and maintain 
it below that level. This will be well below the average for EU Member States in 20207. Annual 
targets are included in the plan in this regard. Each of those annual targets will be audited to ensure 
that the reported levels are accurate. To achieve these targets, Hungary committed to develop and 
continuously make use of a monitoring tool assessing the level and cause of public procurement 
procedures resulting in single bids; to develop a performance measurement framework to regularly 
assess the efficiency and cost-effectiveness of public procurements and the reasons for and effects 
of limited competition in the sectors most affected by the low level of competition; and to set up 
and  implement  an  action  plan  based  on  good  international  practices  to  increase  the  level  of 
competition  in  public  procurement.  In  order  to  facilitate  the  participation  of  micro-  and  small 
enterprises  in  public procurements, Hungary  plans to develop  e-learning and training materials 
that  provide  the  most  important  theoretical  and  practical  information  to  micro-  and  small 
enterprises on how they can successfully participate in public procurement tenders. Hungary is 
expected  to  set  up  a  voucher  scheme  providing  compensation  –  based  on  objective,  non-
discriminatory and transparent selection criteria – to micro- and small enterprises on a flat-rate 
basis for their costs associated with their participation in public procurement tenders. Hungary also 
plans  to  develop  its  electronic  public  procurement  platform  further,  which  will  allow  the  bulk 
download of all contract award notices since 2014 in a machine-readable format to increase the 
transparency  of  public  procurements  and  facilitate  independent  oversight.  Overall,  all  these 
measures are expected to facilitate access to public procurement procedures and competition in 
public procurement.  

Regarding research and development, the plan contains actions to strengthen the innovation 
ecosystem in the country (2019 CSR 3, 2020 CSR 3 and 2022 CSR 5). This includes the setting 
up of national laboratories in five thematic research areas, as well as the delivery of a report on 
their  performance.  These  national  laboratories  are  formalised  research  consortia,  including 
universities, research institutes and other public actors (such as the National Food Chain Safety 
Office  and  the  Hungarian  Meteorological  Service),  with  the  aim  of  conducting  research  and 
publishing studies in relevant research areas.  

7 Single Market Scoreboard: Public Procurement https://single-market-scoreboard.ec.europa.eu/policy_areas/public-
procurement_en 

42 

 
 
                                                           
Issues related to the labour market integration of the most vulnerable groups are addressed 
mainly  by  providing  support  to  employment  and  skills  development  in  disadvantaged 
settlements, a wide set of education and skills-related measures and the creation of additional 
early childhood education and care facilities (2019 CSR 2, 2020 CSR 2 and 2022 CSR 3). A 
dedicated  component  focuses  on  the  economic  development  of  the  300  most  disadvantaged 
settlements in Hungary. One of the measures consists in the participation of at least 10 000 persons 
in labour socialisation programmes, which include training, personal mentoring, tailored services 
and employment opportunities. Other components are focused on strengthening access to quality 
education  and  skills,  notably  digital  ones.  They  include  measures  for  the  development  of 
vocational education and training infrastructure. The plan also foresees the creation of 3 593 new 
childcare places, which are expected to contribute to higher employment of parents with young 
children and thereby to reducing the gender employment gap. 

The plan includes measures to address challenges related to poverty (2019 CSR 2, 2020 CSR 
2  and  2022  CSR  3).  The  plan  aims  to  provide  basic  services  in  the  300  most  disadvantaged 
settlements  of  Hungary  through  an  integrated  social  policy  intervention.  This  notably  includes 
improving  housing  conditions  in  those  settlements  by  expanding  the  network  of  social  houses 
through the purchase and renovation of existing housing stock and building of new dwellings. In 
addition, social solar power plants would be built and operated for the benefit of inhabitants. At 
the  same  time,  the  plan  outlines  that  Hungary  is  expected  to  further  tackle  poverty  related 
challenges  in  the  disadvantaged  settlements  through  complementary  investments  under  the 
cohesion  policy  funding,  to  ensure  the  continuous  presence  of  social  workers,  early  childhood 
support and mobile primary healthcare services. Several measures in the education and healthcare 
sectors are also expected to benefit the more vulnerable parts of the population (including Roma). 

A  dedicated  reform  aims  to  address  the  recommendation  related  to  the  long-term 
sustainability and adequacy of the pension system (2022 CSR 1). The reform puts in place a 
transparent process with involvement of stakeholders and international experts, which will help 
the  authorities  to  design  effective  measures  to  address  challenges  of  the  pension  system.  Such 
measures  are  expected  to  contain  the  currently  projected  rise  in  expenditure  on  pensions  as 
percentage  of  GDP,  thus  improving  the  medium-  and  long-term  sustainability  of  the  pension 
system. In line with the CSR, those measures are also expected to preserve adequacy and mitigate 
inequalities in the pension system. 

The plan sets out an ambitious agenda to address key challenges  of the healthcare system 
(2019 CSR 2, 2020 CSR 1 and 2022 CSR 3). Such challenges include unequal access to health 
services,  a  high  prevalence  of  gratuity  payments,  excessive  reliance  on  hospital-level  care  and 
regional  disparities  stemming  from  staff  shortages  and  an  uneven  distribution  of  active  health 
workforce across the country. The dedicated component includes a number of significant reforms 
and investments that have the potential to improve the quality, accessibility and cost-effectiveness 
of the healthcare system.  It also includes a measure to eradicate gratuity  payments as part of a 
wide-ranging  reform package according to  which the receipt of such payments is  criminalised, 
while doctors’ salaries are being substantially increased (exclusively from the national budget) to 
reduce the incentives to request gratuity payments from patients. This is expected to lead to more 
efficient and equitable pathways for treating patients in the healthcare sector. The plan also plans 

43 

 
 
measures to increase the share of general practitioners working in group practice, to increase the 
number of patients enrolled in health promotion and disease prevention programmes, to review 
and optimise the hospital network, as well as to develop health digitalisation projects (including a 
remote health monitoring programme for the elderly), which can offer potentially sizeable savings. 
In turn, these improvements in cost-effectiveness are expected to help alleviate the long-term fiscal 
sustainability risks stemming from public spending on healthcare and long-term care. 

The plan comprises reforms related to challenges in the area of taxation and aggressive tax 
planning  (2019  CSR  4,  2020  CSR  5  and  2022  CSR  4).  Several  measures  aim  at  tackling 
aggressive tax planning more effectively, such as increasing the data reporting on transfer pricing, 
the introduction of minimum substance requirements for corporate income tax for shell companies, 
and broadening the scope of non-deductibility rules for outbound payments to zero- and low-tax 
jurisdictions. Taken together, these measures are expected to contribute to decreasing the room for 
aggressive tax planning practices, while closing the loopholes that facilitated the transfer of profits 
to low- or no-tax jurisdictions without corresponding economic activity in Hungary. As such, they 
are  expected  to  play  an  equivalent  role  to  that  of  similar  anti-tax  avoidance  measures,  such  as 
withholding  taxes.  As  for  tax  simplification,  the  plan  includes  measures  on  the  digital 
transformation of tax compliance procedures, on reducing the number of taxes, and on repealing 
or amending the distortive tax on public utility pipelines.  

The plan includes several reforms to reinforce the anti-corruption framework (2019 CSR 4 
and  2022  CSR  4).  These  include  the  setting  up  of  an  Integrity  Authority  to  reinforce  the 
prevention, detection and correction of fraud, conflict of interest and corruption as well as other 
illegalities and irregularities concerning the implementation of Union support in Hungary, with a 
particular focus on public procurement. The establishment of an Anti-Corruption Task Force, with 
the  close  involvement  of  independent  non-governmental  organisations,  will  serve  to  examine 
existing anti-corruption measures and draw up proposals concerning the improvement of detection, 
investigation,  prosecution  and  sanctioning  of  corruption  practices  and  other  practices  such  as 
nepotism,  favouritism  or ‘revolving doors’ between the public and private sectors.  In addition, 
legislative  amendments  are  expected  to  extend  the  personal  and  material  scope  of  asset 
declarations as well as to strengthen cooperation with the European Anti-Fraud Agency (OLAF), 
by  providing  assistance  from  national  authorities  to  carry  out  investigations  effectively  and  to 
impose financial sanctions on economic operators that do not cooperate. Further legal changes are 
expected to reinforce the oversight and transparency of the operation of how public interest asset 
management  foundations  performing  public  interest  activity  and  legal  persons  established  or 
maintained by them make use of Union support, along with the introduction of more stringent rules 
to ensure the effective prevention, detection and correction of fraud, corruption, conflict of interest 
and other illegalities related to the implementation of any Union support in Hungary. The anti-
corruption framework will also be strengthened by establishing the possibility of a judicial review 
of decisions of the prosecution service or the investigating authority to dismiss a crime report or 
terminate criminal proceedings. The plan also includes a measure to fully implement Hungary’s 
current National Anti-Corruption Strategy and action plan and to prepare a new National Anti-
Corruption  Strategy  and  action  plan.  Moreover,  several  measures  contribute  to  increasing  the 
transparency of and access to public data, which also reinforces the anti-corruption framework by 

44 

 
 
facilitating independent oversight. Such measures include setting up and operating a searchable 
central registry of public spending, eliminating or limiting the costs related to requests for public 
information,  shortening  court  procedures  on  cases  related  to  access  to  public  information,  and 
regular  checks  on  all  public  bodies  to  assess  whether  they  comply  with  their  respective 
requirements  on  providing  access  to  data  of  public  interest.  The  findings  of  those  checks  are 
expected to be made publicly available.  

The  recommendation  on  strengthening  judicial  independence  is  addressed  by  several 
reforms across different levels of the judicial system (2019 CSR 4 and 2022 CSR 4). They are 
expected to strengthen the independence and impartiality of courts and judges established by law 
in accordance with Article 19 of the TEU and the relevant EU acquis, thus raising the standard of 
judicial protection and improving the investment climate. The measures included ensure that the 
position and career of judges in terms of leadership of courts, appointments, secondments and in 
other decisions is secured against arbitrary decisions and the exercise of undue influence. This is 
to be achieved by enhancing the system of checks and balances strengthening the requirements for 
appointments  in  key  court  leadership  positions,  and  by  establishing  clear  and  objective,  non-
discretionary rules.  

-  First, in terms of court administration, this includes measures to strengthen the role and powers 
of the National Judicial Council, led and elected by judges themselves, to counterbalance the 
powers of the President of the National Office for the Judiciary, with respect to discretionary 
decisions on individual cases as well as to the regulations for the judicial system as a whole. 
In particular, Hungary commits to require the consent of the National Judicial Council, through 
a  motivated  binding  opinion,  on  the  suitability  of  candidates  for  the  posts  of  President  and 
Vice-President  of  the  National  Office  for  the  Judiciary,  based  on  suitability  criteria;  on 
decisions  on  the  annulment  of any appointment  procedures  for judicial and court executive 
positions; on the transfer of judges; and on any removal of judges from the pool of judges that 
hear special, including administrative, cases. The National Judicial Council is also expected to 
give a motivated binding opinion on key regulations for the judicial system such as the points 
system for judicial posts, the conditions for the award of bonuses, the training of judges, the 
national  workload  (including  the  underlying  data),  and  the  number  of  judicial  posts,  where 
currently  changes  can  occur  without  the  consent  of  the  representatives  of  the  judges 
themselves.  The  National  Judicial  Council  itself  is  expected  to  be  further  strengthened  in 
exercising  its  duties  by  allowing  judges-members  of  the  National  Judicial  Council  the 
possibility to be re-elected for the next term of office, and by providing the Council with legal 
capacity, autonomy in disbursement of its budget, right to access to all relevant documents, 
and  the  right  to  seize  the  competent  court  and  the  Constitutional  Court  to  defend  its 
prerogatives.  Non-discretionary  rules  on  designation  of  ad  interim  court  presidents  and  a 
prohibition for the reintegration of judges to a higher court instance following their secondment 
are also to be introduced, further reducing the scope for exercising undue influence.  

-  Another reform  is  expected to  strengthen the judicial independence of the  Supreme Court 
(Kúria) and limit risks of political influence over the top court, notably by amending the rules 
on the election of the Kúria president, who should have at least five years’ experience as a 

45 

 
 
judge and should not have the possibility to be re-elected. The National Judicial Council is also 
expected  to  give  its  consent  on  this  matter  through  a  motivated  binding  opinion  on  the 
suitability  of  candidates  for  President  and  Vice-President  of  the  Kúria.  The  reform  is  also 
expected  to  limit  undue  influences  by  removing  the  possibility  for  members  of  the 
Constitutional Court – who are appointed by the Parliament – to be appointed as judges to the 
Kúria outside of the normal application procedure, improving the case allocation scheme and 
enhancing oversight over it, and ensuring a set of stronger powers for the judicial council of 
the Kúria itself and, in cases where the Kúria president acts as an appointing authority, for the 
National Judicial Council.  

-  Further  reforms  are  expected  to  prevent  the  Supreme  Court  from  reviewing  preliminary 
rulings to the Court of Justice of the European Union (CJEU) by Hungarian judges, in line 
with a CJEU ruling.  

- 

In  order  to  limit  any  possible  undue  influence  in  the  judicial  review  of  decisions  of  public 
authorities, Hungary is also expected to remove the possibility, introduced in 2019 and used 
on a number of occasions since then, for public authorities to challenge final judicial decisions 
before the politically-appointed Constitutional Court. 

The plan includes reforms to improve the quality and transparency of the decision-making 
process through effective social dialogue, engagement with other stakeholders and regular 
impact  assessments  (2019  CSR  4,  2020  CSR  4  and  2022  CSR  4).  Related  measures  include 
targeted legislative changes to establish minimum public consultation periods on draft legislation 
before they are finalised or submitted to the Parliament and to keep the share of legislative acts 
adopted without public consultation to the necessary minimum, with systematic justification for 
the  use  of  exceptional  procedures.  The  plan  includes  binding  targets  in  this  regard.  Impact 
assessments are expected to be systematically prepared and made available publicly in relation to 
all  draft  legislation,  and  a  new  impact  assessment  methodology  will  be  developed  with  the 
involvement  of  international  institutions  and  stakeholders.  The  explicit  involvement  of  social 
partners and stakeholders in decision-making is a prerequisite condition of several measures in the 
plan, with specific milestones envisaged to that effect. The public oversight of the plan itself is 
also envisaged: this will be the main task of a dedicated monitoring committee, with at least half 
of the members coming from civil society organisations  that are truly independent  from public 
authorities. 

The plan includes several measures in the field of education, contributing to addressing key 
challenges  (2019  CSR  2,  2020  CSR  2  and  2022  CSR  3).  Low  education  outcomes  are  a 
significant  bottleneck  to  social  inclusion  and  the  long-term  growth  prospects  of  the  Hungarian 
economy. The plan features reforms to improve the attractiveness of the teaching profession, to 
decrease segregation in schools as well as to ensure access to quality school education, in particular 
by  providing  pupils  and  teachers  with  the  devices  necessary  to  participate  in  modern  digital 
education, and by developing the digital skills of pupils and teachers. Measures tackling the low 
attractiveness  of the teaching profession include  a  gradual  increase of wages of teachers in  the 
public education system, to reach at least 80% of the average wage of tertiary graduates by 2025 
and maintaining such level until 2030, with special emphasis on teachers working in disadvantaged 

46 

 
 
areas  and  in  schools  with  high  share  of  disadvantaged  students  and  on  entry-level  teachers.  A 
number of 579 000 digital notebooks are envisaged to be delivered in public education institutions 
for the use of students in grades 5 and 9, out of which at least 55 000 for teachers and at least 
10 000 for schools. At least 3 100 schools are expected to be equipped with interactive display 
tools and devices to develop student creativity and problem-solving capacity, while priority will 
be  given  to  schools  with  high  share  of  disadvantaged  students.  The  plan  also  supports  the 
integration  of  low-performing  lower  secondary  classes  into  larger  schools  in  neighbouring 
settlements, adjusts the financial support mechanism for schools to incentivise efforts to reduce 
school segregation, enhances the quality of specialised education services for students with special 
needs,  improves  managerial  skills  of  school  heads  and  their  deputies  as  well  as  provides 
qualifications on additional disciplines for teachers and pedagogical skills of education staff. The 
component supporting the development of a highly qualified and competitive workforce includes 
investments related to modernising the physical and digital infrastructure of vocational education 
and training institutions, to developing digital curricula and for the energy efficiency refurbishment 
of  buildings.  Measures  in  another  component  aim  at  providing  inclusive  pedagogical 
developments  in  at  least  100  public  education  institutions  in  some  of  the  most  disadvantaged 
municipalities selected under the Catching up Settlements Programme. This includes the provision 
of extended school programmes and scholarships for secondary education in education tracks that 
lead to ‘matura’ diploma, which is also expected to contribute to the prevention and reduction of 
segregation. 

A few challenges identified in the CSRs are considered as not being adequately addressed. 
The challenges associated with the labour market (2022 CSR 4) are only partially tackled, as the 
plan lacks measures to extend the duration of unemployment benefits. This is also the case for 
challenges  associated  to  the  adequacy  of  social  assistance  (2022  CSR  3),  as  the  plan  includes 
targeted interventions focusing on the inhabitants of the most disadvantaged settlements, which 
are only a segment of the population at risk of poverty or exclusion. The plan also does not include 
measures  in  relation  to  competition  in  services  and  the  systematic  application  of  competition 
scrutiny in business transactions (2022 CSR 5); and in relation to the digitalisation of businesses 
(2022 CSR 5), which is however well covered under the EU cohesion policy. 

Taking into consideration the reforms and investments envisaged by Hungary, its recovery and 
resilience  plan  is  expected  to  contribute  to  effectively  addressing  all  or  a  significant  subset  of 
challenges  identified  in  the  country-specific  recommendations,  or  challenges  in  other  relevant 
documents officially adopted by the Commission under the European Semester, and the recovery 
and  resilience  plan  represents  an  adequate  response  to  the  economic  and  social  situation  of 
Hungary. This would warrant a rating of A under the assessment criterion 2.2 in Annex V to the 
RRF Regulation.

47 

 
 
4.3. Growth  potential,  job  creation,  economic,  institutional  and  social  resilience, 
European  Pillar  of  Social  Rights,  mitigating  the  impact  of  the  crisis,  and  social 
territorial cohesion and convergence 

Fostering economic growth and jobs 

The  plan  aims  to  support  Hungary’s  recovery  and  improve  long-term  growth  prospects 
through a range of investments and reforms. The main objectives of the plan are to improve 
Hungary’s  growth  potential,  job  creation,  and  economic,  social  and  institutional  resilience  that 
should  ultimately  reduce  the  country’s  vulnerability  to  shocks.  The  measures  in  the  plan  are 
expected to support human capital accumulation and labour market participation, the roll-out of 
green and digital technologies and productivity growth. 

The  availability  of  skilled  labour  is  a  key  long-term  challenge  of  Hungary.  Bottlenecks  in 
human capital development arise due to weak education outcomes, including relatively high early 
school leaving (see also Box 2) and low digital skills. Hungary also suffers from low attractiveness 
of the teaching profession and the plan seeks to address teacher shortages by increasing the average 
salary of teachers in the public education system from 59% (in 2022) to at least 80% of the average 
wage of tertiary graduates, and by offering retraining opportunities for teachers. To support pupils 
of  disadvantaged  socio-economic  background  (including  Roma),  the  plan  promotes  inclusive 
education  practices,  creates  financial  incentives  for  schools  to  limit  segregation,  and  envisages 
integrating  small  lower-secondary  classes  into  larger  schools  in  neighbouring  settlements  to 
improve pupils’ access to quality mainstream education. The plan is expected to boost digital skills 
by investing in digital education solutions through the distribution of personal digital devices for 
teachers  and  pupils,  and  the  provision  of training  for  teachers.  The  improvement  of  vocational 
education and training schools, including the development of digital education solutions, and the 
planned stronger involvement of higher education institutions in adult training will also help raise 
skills levels overall. 

Health  outcomes  are  also  essential  for  human  capital  and  societal  development.  Hungary 
suffers from below average performances: a Hungarian newborn in 2019 could expect 61.7 healthy 
life years compared to the EU average of 64.6 years. Thus, despite a gradual improvement in this 
indicator, an average Hungarian could still expect to encounter health problems three years before 
regular retirement age. The comprehensive reform of the healthcare sector is expected to improve 
the overall health status of the population and thus increase the availability of workers.  

The plan also includes measures to increase labour market participation of specific groups. 
In particular, Hungary  plans to  increase the capacity of  early  childcare facilities, which can  be 
expected  to  raise  the  labour  market  participation  of  parents,  and  notably  women  with  young 
children. Furthermore, actions envisaged in the most disadvantaged settlements of the country seek 
to help the long-term unemployed population with mentoring, targeted skills development, and 
employment opportunities.  

Capital accumulation is supported by significant investment to support the green and digital 
transitions. These investments are expected to improve the infrastructure necessary for businesses 
(e.g. the rail network) and to help the economy transition towards new technologies. Reforms and 

48 

 
 
investments  in  waste  management  can  also  be  expected  to  help  develop  the  circular  economy, 
including through the adoption of new technologies to treat plastic waste.  

Productivity growth may benefit from efforts to stimulate innovation. Investment in skills, in 
higher education and support for R&D networks can be expected to help Hungary improve upon 
its emerging innovator status, which is essential for sustainable growth in the long run. The plan 
foresees the creation of new national laboratories which  are expected to foster cooperation and 
knowledge transfer among research entities, higher education institutions and businesses. Some of 
the  research  topics  to  be  funded  can  be  expected  to  support  the  development  of  innovative 
enterprises, for example in the automotive, pharmaceutical and information sectors. The plan is 
also expected to support digitalisation through the promotion of digital solutions in education and 
the  development  of  digital  services,  in  particular  in  healthcare.  Finally,  efforts  to  increase 
competition in public procurement through facilitating, among others, the participation of micro-, 
small and medium-sized enterprises are expected to enhance competition and productivity growth. 

The plan is  expected to help maintain public investment at a high level.  Public investment 
remained resilient during the 2020 recession and reached 6.3% of GDP in 2021, the highest level 
in the EU. This reflected the absorption of significant EU funding available for Hungary, as well 
as a high level of nationally financed investment. This development is commensurate with the need 
for greater capital accumulation, including public infrastructure, in a catching-up economy. In the 
medium  term,  Hungary  faces  various  economic  and  social  challenges,  including  the  green  and 
digital transformations, which continue to require significant public investment (see sections 2.2 
and 2.3). Funding from  the  RRF is  expected to  contribute to  maintaining  a high  rate of  public 
investment  in  a  period  where  the  government  faces  significantly  higher  financing  costs. 
Investments funded by the Facility are expected to amount to an annual average of 0.7% of GDP 
(at 2021 prices) over 2021-2026. The plan does not include a projection for public investment, but 
the macroeconomic scenario of the 2022 Convergence Programme, which takes into account the 
impact of the plan, foresees public investment at 5.8% on average in 2022-2026. 

The plan is expected to contribute positively to economic growth. Hungary has not provided a 
baseline  scenario  for  public  investment  without  the  plan.  Simulations  with  the  Commission’s 
QUEST  model  indicate  that  the  investments  financed  by  the  Facility  could  raise  the  level  of 
Hungary’s GDP by 1.0% to 1.4% by 2025 (see box 2 for further detail). Hungary has prepared a 
detailed quantitative impact assessment using an input-output model. While this model accounts 
for  supplier  linkages,  it  does  not  take  into  account  second-round  effects  (e.g.  on  prices)  and 
international spillovers. Due to these differences, the calculations cannot be directly compared to 
the Commission simulations.  

49 

 
 
 
 
Box 2: Stylised NextGenerationEU (NGEU) impact simulations with QUEST – Hungary 

Model simulations conducted by the Commission using the QUEST model show that the 
economic impact of NGEU in Hungary could lead to an increase of GDP of between 1.0% 
and 1.4%.[1] After 20 years, GDP could be 0.4% higher compared to a no-NGEU baseline. 
Spillovers account for a significant part of the effect. According to these simulations, this 
would translate into around 22 thousand additional jobs. Cross border (GDP) spillovers account 
for 0.4 pps in 2026, showing the value added of synchronised expenditure across Member States 
(line  2).  Even  assuming  with  a  lower  productivity  of  NGEU  funds,  it  would  still  lead  to  a 
significant impact (line 3).[2] 

Table 7. QUEST simulation results (%-deviation of real GDP level from non-NGEU case)  
Scenario 
Baseline 
  of which spillover 
Low productivity 

2021  2022  2023  2024  2025  2026  2027  2028  2029  2030  2040 

1.0 
0.4 

1.3 
0.4 

0.6 
0.3 

-0.3 

0.5 

1.3 

1.4 

0.0 

0.2 
1.0 

0.0 
0.2 

0.4 
1.0 

1.0 
0.2 
0.7 

0.6 
0.2 
0.2 

0.4 
0.1 
0.2 

0.6 
0.2 
0.2 

0.2 

0.5 

0.9 

0.0 

This stylised scenario does not include the possible positive impact of structural reforms, 
which  can  be  substantial.  A  model-based  benchmarking  exercise  shows  that  undertaking 
structural  reforms  that  would  result  in  halving  the  gap  vis-à-vis  best  performers  in  terms  of 
indicators of structural reforms could raise Hungary’s GDP by 14% in 20 years’ time, compared 
to 11% for the EU average.[3] 

Due  to  the  differences  in  the  assumptions  and  methodology,  the  results  of  this  stylised 
assessment  cannot  be  directly  compared  to  the  numbers  reported  in  chapter  4  of 
Hungary’s RRP. 

Strengthening social cohesion 

The plan includes measures in several areas identified as pressing challenges in the EU Social 
Scoreboard. The Social Scoreboard flags as most critical areas for Hungary the low share of young 
children enrolled in formal childcare and the low level of digital skills in the population (see also 
Box 3), and Hungary’s plan envisages actions related to these areas. The low share of children 
under age 3 enrolled in formal childcare is also a key factor behind the gender employment gap in 
Hungary.  The  development  of  early  childcare  facilities  –  which  is  also  supported  by  cohesion 
policy funds in addition to the RRF – may thus be expected to contribute to raising the employment 
rate of women. Digital skills development is also at the core of several interventions of the plan. 
In 2019, 51% of individuals lacked basic digital skills in Hungary, compared to 46% in the EU. 
The plan foresees the distribution of ICT equipment to teachers and pupils on various education 
levels, as well as efforts to develop digital education content in vocational education and training 
schools and in adult learning and promote digital education methods. 

The plan is expected to improve the access of disadvantaged groups to quality public services. 
Access  to  quality  mainstream  education  should  be  improved  through  measures  such  as  a 
comparatively  higher  salary  increase  for  teachers  working  in  disadvantaged  areas  or  with 

50 

 
 
 
 
 
 
 
disadvantaged pupils, as well as a financial incentive for schools to prevent segregation and the 
integration of small lower secondary classes (from schools typically located in rural/disadvantaged 
areas) into larger neighbouring schools. Measures to distribute ICT equipment to pupils will also 
benefit low-income households to a greater extent because they are less likely to own such devices. 
In  the  area  of  healthcare,  the  practice  of  gratuity  payments  reduces  the  access  of  low-income 
groups to quality care. The plan includes a measure to eradicate such gratuity payments as part of 
a wide-ranging reform package according to which the receipt of such payments is criminalised, 
while doctors’ salaries are being substantially increased to reduce the incentives to request gratuity 
payments from patients (no RRF funding is envisaged for the financing of the doctors’ salaries). 
This may be expected to lead to establishing more efficient and equitable pathways to diagnosis 
and treatment for all patients. 

The scaling up of an integrated development programme is expected to benefit the 300 most 
disadvantaged settlements. Hungary has launched a long-term  development initiative  in  2019 
(the Catching-up Settlements programme) focusing on people living in the most disadvantaged 
settlements  by  offering  wide-ranging  support  adapted  to  local  needs.  Such  support  includes 
improving  the  housing  situation,  developing  solar  power  plants  benefitting  the  communities, 
education  and  employment  through  non-profit  organisations  with  complementary  interventions 
envisaged from the cohesion policy funds (social work, healthcare, early childhood education and 
care  and  community  building).  Currently  118  settlements  are  involved  in  the  programme.  The 
scaling up of this programme to 300 settlements (amounting to about 3% of Hungary’s population) 
is supported by targeted measures in the RRP, with complementary interventions envisaged from 
the EU cohesion policy funding.  

The plan contains  some  measures  in the area of gender equality and equal  opportunities. 
These measures are mostly related to Component 1 (Demography and public education) through 
the increase of places in early childcare facilities to enhance parents’ participation in the labour 
market and to contribute to their work-life balance; and Component 3 (Catching-up settlements) 
with  an  integrated  approach  to  social  integration,  including  Roma.  Measures  in  Component  2 
(Highly  qualified,  competitive  workforce)  are  also  expected  to  improve  accessibility  of  digital 
learning materials for disadvantaged learners. Component 5 (Sustainable green transport) is also 
expected to improve accessibility for persons with disabilities at some railway stations and to new 
buses. Some measures of healthcare reform (Component 8 – Healthcare) are expected to contribute 
to the implementation of the Strategy for the Rights of Persons with Disabilities. Looking ahead 
at the design and delivery of most measures, it will be important to keep a specific attention to 
their effects in terms of gender equality and equal opportunities. 

Reducing vulnerability and increasing resilience 

Green  investments  are  expected  to  strengthen  economic  and  environmental  resilience. 
Hungary’s reliance on energy imports and the economy’s exposure to international energy price 
fluctuations are major sources of vulnerabilities. The plan is expected to contribute to increasing 
the share of renewable energy production through the promotion of solar energy and wind power, 
to the strengthening of the electricity network to accommodate renewable energy sources and to 
the  facilitation  of  grid  connections.  The  plan  is  also  expected  to  contribute  to  higher  energy 

51 

 
 
efficiency levels, mainly through the renovation of public buildings. Furthermore, investment in 
sustainable public transport may not only ease traffic congestion and improve air quality, but it 
may also facilitate greater labour mobility.  

Investment in digitalisation, education and skills, and the reform of the healthcare system 
will  contribute  to  social  resilience.  Digital  education  solutions  and  the  modernisation  of 
education and adult training can contribute to upskilling, reskilling and a greater adaptability of 
workers. Health promotion campaigns, more comprehensive primary care services through general 
practitioners’  communities,  a  reorganised  and  modernised  hospital  system  and  clear  treatment 
pathways  for  patients  can  improve  health  outcomes  and  increase  efficiency  in  the  healthcare 
system,  while  strengthening  its  resilience  in  case  of  health  crises.  A  remote  health  monitoring 
system for elderly people is expected to contribute to the de-institutionalisation of long-term care. 
The  digitalisation  of  healthcare  is  expected  to  make  the  operation  of  health  institutions  more 
efficient and secure. The plan can be also expected to increase social resilience indirectly, through 
investing in R&D on major societal challenges in areas such as healthcare and the environment. 

Cohesion and convergence 

The  RRF  complements  other  EU  funding  aiming  to  foster  territorial  cohesion  and 
convergence in Hungary. Hungary is a major beneficiary of cohesion policy funds, which are 
primarily targeted at its less developed regions. Due to the greater flexibility of the RRF in terms 
of incorporating reforms and geographical coverage of investment measures, the plan can serve as 
a  strategic  complement  to  other  EU  interventions  in  Hungary.  In  some  cases,  such  as  the 
development  of  public  transport,  relatively  larger  interventions  are  planned  in  more  developed 
areas where some of the challenges of greening the economy (such as traffic congestion and the 
consequent air pollution) are often concentrated.  

Investment in digital public education and healthcare can be expected to reduce inequalities 
in  the  access  to  quality  public  services.  Rural,  disadvantaged  areas  are  more  likely  to  lack 
adequate education and health infrastructure, as well as face shortages in the number of teachers 
and doctors. Therefore, they stand to gain the most from measures such as the distribution of digital 
equipment  in  schools  and  the  more  efficient  organisation  and  better  endowment  of  healthcare 
services.  Moreover,  the  integrated  development  programme  for  the  most  disadvantaged 
settlements proposes customised solutions to local needs to break out of poverty and deprivation. 

52 

 
 
Box 3: Employment and social challenges in light of the Social Scoreboard 
accompanying the European Pillar of Social Rights 

of 

indicators 

Hungary  performs  relatively  well  on 
the  Social 
some 
Scoreboard  supporting  the  European 
Pillar of Social Rights, but significant 
challenges  remain.  The  employment 
rate  is  above  the  EU  average  and 
is  well  below.  The 
unemployment 
growth 
in  real  per  capita  adjusted 
disposable  income  of  households  was 
better than the EU average, with a 33 pps 
increase since 2008. The gender pay gap 
remains wide compared with the rest of 
the EU and has increased sharply above 
the  EU  average  since  2019.  The  youth 
slightly 
rate 
unemployment 
increased from 12.8% in 2020 to 13.5% 
in 2021, being close to the EU average of 
13.0%  (2021).  (The  share  of  young 
people  who  are  neither  in  employment, 
nor in education and training (NEET) is 
relatively low (11.7% in 2021) except for 
women, who are affected nearly twice as 
often as men.  
Labour  market  outcomes  are  weak  also 
for  vulnerable  groups,  including  Roma 
and persons with disabilities.  

has 

The share of people at risk of poverty 
or social exclusion  decreased,  but the 
depth  of  poverty  has  significantly 
worsened (from 16.7% in 2017 to 27.9% 
in 2020), pointing to a  limited redistributive capacity of  social transfers. The  high rate  of early school leaving, 
especially among the Roma population, the low level of individuals’ digital skill and adult education participation 
rates pose important challenges. Provision of early childhood education and care is among the lowest in the EU, 
with only 16.9% of children under the age of 3 in formal childcare (EU: 35.3% in 2019), which negatively impacts 
on equal opportunities and work-life balance. More action is needed on the provision of long-term social housing 
and accompanying inclusion measures. The unemployment rate of low-skilled people is 2.5 and 6 times higher than 
that of the medium- or high-skilled respectively, which points to the need for active labour market policies to focus 
more on upskilling and reskilling. 

With its Recovery and Resilience Plan, Hungary intends to channel investments in some of the areas where 
the Social Scoreboard indicates the most pressing challenges for Hungary. To foster equal opportunities and 
access to the labour market as well as social protection and inclusion, the plan envisages developments targeting 
the 300 most disadvantaged settlements in order to improve access to social and healthcare services. The adequacy 
of social assistance in general remains, however, low. Investments are proposed to foster the quality of and access 
to  primary  care  services.  To  improve  labour  market  dynamics  and  working  conditions,  Hungary  plans  the 
preparation of a digital competency framework and the provision of related trainings aiming to improve the basic 
digital skills of the population. The plan also envisages reforms and investments  in higher education, vocational 
education and training, and innovation as well as investments in the digitalisation of public education.  

Steps have been taken to improve the labour market participation of women, in particular by increasing the 
availability of early childhood education and care (ECEC) facilities. The proportion of children under 3 years 

53 

 
 
 
 
  
  
of age in formal childcare increased to 16.9% in 2019 from 13.8% in 2017, which is a step towards the Barcelona 
target. Hungary has invested significant EU and national funds into extending the provision of childcare by creating 
new places in creches. It has proposed additional investments in early childhood education and care in its Recovery 
and Resilience Plan, aiming to improve capacity by around a further 3600 places. 

[1] The simulations are based on Pfeiffer, P., Varga, J. and in ’t Veld, J. (2021), “Quantifying Spillovers of Next Generation EU 
Investment”, European Economy Discussion Paper 144. The simulations were updated to reflect new grant allocations and actual 
annual spending profiles. RRF amounts to roughly 90% of NGEU, which also includes REACT-EU, Horizon, InvestEU, JTF, Rural 
Development and RescEU. 

[2] Technically, the low productivity scenario considers a significantly reduced output elasticity of public capital. 

[3] Varga, J, in 't Veld J. (2014), “The potential growth impact of structural reforms in the EU: a benchmarking exercise ", European 
Economy Economic Papers no. 541.  

http://ec.europa.eu/economy_finance/publications/economic_paper/2014/pdf/ecp541_en.pdf. 

Taking  into consideration all reforms and investments  envisaged by Hungary, its recovery and 
resilience  plan  is  expected  to  have  a  high  impact  on  strengthening  the  growth  potential,  job 
creation, and economic, social and institutional resilience of the Member State, on contributing to 
the implementation of the European Pillar of Social Rights, including through the promotion of 
policies for children and youth, and on mitigating the economic and social impact of the COVID-
19 crisis, thereby enhancing the economic, social and territorial cohesion and convergence within 
the Union. This would warrant a rating of A under the assessment criterion 2.3 of Annex V to the 
RRF Regulation.  

4.4. The principle of ‘do no significant harm’ 

The Regulation establishing the RRF stipulates that the recovery and resilience plan should 
ensure that no measure for the implementation of the reforms and investments should lead 
to significant harm to any of the six environmental objectives within the meaning of Article 
17 of the Taxonomy Regulation8. In line with the RRF Regulation and the Technical Guidance 
on  the  Application  of  ‘do  no  significant  harm’  under  the  RRF  Regulation  (hereafter  ‘DNSH 
Technical Guidance’9), Member States provide a ‘do no significant harm’ (DNSH) assessment, on 
which basis the Commission assesses whether each measure of the plan complies with the DNSH 
principle.  Hungary  has  submitted  a  detailed  DNSH  assessment  of  all  measures  included  in  the 
plan. 

The  evidence  provided  on  the  criteria  used  for  the  selection  and  design  of  measures  is 
sufficient  to  conclude  that  no  measure  in  the  plan  is  expected  to  do  significant  harm  to 
environmental  objectives.  Many  measures  included  in  the  plan  contribute  substantially  to 
environmental  objectives,  or  have  no  or  an  insignificant  foreseeable  impact  on  environmental 
objectives, and are therefore considered DNSH compliant from the outset (e.g. certain measures 
in  education  and  public  administration).  Other  measures  are  designed  in  such  a  way  that  they 

8 The six environmental objectives comprise (1) climate change mitigation, (2) climate change adaptation, (3) 
sustainable use and protection of water and marine resources, (4) the circular economy, (5) pollution prevention and 
control, and (6) protection and restoration of biodiversity and ecosystems. 
9 COM (2021) C58/01, Technical Guidance on the Application of ‘do no significant harm’ under the Recovery and 
Resilience Facility Regulation. 

54 

 
 
 
                                                           
include assurances that DNSH requirements will be respected, being enshrined in the design of 
measures or, when necessary, also reflected in various milestones and targets. 

For measures where it is relevant, the potential harmful environmental and climate impact 
is addressed through appropriate assurances that the applicable criteria are to be respected. 
The water management component, which includes the development of new water networks and 
systems, requires taking specific precautions. Hungary is expected to ensure full compliance of 
supported projects with relevant EU legislation, namely the Water Framework, Habitats and Birds 
Directives  and  national  legislation.  Hungary  committed  to  conduct  full  environmental  impact 
assessments  (EIAs)  relevant  to  each  of  these  measures,  and  to  design  projects  in  line  with  the 
findings of these assessments. Ensuring compliance with EU environmental law aims in particular 
to ensure that the good ecological status of the surface and groundwater bodies affected by those 
investments  will be achieved.  It  also  aims to  ensure that protected habitats  and species  are not 
impacted negatively by the measures and that the conservation objectives of the Natura 2000 sites 
concerned are complied with. The EIAs for these measures are also expected to take into account 
projected  impacts  from  climate  change  based  on  the  best  available  science  (in  particular  with 
regard  to  the  increasing  frequency  and  length  of  low  flow  periods  predicted  in  the  National 
Adaptation Strategy on the rivers that should feed the canals targeted by the intervention). Should 
the EIA suggest conditions through which significant harm to both surface and groundwater bodies 
can  be  avoided,  Hungary  is  expected  to  undertake  the  recommended  conditions  and  measures. 
Hungary committed in particular that water bodies affected by the investments under the RRP will 
have reached good status by the end of 2025. In addition, substantial nature-based solutions for 
water retention are expected to be included in the design of the infrastructure projects included in 
the water management component. These requirements are included in the relevant milestones for 
each project. 

The measures in the transport sector are expected to be implemented in compliance with the 
DNSH  principle.  For  that  purpose,  the  contractors  of  the  infrastructure  work  (railways  and 
relevant installations, including buildings, car parks and roads) are expected to ensure that at least 
70% of non-hazardous construction and demolition waste is prepared for re-use/recycling/other 
material recovery. Building components and materials used in the construction are also expected 
not to contain asbestos nor substances of very high concern, and the vehicles purchased (buses) 
are expected to be fully zero-emission powered. 

The measures aiming at the transformation towards a circular economy are also expected to 
be implemented in compliance with the DNSH principle. Specific requirements include that the 
output  of  the  chemical  recycling  process  of  the  supported  recycling  facility  is  expected  to  be 
secondary  raw-materials  and  not  fuels,  and  as  such  this  process  does  not  constitute  energy 
recovery,  under  the  meaning  of  the  Waste  Framework  Directive.  They  also  include  that  green 
hydrogen  to  be  produced  as  part  of  the  investment  and  used  as  part  of  the  chemical  recycling 
process should be produced from renewable energy sources in accordance with applicable EU law. 
They  further  include  that  the  plant  shall  only  treat  plastic  waste  that  cannot  be  recycled 
mechanically. Finally, the requirements include that in case the measure includes activities under 

55 

 
 
the EU Emission Trading System (ETS), such activities must achieve projected greenhouse gas 
emissions lower than the relevant benchmarks10. 

Taking  into  consideration  the  assessment  of  all  the  measures  envisaged,  no  measure  for  the 
implementation of reforms and investments projects included in Hungary’s recovery and resilience 
plan is expected to do a significant harm to environmental objectives within the meaning of Article 
17 of Regulation (EU) No 2020/852 (the principle of ‘do no significant harm’). This would warrant 
a rating of A under the assessment criterion 2.4 of Annex V to the RRF Regulation. 

4.5. Green transition  

Climate target 

Measures supporting climate objectives in Hungary’s recovery and resilience plan account 
for EUR 2.80 billion, which represents 48.1% of the plan’s total allocation. This exceeds the 
minimum  climate  target  of  37%  as  set  out  in  the  RRF  Regulation.  The  highest  contribution  to 
climate objectives stems from investments in the rail sector through the modernisation of railway 
lines, and investments in renewable energy through the development of the electricity network, as 
well as financial support for the upscaling of residential renewable energy production capacities. 
Other sizeable green investments concern new zero-emission buses and setting up a new chemical 
recycling  and  hydrogen  production  plant.  The  plan  also  includes  investments  in  renovation  of 
public buildings and the construction of energy-efficient new buildings, notably in the education 
and healthcare sectors. 

The tagging is based on a correct application of the methodology for climate tracking as set 
out in Annex VI to the RRF Regulation, by identifying intervention fields, and corresponding 
coefficients for the calculation of support to climate change objectives. For broad measures, 
the climate contribution is computed at sub-measure level to ensure that intervention fields  are 
accurately  selected  and  to  avoid  any  overestimation  of  the  overall  contribution  of  individual 
measures  to  the  climate  objectives.  Whenever  a  selected  intervention  field  includes  specific 
additional conditions, these are substantiated in the description of the respective measure as well 
as reflected by specific provisions in the milestones and targets to ensure that the characteristics 
of the measures conform to the conditions set out in Annex VI to the RRF Regulation. 

10 Where the activity supported achieves projected greenhouse gas emissions that are not significantly lower than the 
relevant benchmarks, an explanation of the reasons why this is not possible shall be provided. Benchmarks established 
for  free  allocation  for  activities  falling  within  the  scope  of  the  EU  Emissions  Trading  System,  as  set  out  in  the 
Commission Implementing Regulation (EU) 2021/447. 

56 

 
 
 
                                                           
Table 8: Climate contribution and cost per component 

Component 

1. Demography and public education 

2. Highly qualified, competitive workforce 

3. Catching up settlements 

4. Water management 

5. Sustainable green transport 

6. Energy - green transition 

7. Transition to the circular economy 

8. Health 

9. Governance and public administration 

Total 

Green transition 

Total cost 
(EUR 
million) 

Climate 
contribution 
 (EUR million) 

Climate 
contribution 
 (% of total 
cost) 

621 

692 

225 

145 

1 414 

1 246 

109 

1 306 

66 

5 824 

46 

70 

30 

48 

1 233 

1 209 

109 

55 

- 

2 800 

0.8% 

1.2% 

0.5% 

0.8% 

21.2% 

20.8% 

1.9% 

0.9% 

- 

48.1% 

The recovery and resilience plan contributes to the green transition, addresses the related 
challenges and is well aligned with the priorities of the European Green Deal and its 2030 
climate target plan, as well as the goal to make the EU climate-neutral by 2050. The selection 
and design of green measures reflect the main priorities of the NECP, although the plan does not 
quantify the contribution of the different measures. In line with the NECP, the green components 
cover the important  greenhouse gas  emitting sectors of buildings and transport and support the 
deployment of renewable energy sources capacities.  

The plan includes a complete set of reforms with regards to renewable energy production 
and energy efficiency. In order to promote the green transition, to decrease the dependence on 
fossil fuels and to increase the security of energy supply at times of the energy crisis provoked by 
Russia’s  war  of  aggression  against  Ukraine,  a  comprehensive  set  of  reforms  to  the  regulatory 
system is envisaged, leading to a full overhaul of Hungary’s electricity system:  

-  A reform aims at encouraging the development of onshore wind energy by removing existing 
unnecessary obstacles to the development of wind power plants, in particular those relating to 
the distance between wind turbines and residential or other affected areas, to wind power plant 
height and capacity. The reform will also simplify permitting procedures for installing wind 
turbines in specific areas identified as “go-to areas”.  

57 

 
 
 
-  Another  reform  has  the  objective  of  promoting  the  deployment  of  renewable  energy  by 
improving  and  shortening  the  permit  granting  procedures  for  renewable  energy  projects 
through integrated procedures for environmental and construction permits, shorter deadlines 
and  ‘automatic’  authorisations  for  small  photovoltaic  installations.  The  recently  introduced 
temporary cessation of the possibility for newly built residential PV systems to supply power 
to the grid is also expected to be removed.  

-  A third reform contains a comprehensive set of measures that aim at improving transparency, 
predictability and availability of the grid connection for weather dependent renewable energy 
investments. This reform is expected to ensure a non-discriminatory approach between power 
generating  technologies  and  to  allow  for  more  connections  despite  temporary  grid  capacity 
limitations  by  authorising  connection  requests  that  are  able  to  fulfil  specific  balancing 
requirements. Justified balancing requirements (e.g. storage related to the new capacities to be 
connected) are allowed to be set as these serve to balance the electricity grid until the necessary 
developments  are  carried  out  by  the  system  operators.  The  reform  also  intends  to  increase 
transparency of the grid connection procedure with several actions to raise awareness and to 
foster  informed  decisions  by  market  players.  These  reforms  are  expected  to  contribute  to 
increasing the total capacity of renewable energy production authorised to be connected to the 
grid to at least 10 000 MW by 2026. 

-  A fourth reform should provide for a new accounting system for prosumers who benefit from 
public financial support for the installation of their solar panel systems as from 1 January 2023. 
According to this accounting system, prosumers will account separately for the electricity fed 
into  the  grid  and  electricity  consumed  from  the  grid.  This  measure  should  contribute  to  an 
adequate cost sharing of the electricity system. 

-  Finally,  a  reform  related  to  energy  efficiency  is  expected  to  introduce  the  requirement  to 
achieve  at  least  30%  energy  consumption  reduction  for  building  renovation  schemes  when 
those are financed from EU funds. 

The plan also includes significant investments to support the uptake of renewable generation. 
It includes investments in small residential solar power systems of about 4-5kW on average on 
roof structures for self-consumption. The measure should benefit 34 920 households, of which at 
least 11 600 households should be entitled to replacement of windows, establishment of storage 
capacity (maximum  14kWh) and installation of electric heating  (electric  panels  or heat  pumps, 
depending on the technical circumstances of the building benefiting from the support) in addition 
to the installation of solar panel systems. The plan aims to contribute to the achievement of the 
objectives  set  out  in  the  NECP  by  deploying  additional  renewable  energy  capacity  of  140-
175 MW. The measures should contribute to the government’s strategic goal to reach by 2035 at 
least 200 000 households having roof-mounted solar panels with an average capacity between 4 
and 5 kW. The measures are expected to help Hungary to reduce greenhouse gas emissions by 
around  49 720  tonnes  per  year  (i.e.  0.1%  of  national  emissions).  They  are  also  expected  to 
contribute  to  increasing  the  installed  capacity  of  residential  heat  pumps  to  around  400 MW  by 
2030. 

58 

 
 
With a view to integrating the energy production capacities from renewable energy sources 
into  the  electricity  network  in  a  secure  and  flexible  way,  the  plan  supports  the  network 
development  and  the  installation  of  storage  facilities.  In  accordance  with  Hungary’s  energy 
policy  strategy,  Hungary  intends  to  increase  the  share  of  renewables  in  its  energy  mix  and  to 
significantly enhance its current domestic solar power plant capacity by 2030. To ensure sufficient 
network access and necessary grid capacity, Hungary is expected to develop the transmission and 
distribution  network.  In  order  to  support  the  integration  of  electricity  generated  by  weather-
dependent energy sources into the grid, the plan also supports the installation of storage facilities 
both for market participants as well as for the transmission system operator and distribution system 
operators. The transmission system operator and the distribution system operators are expected to 
use their storage facilities for the sole purpose of ensuring a secure and reliable operation of the 
transmission or distribution system. Their storage facilities should not be used for balancing or 
congestion management. The plan also supports the installation of smart meters, which is expected 
to play an important role as an end-to-end tool for the accurate determination of consumer profiles 
and  the  optimisation  of  electricity  demand.  In  the  long  term,  the  roll-out  of  smart  meters  and 
flexible  tariffs  are  expected  to  provide  the  basis  for  demand-side  responses.  The  data  gathered 
from smart meters is expected to be used for increasing the accuracy of the network development 
plan, and for the development of flexible connection and operation options. 

The  plan  is  expected  to  promote  clean  heating  solutions  among  the  most  disadvantaged 
settlements. This is set to be done by supporting the installation of low-capacity solar power plants 
within or in the proximity of the most disadvantaged municipalities selected under the Catching 
up Settlements Programme. The net revenue  generated by these power plants is expected to be 
used  to  support  the  electricity  need  for  heating  purposes  of  vulnerable  families  that  will  be 
combined with pre-indebtedness solutions (e.g. prepaid hours) to address social and environmental 
sustainability  aspects.  This  measure  is  expected  to  contribute  to  the  creation  of  additional 
renewable energy production capacity of 25 000 kWp. 

Measures  included  in  the  plan  contribute  to  improving  energy  efficiency  through 
investments in deep renovation of existing buildings or the construction of new more energy 
efficient  buildings.  Regarding  the  measures  supporting  deep  energy  efficiency  renovation  of 
university  higher  education  institution  buildings  serving  educational  purposes  or  of  hospital 
buildings, the plan includes a commitment that as a result of the renovation at least 30% primary 
energy  savings  compared  to  the  ex-ante  emissions  shall  be  achieved,  on  average,  across  the 
refurbished  infrastructure.  This  commitment  is  reflected  in  the  relevant  targets.  Similarly,  the 
investment in the construction of hospital buildings is linked with a commitment that the primary 
energy demand of any new buildings is set to be at least 20% lower than the nearly zero-energy 
building requirement. The support for window replacement and heating modernisation of 11 600 
households mentioned above is also expected to contribute to energy efficiency  improvements. 
Hungary is expected to further achieve the reduction of energy consumption and greenhouse gas 
emissions in buildings, by supporting additional investments in the energy efficiency renovation 
of the residential building stock as part of programmes financed from the cohesion policy funds.  

Measures in the plan are expected to increase the share of environmentally friendly forms of 
transport  and  the  volume  of  goods  transported  on  rail.  The  railway  investments  around 

59 

 
 
Budapest have the potential to increase significantly the attractiveness of urban and sub-urban rail 
journeys to and from the capital, contributing to the national objectives to increase the number of 
passengers using trains by 80% and to prevent 4 million tonnes of greenhouse gases per year by 
2040. Other measures are set to support this modal shift to public transport, such as an improved 
rail traffic management system and the introduction of a single tariff and passenger information 
system. The new measures are expected to increase the volumes of goods transported in cleaner 
transport modes through the removal of a bottleneck in one TEN-T core section. The purchase of 
300 electric buses, and the replacement of old rolling stock, is expected to contribute to decreased 
use of fossil fuels in municipalities throughout the country and support the roll-out of charging 
stations for alternative fuels public transport. These investments and the reform of the tariff system 
are expected to create a cleaner, smarter, safer and more efficient transport sector. 

The plan also comprises investments in the water management system and accompanying 
reforms. New and upgraded water management networks and systems are expected to enhance 
the availability of surface water in areas suffering periods of water scarcity, using water abstracted 
from the country’s rivers. Specific provisions and milestones ensure that these measures include  
nature-based  water  retention  practices,  that  the  design  of  projects  implements  the  results  and 
conditions from Environmental Impact Assessments, in compliance with EU environmental law, 
that  relevant  water  abstraction  permits  are  granted,  and  that  the  good  ecological  status  of  the 
surface and groundwater bodies affected by those investments will be achieved. The strengthening 
of the monitoring system for surface and groundwater abstractions at local and national level is 
expected to mitigate the risk of excessive and/or illegal water abstractions. The plan also envisages 
broadening  the  scope  of  the  existing  farmers’  associations  (‘irrigation  communities’)  into 
‘sustainable  water  management  communities’,  revising  the  mandate  of  these  associations  and 
providing  them  with  trainings  to  turn  their  activities  towards  sustainable  water  management 
practices. 

The plan includes measures for the transition to a circular economy by using reprocessed 
materials  as  raw  materials,  which  are  expected  to  contribute  to  the  green  transition.  The 
strengthening of a smart, innovative and sustainable waste management industry and secondary 
raw  materials  market  is  also  expected  to  contribute  to  climate  objectives  and  support  national 
pollution prevention measures by contributing to the reduction of landfilling rates.  

Taking  into  consideration  the  assessment  of  all  the  measures  envisaged,  the  recovery  and 
resilience  plan  is  expected,  to  a  large  extent,  to  make  a  significant  contribution  to  the  green 
transition or to address the challenges resulting from it and ensures that at least 37% of its total 
allocation contribute to the climate target. This would warrant a rating of A under criterion 2.5 of 
Annex V to the RRF Regulation. 

60 

 
 
4.6. Digital transition 

Digital target 

Based  on  the  methodology  for  digital  tagging  set  out  in  Annex  VII  to  the  Regulation, 
measures  contributing  to  the  digital  transition  account  for  29.8%  of  the  plan’s  total 
allocation. This exceeds the required minimum of 20%. Seven of the nine components of the plan 
contribute to the digital target. Component 1 (Demography and public education) and component 
8 (Health) represent the largest shares of total digital investments. Other measures such as digital 
skills and the digitalisation of railways, of the electricity network and of the public administration 
also contribute largely to the digital transition of Hungary. 

Table 9. Digital  contribution of the components of the Hungarian recovery and resilience 
plan. 

Component 

1. Demography and public education 

2. Highly qualified, competitive workforce 

3. Catching up settlements 

4. Water management 

5. Sustainable green transport 

6. Energy - green transition 

7. Transition to the circular economy 

8. Health 

9. Governance and public administration 

Total 

Digital transition 

Total cost 
 (EUR 
million) 

Digital 
contribution 
 (EUR 
million) 

Digital 
contribution 
 (% of total 
cost) 

621 

692 

225 

145 

1 414 

1 246 

109 

1 306 

66 

5 824 

391 

256 

- 

26 

212 

310 

- 

480 

62 

6.7% 

4.4% 

- 

0.4% 

3.6% 

5.3% 

- 

8.2% 

1.1% 

1 737 

29.8% 

A vast range of reforms and investments put forward in the plan contribute to the digital 
transformation of the economy and society. As described in section 2.3, Hungary’s main digital 
challenges include the need to improve the level of digital skills, digitalisation of education and 
healthcare and the need to promote digital-related R&D. The plan is expected to respond to these 
challenges, in line with the EU digital strategy and the National Digitalisation Strategy. 

61 

 
 
 
The plan aims to develop digital skills, which are crucial for the digital transformation of the 
economy  and  society.  Measures  in  the  plan  aim  at  enlarging  access  to  digital  education  for 
students  and  teachers  and  at  integrating  digital  education  solutions  in  everyday  educational 
practice. In particular, the plan supports digital education by providing IT equipment to pupils and 
teachers and offering training to teachers on how to use digital equipment. Providing laptops to 
pupils will also benefit disadvantaged families, contributing to equal access to quality education 
and ensure their inclusion in the changing society as a result of digitalisation. The implementation 
of the measures will help students and teachers to acquire digital skills and competences for the 
labour market, tertiary education and distance learning. In line with the proposals set out in the EU 
Digital Education Action Plan, the plan supports the development of digital learning content for 
primary  and  vocational  training  and  the  development  of  digital  skills  of  students  in  higher 
education. Overall, the plan’s measures are expected to contribute to the improvement of digital 
skills of people in education and raise the quality of the educational system. 

The  plan  also  includes  investments  in  the  digitalisation  of  public  services,  notably  in  the 
health  sector.  The  healthcare  component  contains  several  measures  aiming  at  reforming  and 
digitalising this sector. The measure related to digitalisation of healthcare covers a wide range of 
initiatives such as establishment of a central remote diagnostics centre, introduction of an artificial 
intelligence-based system for the medical emergency service and development of mobile health 
apps. Another measure relates to setting-up a remote patient monitoring system for the elderly. By 
2030, almost a quarter of the Hungarian population will be aged over 65 years and around 7% will 
be  over  80  years,  which  will  increase  the  pressure  on  the  social  security  system,  in  particular 
residential  homes  for  the  elderly.  The  COVID-19  outbreak  created  an  urgent  need  to  enlarge 
assistance  to  elderly  people.  ICT  tools  offer  an  opportunity  to  perform  a  significant  part  of 
monitoring  and  care  tasks  remotely.  The  measure  in  the  plan  aims  to  enrol  1.5  million  elderly 
people in the programme by the end of 2025. Overall, investments in digital health are expected 
to yield quality and efficiency improvements in the healthcare sector. 

The modernisation of the railway network also relies on successful digitalisation. The railway 
infrastructure  investments  in  the  plan  include  the  deployment  of  a  central  traffic  management 
system on TEN-T railway lines and on upgraded sub-urban lines around the capital, as well as the 
introduction of a national single tariff, ticketing and passenger information system for bus and rail. 
This  is  expected  to  help  ensure  interoperability  for  railway  developments  on  TEN-T  network 
elements, improve safety, and enable a more efficient monitoring and control of rail traffic. The 
digitalisation of the rail network is also expected to improve the services provided to passengers 
at stations and stops. 

The digital transformation of the energy sector is a central aspect of several measures, such 
as investments in the development of smart transmission and distribution grids and the roll-out of 
smart  meters.  Smart  grid  development  based  on  innovative  technical  solutions  is  necessary  to 
increase the ability of the power grid to integrate additional capacities from weather dependant 
renewable  energy  sources  into  the  electricity  system.  The  analysis  of  data  through  digital 
technologies will improve the forecasting and balancing of supply and demand in the electricity 
system  and  will  facilitate  a  better  regulation  of  energy  production.  This  creates  the  necessary 
conditions  for  a  better  integration  of  weather-dependent  renewable  energy  production  in  the 

62 

 
 
electricity system. Smart meters as end-to-end tools are expected to determine consumer profiles 
and  to  contribute  to  the  optimisation  of  electricity  demand.  Their  data  collection  and 
communication  functions  will  allow  their  use  also  in  other  areas  of  application.  The  system 
operators are expected to create the necessary IT infrastructure to be able to use data gathered form 
smart meters. Smart meters with flexible tariffs may provide the basis for demand-side responses 
in the long term, which is expected to help to build flexibility into the electricity system in the long 
term.  

The  digital  transformation  of  water  resources  management  is  also  envisaged,  through  the 
provision of measurements from quantitative real-time data to the end users, leading to a more 
resource-efficient system. 

The plan also includes measures to improve government ICT solutions and services, which 
offer the opportunity to modernise and improve the public administration. The introduction 
of a new asset management software will integrate the IT equipment management processes of at 
least 3 000 public institutions. IT solutions will also facilitate easier access to public data and the 
development  of  the  automated  decision-making  system  is  expected  to  simplify  certain 
administrative processes that will also benefit citizens. Upgrading the cooperation system of the 
prosecution service is not just an IT development but part of a more ambitious attempt to foster 
internal  cooperation.  The  plan  also  includes  measures  on  the  digital  transformation  of  tax 
compliance procedures, which makes tax reporting of companies easier, simpler and faster.  

Taking  into  consideration  the  assessment  of  all  the  measures  envisaged,  the  recovery  and 
resilience  plan  is  expected,  to  a  large  extent,  to  make  a  significant  contribution  to  the  digital 
transition or to address the challenges resulting from it and ensures that at least 20% of its total 
allocation contribute to the digital target. This would warrant a rating of A under criterion 2.6 of 
Annex V to the RRF Regulation.  

4.7. Lasting impact of the plan 

The  recovery  and  resilience  plan  includes  a  wide  range  of  measures  aimed  at  addressing 
challenges identified in the context of the European Semester. The measures are expected to 
support  the  green  and  digital  transitions  and  strengthen  the  growth  potential,  job  creation  and 
economic and social resilience and cohesion of Hungary. The proposed initiatives and investments 
are expected to have a lasting, positive impact on Hungary’s economy and society. The lasting 
impact is expected to result especially from policy areas where wide-ranging reforms are being 
implemented, as specified in Section 4.3. 

Structural change in administration and institutions 

The plan aims to achieve structural changes and efficiency gains in the healthcare sector and 
in public administration. The far-reaching reform agenda for the healthcare sector aims, among 
other things, to eradicate informal gratuity payments, which hamper the access of the low-income 
population to quality care and creates inefficiencies in patient treatment pathways. The successful 
elimination  of  gratuity  payments  can  also  be  expected  to  contribute  to  reducing  low-level 

63 

 
 
 
corruption.  Without  the  distorting  effect  of  these  payments,  the  treatments  of  patients  can  be 
planned in a more transparent and efficient way. Healthcare reforms are supported by investments 
in e-health. This combination of reform and investment is expected to pave the way for efficiency 
gains  through  a  greater  emphasis  on  prevention  and  primary  care  and  a  more  rational  hospital 
network structure. If successfully implemented, these measures may thus be expected to improve 
the financial sustainability of the public healthcare sector, in addition to delivering better health 
outcomes. The education outcomes are also expected to improve, and the large impact of socio-
economic background on education outcomes is expected to decrease, as a result of the various 
reforms and investments in education, including measures on increasing the attractiveness of the 
teaching profession, training teachers, providing laptops to pupils and integration of small lower 
secondary classes into larger schools. Finally, the quality of public administration is expected to 
improve through the effective implementation of proposed measures to fight corruption, increase 
competition in public procurement, strengthen judicial independence, conduct expenditure reviews 
which aim to identify potential efficiency gains in priority areas of public spending, and through 
the digitalisation of certain public services. A more systematic and effective involvement of social 
partners in decision-making is also expected to contribute to reducing policy errors and increasing 
the social acceptance of legislative changes.  

Structural change in policies 

The  plan  includes  measures  that  increase  the  emphasis  on  long-term  sustainability, 
digitalisation  and  inclusiveness.  As  regards  sustainability,  the  plan’s  measures  aim  to  boost 
renewable  electricity  generation  by  easing  regulatory  restrictions  (e.g.  on  wind),  improve  the 
monitoring of water resources and raise awareness to water conservation in agriculture. Another 
measure  aims  to  improve  the  medium  and  long-term  fiscal  sustainability  and  adequacy  of  the 
pension  system.  The  plan  contains  several  initiatives  to  digitalise  public  services  including 
healthcare, and also aim to support the accumulation of digital skills in all levels of education. 
Social  inclusion  can  be  expected  to  be  supported  by  the  effective  implementation  of  a  new 
regulation against segregation in school education, the scaling up of a development programme 
for the most disadvantaged settlements, and a more efficient and equitable provision of healthcare 
services once the reform agenda is accomplished. 

Lasting impact 

The outlined structural changes to institutions and policies tackle certain root causes behind 
Hungary’s challenges and are thus expected to achieve a lasting positive impact. In its plan, 
Hungary provided estimates for the long-run economic impact of the plan on a 10-year horizon. 
While these projections point to a lasting positive effect of the plan, a stronger justification for 
these effects could have helped to further underpin the analysis. A qualitative assessment of the 
main  implementation  risks  and  challenges  was  also  provided.  Hungary  carried  out  a  public 
consultation of the draft plan back in 2021. Further consultation and the continuous involvement 
of relevant stakeholders, including social partners, will be crucial in the implementation phase to 
ensure ownership of the plan. 

64 

 
 
Taking into consideration all reforms and investments envisaged by Hungary in its recovery and 
resilience plan, their implementation is expected, to a moderate extent to bring about a structural 
change in the administration or in relevant institutions and/or in relevant policies and to have a 
lasting  impact.  This  would  warrant  a  rating  of  A  under  criterion  2.7  of  Annex V  to  the  RRF 
Regulation.  

4.8. Milestones, targets, monitoring and implementation 

Adequacy of the structure tasked with the implementation of the plan, monitoring of progress and 
reporting 

The  central  coordinating  body  for  Hungary’s  recovery  and  resilience  plan  (National 
Authority) has clearly assigned responsibilities. The division of tasks is clear, and the roles are 
adequately separated. The arrangements described are expected to constitute an adequate structure 
for implementing the plan, monitoring progress  and reporting. The plan identified the National 
Authority  (the  Office  of  the  Deputy  State  Secretary  of  the  ministry  responsible  for  the 
implementation of Union support, also in charge of the implementation of the RRP) as the central 
coordinating  body  for  Hungary’s  recovery  and  resilience  plan  and  its  implementation.  The 
National Authority is responsible for the overall coordination of the implementation of the plan 
and  for  monitoring  progress  on  milestones  and  targets.  It  also  coordinates  the  reporting  on 
milestones  and  targets,  relevant  indicators,  but  also  the  provision  of  data,  such  as  on  final 
recipients. It is tasked, among other things, with ensuring compliance with Union and national law, 
monitoring the full and timely fulfilment of the strategic and operational objectives of the recovery 
and  resilience  plan  through  milestones  and  targets,  as  well  as  ensuring  that  final  recipients 
implement their projects in compliance with the respective conditions for the use of funding. The 
National Authority is responsible for preparation and submission of payment requests under the 
RRP.  It  is  also  responsible  for  signing  the  accompanying  management  declarations  based  on 
information collected from and reported to it by the responsible public bodies. It will draw up the 
necessary reports to the Commission. The National Authority is also responsible for establishing 
an effective internal management and control system to prevent and detect irregularities and take 
appropriate corrective measures, ensuring the evaluation of the results of the plan, taking effective 
and  proportionate  measures  to  combat  fraud  and  corruption,  taking  into  account  the  risks 
identified; and ensuring the prevention of double funding; providing methodological support and 
guidance to implementing bodies and supervising their work; developing templates and standard 
terms  and  conditions  for  the  implementation  of  the  measures  and  grant  agreements  with  final 
recipients;  operating  the  monitoring  system;  monitoring  the  progress  of  implementation  of  the 
different measures; ensuring the reliability, veracity and accuracy of data in the monitoring system; 
and carrying out management verifications (desk-based and on-the-spot).  

The  intended  monitoring  and  reporting  mechanisms  described  in  the  plan  appear 
appropriate. The main coordination and reporting mechanisms between the different bodies are 
set out in general terms and they rely to a large extent on the functionalities and data provided in 
the monitoring information system. This system is based on the well-established IT-system used 

65 

 
 
 
by Hungary for the purposes of monitoring the implementation of cohesion policy funding and 
will be adapted for the requirements of the RRP. The functionality and operation of the system as 
well as the procedures to ensure the reliability, veracity and accuracy of the data introduced entered 
into the IT system will be crucial to ensure the satisfactory fulfilment of milestones and targets. In 
addition, the plan includes a milestone to confirm the reliability and functioning of the adapted 
monitoring  system,  to  be  met  before  the  first  payment  request.  Furthermore,  a  monitoring 
committee consisting of relevant stakeholders and social partners will be established to monitor 
the effective implementation of the plan. 

Progress  towards  the  satisfactory  fulfilment  of  milestones  and  targets  will  be  monitored 
through  regularly  updated  data  in  a  well-functioning  monitoring  information  system. 
Hungary envisages putting in place specific controlling arrangements to closely follow progress 
of the measures and ensure that their implementation remains on track, so that the risk of delays 
can be identified early on. Adequate arrangements and multi-layer control mechanisms are put in 
place to ensure the reliability and veracity of data in the monitoring information system (including 
through in-built consistency checks in the monitoring system, established interfaces with official 
databases,  ex-ante  and  ex-post  checks  and  management  verifications  on  data  quality).  The 
verification mechanisms, data collection and related responsibilities described by Hungary appear 
sufficiently robust to adequately justify payment requests once the milestones and targets are met. 

Milestones and targets 

The  plan  includes  167  milestones  and  103  targets  distributed  across  the  implementation 
period.  The  54  reforms  and  31  investments  included  in  the  nine  components  of  the  RRP  are 
supported  by  an  overall  number  of  270  milestones  and  targets  spread  throughout  the 
implementation period. The distribution of milestones and targets features a high concentration at 
the beginning and  the end of the  implementation  period of the  plan. This  entails  some risks  to 
which the Hungarian authorities need to pay attention. 

The milestones and targets in the plan constitute an appropriate system for monitoring the 
plan’s  implementation.  The  monitoring  indicators  are  in  general  sufficiently  clear  and 
comprehensive  to  ensure  that  their  completion  can  be  traced  and  verified.  The  milestones  and 
targets chosen represent key steps of the measures and concrete achievements directly linked to 
the  implementation  of  the  measures  and  under  the  control  of  the  Hungarian  authorities.  The 
milestones and targets  are considered relevant  for the implementation  of the plan. They reflect 
adequately the overall level of ambition of the plan and appear realistic. They are considered well 
designed,  with  relevant,  acceptable  and  robust  indicators  ensuring  proper  monitoring  during 
implementation. 

Overall organisational arrangements 

The plan sets out the administrative organisation for the implementation of the measures 
contained  in  it.  It  clearly  identifies  the  institutional  actors  that  are  responsible  for 
implementing the individual reforms and investments. A relevant line ministry is designated to 
closely monitor and coordinate the implementation of each of the components. Where more line 
ministries are responsible for the implementation of measures in a component, one line ministry is 

66 

 
 
identified  as  the  one  responsible  for  the  overall  coordination  and  implementation  of  the  whole 
component. Some of the measures may also receive expert support from the Technical Support 
Instrument. 

The National Authority is expected to involve implementing bodies in the implementation of 
certain measures. This is the case for investment measures implemented through open calls for 
proposals or where specific expertise is required. Implementing bodies are selected based on their 
competence,  relevant  expertise  and  administrative  capacity.  Where  implementing  bodies  are 
involved,  the  roles  and  responsibilities  of  those  implementing  bodies  is  expected  to  be  clearly 
defined in writing and the National Authority will coordinate and supervise their work. 

The detailed tasks and responsibilities of the different bodies involved in the coordination, 
implementation, monitoring, control and audit of the plan are set out in a government decree. 
The necessary functions of the monitoring system, including ensuring the collection, storage and 
provision,  as  well  as  the  reliability,  veracity  and  accuracy  of  the  data  required  for  the 
implementation of the plan, will need to be fully functional and operational at the latest before the 
submission of the first payment request to the Commission. 

The arrangements proposed by Hungary in its recovery and resilience plan are expected to be 
adequate to ensure effective monitoring and implementation of the recovery and resilience plan, 
including the envisaged timetable, milestones and targets, and the related indicators. This would 
warrant a rating of A under the assessment criterion 2.8 of Annex V to the RRF Regulation. 

4.9. Costing 

Overall, the costing information and supporting documents presented by Hungary provide 
a good basis to assess the reasonability and plausibility of cost estimates. Hungary has provided 
individual cost estimates for all investments and reforms included in the plan for which funding 
through  the  Facility  is  requested.  Hungary  provided  detailed  information  on  costs  using  the 
standard template tables. This was supplemented by separate documents including more elaborate 
descriptions of the methodology, calculations on how the estimates were reached, and supporting 
documents providing evidence on individual cost items. 

The costs have been estimated based on a combination of methodologies. Most of the measures 
have been estimated based on a bottom-up approach, with the authorities presenting the units that 
make up the investment and their unit costs being estimated based on market prices or prices of 
similar units in past investments or on indicative offers. For other measures, a top-down approach 
is used where the overall cost of the project is based on similar projects from the past, frequently 
financed  from  cohesion  policy  funds,  with  the  necessary  adjustments.  Cost  estimates  based  on 
historical  data  were  adjusted  in  order  to  ensure  comparability  with  the  project  proposed  to  be 
financed  out  of  the  RRF.  A  frequently  used  adjustment  is  the  indexation  with  price  and  cost 
increases  that  took  place  since  the  past  investments  and  the  expected  price  changes  over  the 
horizon of the plan. For demand-driven schemes, where final recipients have to submit applications 
for intended projects, ex-ante cost estimations are less precise than in the case of measures where 

67 

 
 
 
the type and nature of projects is clearly defined from the beginning. For these types of measures, 
Hungary has provided a target for the number of beneficiaries and the amount  envisaged to be 
allocated. In the costing of all measures, the amount to be requested from the RRF is net of the 
own financing required from the final recipients.  

Reasonable costs  

Hungary  has  overall  provided  sufficient  information  and  evidence  to  allow  assessing  the 
reasonability  of  the  estimated  costs  of  the  plan.  Based  on  the  assessment  of  individual  cost 
estimates  and  related  supporting  documents,  the  amounts  proposed  for  financing  have  been 
deemed appropriate for most of the measures, whilst taking into account the limitations of an ex-
ante  based  assessment  of  cost  estimates.  For  the  majority  of  measures  included  in  the  plan, 
Hungary  provided  clear  and  sufficient  information,  evidence,  budgetary  implications  and 
calculations behind cost estimates. The information provided was less clear for a limited number 
of cases, especially for measures where the projects are not yet completely defined and will depend 
on applications to be received from final beneficiaries for intended projects. Nevertheless, there is 
no evidence that would shed doubts on the costing estimates provided.  

The reforms and investments included in the plan comply with the eligibility criteria set out 
in  the  RRF  Regulation.  All  costs  to  be  supported  by  the  RRF  are  incurred  for  reforms  and 
investments (to be) implemented after 1 February 2020 and the agreed milestones and targets are 
set in such a way that no RRF funding is to be requested after 31 August 2026. Value-added tax 
(VAT) is not part of the cost estimates. The plan contains some recurrent costs, such as personnel 
costs and maintenance costs, which are deemed duly justified and acceptable. The plan provides 
justifications to show that these costs are essential for the success of the reforms and investments 
to which they correspond and that they do not represent a significant burden on the national budget. 
Most  of  these  costs  are  temporary,  while  the  non-temporary  ones  can  be  counterbalanced  by 
budgetary savings if the measures they support are successfully implemented. Hungary did not 
provide an independent validation of the cost estimates. However, as it was not formally required 
by  the  RRF  Regulation,  this  does  not  affect  the  assessment  of  the  reasonability  of  the  cost 
estimates. 

Against  this  background,  it  is  deemed  that  the  reasonability  of  the  cost  estimates  has  been 
established to a medium extent. 

Plausible costs  

Hungary  has  overall  provided  sufficient  information  and  evidence  to  establish  the 
plausibility of the cost estimates. For most of the measures included in the plan, Hungary has 
provided reference costs including historical or comparative data for the cost drivers, results of 
previous investments in Hungary or in other member states, or results of past tenders or indicative 
offers. For some innovative schemes, studies or reports with cost estimates have been provided. 
An adjustment factor was often provided to account for the comparability of the projects. In a few 
cases the indicated prices were found to be relatively high in international comparison. However, 
against a background of high inflation in the economy,  these high prices might  also reflect the 
impact of rising production costs or supply shortages. Moreover, the exact comparability of the 

68 

 
 
projects to be financed from the RRF with past projects cannot be guaranteed in all instances. This 
is  the  case  especially  for  complex  infrastructure  development  in  vocational  schools  and  the 
healthcare sector. For these projects, Hungary has provided aggregated costing estimates which 
cannot  fully  take  into  account  differences  between  the  content  of  the  proposed  and  historical 
investments.  

The plausibility of cost estimates is impacted by the recent volatility of the Hungarian forint, 
by  creating  uncertainty  in  the  estimated  cost  of  imported  investment  goods.  Since  the 
beginning of 2022, the forint depreciated by some 11% relative to the euro and showed significant 
fluctuations in response to macroeconomic and geopolitical developments. In order to arrive at a 
stable exchange rate assumption that is not affected by short-term fluctuations, Hungary applied 
the  average  exchange  rate  of  six  months  before  the  finalisation  of  the  cost  estimates  (394.83 
HUF/EUR), which is nonetheless somewhat lower than the values observed during the finalisation 
of the present staff working document.  

Taking  into  account  the  limitations  of  ex  ante  cost  estimates,  the  submitted  evidence  and  the 
amounts  proposed  for  financing  were  found  appropriate  and  the  cost  estimates  were  deemed 
plausible to a medium extent. 

No double EU financing  

Hungary has overall provided sufficient information and evidence that the estimated costs 
of the investments and reforms envisaged to be supported by the Facility are not financed or 
planned to be financed by other EU funds. Overall, synergies with other EU funding instruments 
and the demarcations from other EU funds  are explained. For various measures, synergies will 
need to be carefully monitored at project level during implementation, especially with regards to 
cohesion policy funds. Hungary put in place a joint monitoring IT system that would allow the 
filtering  and  exclusion  of  the  financing  of  the  same  expenditure  twice  by  the  same  final 
recipient/beneficiary. In addition, the envisaged arrangements to ensure the avoidance of double 
funding (see section 4.10) seem sufficient to prevent double funding at project level. However, the 
authorities need to remain vigilant and use the described tools effectively in this regard. 

Commensurate and cost-efficient costs 

The estimated total cost of the plan is commensurate with the expected social and economic 
impact of the envisaged measures. The plan is expected to contribute to addressing a significant 
subset of challenges identified in the country-specific recommendations. The plan also contains 
several  measures  that  aim  to  foster  economic  growth  and  economic  cohesion  in  an  inclusive 
manner. It is addressing weaknesses of the Hungarian economy, boosting the growth potential, 
stimulating job creation, and mitigating the adverse effects of the crisis. This is particularly visible 
in  measures  that  may  increase  effective  labour  supply  through  higher  availability  of  childcare 
services and better education and health outcomes, as well as investments in education and R&D. 
The  plan  also  contains  measures  that  aim  to  strengthen  social  cohesion  and  social  protection 
systems, including an integrated development programme for the most disadvantaged settlements.  

69 

 
 
The justification provided by Hungary on the amount of the estimated total costs of the recovery 
and resilience plan is to a medium extent reasonable, plausible, in line with the principle of cost 
efficiency and commensurate to the expected national economic and social impact on the economy. 
Hungary has provided sufficient information and evidence that the amount of the estimated cost 
of the reforms and investments of the recovery and resilience plan to be financed under the Facility 
is not covered by existing or planned Union financing. This would warrant a rating of B under the 
assessment criterion 2.9 in Annex V to the RRF Regulation. 

4.10. 

Controls and audit  

A robust national internal control system should ensure the protection of the financial interests of 
the Union (prevent, detect and correct fraud, corruption, double funding and conflicts of interest), 
as well as ensure the accuracy of the data underlying milestones and targets. 

Robustness of internal control system and distribution of roles and responsibilities  

The national set-up of Hungary’s internal control systems is clearly defined and the role of 
the  bodies  involved  is  clearly  described.  The  National  Authority  is  designated  as  central 
coordinator.  

The plan clearly sets out that the National Authority is responsible for preventing, detecting 
and correcting serious irregularities. The plan also details the ministries that are responsible for 
supporting the National Authority and monitoring the implementation of each of the components 
of  the  plan.  The  National  Authority  (the  Office  of  the  Deputy  State  Secretary  of  the  ministry 
responsible for the implementation of Union support, which is also in charge of the implementation 
of the plan) will perform management verifications of the fulfilment of milestones and targets in 
line with applicable law and these verifications will be done by desk reviews or on-the-spot checks. 
Where implementing bodies or sub-granting bodies are involved, the management verifications 
(both desk-based and on-the-spot) may also be carried out by those bodies based on the delegation 
agreement.  The  National  Authority  will  supervise  the  implementing  bodies  and  sub-granting 
bodies and carry out regular controls on them. A dedicated unit within the National Authority will 
be responsible for dealing with irregularities, including for assessing their appropriate follow-up. 
In case of suspected irregularities, the RRF Complaint and Irregularity Management Unit within 
the National Authority will be the body to decide how to deal with the situation and what legal 
consequences should be applied if an irregularity is found. That unit will examine all complaints 
made in relation to the use of RRF resources; carry out desk-based checks, carry out on-the-spot 
checks as part of its function, as well as request information and data from the bodies implementing 
RRF  measures  if  it  wishes.  To  ensure  independence,  it  is  legally  protected  from  receiving 
instructions in the performance of its area of affairs in connection with decisions on irregularities 
and complaints relating to the use of RRF resources within its remits. 

70 

 
 
 
The  Directorate  General  for  Audit  of  European  Funds  (EUTAF)  is  designated  as  audit 
authority and is expected to carry out the audit of the implementation of the plan. EUTAF 
has extensive audit experience, sufficient administrative capacity and is expected to conduct both 
system audits and substantive testing. In light of the increased responsibilities of EUTAF, Hungary 
committed to ensure the necessary legislative and budgetary arrangements to provide necessary 
financial and human resources to the EUTAF and to safeguard its independence to enable it to 
carry  out  its  tasks.  The  EUTAF  is  expected  to  develop  an  effective  audit  strategy  in  line  with 
internationally accepted audit standards before the submission of the first payment request under 
the plan. Based on its audit work, it is expected to prepare for the National Authority a summary 
of the audits carried out to accompany the payment requests to the Commission. The final version 
of the audit strategy is included as a milestone in the plan, to be fulfilled before the submission of 
the first payment request and is a condition for the first payment.  

Persons  involved  at  any  level  in  the  implementation  of  the  plan  will  have  to  avoid  any 
(perceived) conflict of interest, which will be checked by a newly-established Directorate for 
Internal Audit and Integrity (DIAI). All staff are required to regularly declare their interests and 
they will need to report any conflict of interest or risk thereof that may come to their attention. A 
new DIAI is expected to be established in the ministry responsible for the implementation of Union 
support before the submission of the first payment request. It will be responsible for carrying out 
regular controls of the veracity of conflict of interest declarations. The DIAI will be independent 
from  the  National  Authority.  Its  work  will  be  supervised  by  the  newly-established  Integrity 
Authority as well as the audit authority for the plan (EUTAF).  

Adequacy of control systems and other relevant arrangements 

The plan contributes to the protection of the financial interests of the Union by reinforcing 
the anti-corruption framework and ensuring that detected irregularities are appropriately 
followed up and sanctioned, including through the judicial system. The plan includes several 
measures to reinforce the anti-corruption framework, including through the setting up of an Anti-
Corruption  Task  Force  with  a  significant  involvement  of  independent  non-governmental 
organisations, through the reinforcement of the accountability of investigating authorities and the 
prosecution  services  when  handling  corruption  cases,  and  through  increasing  independent 
oversight  by  means  of  reinforced  transparency  and  access  to  public  data.  Moreover,  the 
establishment  of  an  independent  Integrity  Authority  is  expected  to  reinforce  the  prevention, 
detection and correction of fraud, conflict of interest and corruption as well as other illegalities 
and  irregularities  concerning  the  implementation  of  Union  support,  with  a  particular  focus  on 
public  procurement.  Finally,  the  reinforcement  of  the  judicial  system  will  ensure  that  detected 
irregularities will be effectively dealt with by the judiciary, thus ensuring their correction and the 
protection of the interests of the taxpayers. 

The  arrangements  and  mechanisms  to  collect,  store  and  make  available  data  on  final 
recipients  seem  appropriate.  Article  22(2),  point  (d),  of  the  RRF  Regulation  provides  for  an 

71 

 
 
obligation  of  the  Member  States,  for  the  purpose  of  audit  and  control,  to  collect  data  on  final 
recipients,  contractors,  subcontractors  and  beneficial  owners.  Information  collection  on  the 
implementation of the RRF in Hungary will be ensured through the FAIR-EUPR monitoring IT 
system which was developed for the monitoring of the implementation of cohesion policy funds. 
Hungary presented sufficient assurance that adequate and regular checks will be in place to ensure 
the  quality,  reliability  and  veracity  of  data  in  the  monitoring  system.  Those  controls  include 
automatic consistency and logical checks of the IT system itself that prevents uploading the same 
supporting documents twice and checking whether some of the main characteristics are in line with 
each other, availability of interfaces with official public administration databases that supports the 
“once only” principle and ensures that only official data is used in the system. Various controls on 
the data provided and targeted audits are expected to provide sufficient assurance.  

Hungary is expected to provide access to data and to do so speedily and effectively. The related 
roles and obligations of bodies involved in the implementation, monitoring, control and audit of 
the RRF in Hungary are expected to be set out in a legislative act. This is envisaged in a dedicated 
milestone  on  the  entry  into  force  of  the  Government  Decree  setting  out  the  roles  and 
responsibilities of bodies involved in the implementation, audit and control of the plan, as well as 
in a dedicated milestone on the repository system, both to be completed before the submission of 
the first payment request. 

Hungary committed to systematically and effectively use the Arachne data-mining and risk-
scoring tool provided by the Commission. Detailed arrangements are expected to be in force that 
ensure that a wide set of data is uploaded into the system every two months and that the different 
control and audit authorities systematically use the risk-scoring generated by the Arachne tool and 
take  them  into  account  during  their  controls  and  audits.  It  is  also  ensured  that  the  different 
implementing and control bodies will systematically follow-up on risks indicated by the Arachne 
tool based on binding procedural guidelines that should describe steps to be taken by these bodies 
in case that Arachne tool indicates risks. The adequacy of the practical arrangements of the use of 
the Arachne tool are expected to be subject to a dedicated audit by the audit body. 

Accordingly, dedicated audit and control milestones, including a number of milestones to be 
fulfilled  before the submission of the first payment request,  are in place to  ensure that the 
internal control system of the RRF in Hungary is effective in preventing, detecting and correcting 
fraud,  corruption, conflict  of interests, double funding  and other irregularities. The satisfactory 
fulfilment  of  these  milestones  will  give  the  necessary  reassurance  that  the  legal  obligation  of 
Hungary to protect the financial interests of the Union is met. Taking into account the systemic 
irregularities, deficiencies and weaknesses identified for Hungary in the procedure under Article 
6 of Regulation (EU, Euratom) 2020/2092 on a general regime of conditionality for the protection 
of the Union budget (‘the Conditionality Regulation’), a significant number of milestones to be 
fulfilled prior to the submission of the first payment request under the plan have been identified.  

Overall, Hungary’s procedures to prevent fraud, corruption and conflicts of interest as well 
as to ensure compliance with applicable law seem comprehensive provided that all dedicated 
audit and control milestones are satisfactorily fulfilled. Based on the expected adequacy of the 

72 

 
 
different control and audit layers of the institutional framework, on the expected legislative and 
practical  provisions  which  are  envisaged  to  significantly  tighten  requirements  regarding  the 
implementation and control of the use of Union support in Hungary, as well as on the additional 
arrangements Hungary has committed to implement, it can be concluded that the arrangements can 
reasonably be expected to be effective in preventing, detecting and correcting fraud, corruption, 
conflict of interest and other irregularities when implementing the plan. 

Adequacy of arrangements to avoid double EU funding 

The arrangements to detect and avoid double funding from RRF and other EU funds and 
programmes are clearly described in the plan. Responsibility for avoiding double funding lies 
with the National Authority and will be monitored closely using a common monitoring IT system. 
Hungary identifies in detail the main demarcation lines regarding the source of financing between 
the RRF and cohesion policy programmes. 

In addition, there is coordination of the different funding streams. In particular, the National 
Authority will coordinate the planning and implementation of cohesion policy spending and RRF 
spending.  The  work will involve regular  consultation  at  management  and expert  level  for both 
funding streams. Further coordination is envisaged through the Development Policy Coordination 
Committee,  which  is  a  government  preparatory  body  for  the  coordination  of  the  development 
actions co-financed by EU funds in Hungary. 

Finally, Hungary will monitor its RRF spending by using the same monitoring IT system it 
uses for cohesion policy spending (FAIR-EUPR). This will allow to track measures in a single 
database and thus make it easier to identify potential overlaps and double financing. The authorities 
will  also  systematically  use  the  Commission’s  Arachne  risk-scoring  tool  for  both  financing 
streams, which will also contribute to the identification of the risks of potential double financing. 

The arrangements described in the plan seem sufficient and adequate to exclude the possibility of 
double funding. 

Legal empowerment and administrative capacity of control function 

Hungary’s  plan  demonstrates  that  the  ministries  and  bodies  responsible  for  carrying  out 
controls on the implementation of the plan (the measures and the underlying investments or 
reforms) have sufficient legal mandates (authority) to exercise these tasks. This is expected to 
be set out in a Government decree 373/2022. The National Authority’s number of staff (71) and 
its distribution as presented in the submitted plan seem to be adequate. A proper internal separation 
of functions is ensured as well. An additional staff of 50 officials in the line ministries is dedicated 
to support the work of the National Authority in ensuring the monitoring and the complementarity 
of 
to  which  certain 
implementation tasks of the National Authority are delegated were selected on the basis of their 
professional expertise and available administrative capacity to carry out their tasks, which will be 
continuously supervised by the National Authority.  

the  different  measures.  Implementing  bodies 

implementation  of 

73 

 
 
The EUTAF is expected to carry out a number of additional tasks, not only related to the audit 
of RRF, but  also  tasks  related to  the Hungarian  commitments  undertaken in  the  context  of the 
Conditionality procedure under the Regulation (EU, Euratom) 2020/2092. It is expected that the 
EUTAF will have appropriate resources to effectively perform these increased tasks in a timely 
manner. For that purpose, a milestone is added which has to be fulfilled before the submission of 
the first payment request under the plan. 

The arrangements proposed by Hungary in the recovery and resilience plan to prevent, detect and 
correct  corruption,  fraud  and  conflicts  of  interest  when  using  the  funds  provided  under  the 
Facility, including the arrangements aimed to avoid double funding from the Facility and other 
Union programmes, are assessed to be adequate subject to the implementation of the identified 
audit and control milestones before the first payment request. This would warrant a rating of A 
under the assessment criterion 2.10 of Annex V of the RRF Regulation. 

4.11. 

Coherence 

The  recovery  and  resilience  plan  of  Hungary  includes  nine  coherent  components,  which 
support the objectives of mitigating the adverse impact of the COVID-19 crisis on the economy, 
employment and society and contributing to the green and digital transitions. At the same time, 
measures in the plan are expected to contribute to the long-term economy policy objectives of the 
Hungarian government in line with the country-specific recommendations addressed to Hungary 
in the European Semester process. 

Each component is built around consistent packages of measures and the plan includes both 
reforms and investments that mutually reinforce or complement each other. 

Mutually-reinforcing measures 

The plan presents a coherent and comprehensive package of reforms and investments that 
are generally reinforcing each other. In Component 8 (Health), the reorganisation of the hospital 
network  through  creating  county-level  hospital  networks  with  integrated  patient  pathways  is 
complemented by investment in the hospitals including both energy efficiency renovation and new 
modern healthcare equipment, the development of e-health services, and reforms and investments 
in  primary  care  services.  In  Component  6  (Energy  –  green  transition),  there  are  mutually-
reinforcing  reforms  and  investments:  the  plan  includes  an  investment  measure  to  support  the 
deployment of solar panels on residential houses, and as a complement a reform aims to create a 
more  effective  administrative  and  legal  framework  to  accelerate  the  deployment  of  renewable 
energy projects and their connection to the electricity system. In Component 1 (Demography and 
public education), there is a mix of reforms and investments to improve the attractiveness of the 
teaching profession, including increasing the salaries of teachers in the public education system, 
providing laptops to teachers and offering trainings to reinforce the skillset of teachers and school 
managers. 

74 

 
 
 
There  are  also  mutually  reinforcing  measures  across  components,  which  are  expected  to 
address  the  same  challenge  from  different  angles.  Component  1  (Demography  and  public 
education)  includes  measures  to  increase  the  number  of  places  in  childcare  facilities,  which  is 
expected to improve the employment possibilities of parents, and notably women. A measure in 
Component 2 (Highly qualified, competitive workforce) develops and promotes adult training with 
digital content, which is also expected to improve the employability of the workforce. As regards 
energy,  the  RRP  includes  measures  to  provide  investment  support  for  energy  efficiency 
investments both for residential and public buildings, in particular for education and healthcare 
facilities. Similarly, both Component 6 (Energy – green transition) and Component 3 (Catching-
up settlements) support the deployment of renewable electricity generation through the installation 
of solar panels; the focus in Component 3 on low-income households is expected to complement 
and  reinforce  the  deployment  of  renewable  energy  sources  by  addressing  specific  hurdles  for 
disadvantaged settlements. Finally, the digital transformation is systematically promoted across 
the plan through a combination of reforms in the form of digitalisation initiatives and investments 
in  ICT  equipment  and  skills  development  in  sectors  such  as  education,  healthcare,  energy, 
transport and in the public administration. 

Complementarity of measures 

Synergies can be found between different components and also between individual measures. 
These are in many cases complementing each other. For example, in Component 3 (Catching-up 
settlements), all measures complement one another in a comprehensive way, and provide a targeted 
approach  to  measures  addressed  in  other  components  in  the  specific  case  of  disadvantaged 
settlements. In this component, measures aim at addressing the same challenges, such as adverse 
impact  of  poverty,  poor  living  conditions  and  shortage  of  job  opportunities  in  the  most 
disadvantaged  settlements. The measures include  both  investment  in  infrastructure, such as the 
refurbishment of dwellings in poor state and building new social houses, and investment in human 
capital, such as skills development and community-oriented pedagogy.  

At the level of the overall plan, some components pursue complementary aims. The various 
components are also expected to provide synergies. For example, Component 9 (Governance and 
public administration) includes several measures to improve competition in public procurement. 
As  most  of  the  investment  in  other  components  are  set  to  be  implemented  through  public 
procurement, the efficiency of public procurements is expected to have a complementary effect on 
various other components. Some reforms are expected to have a cross-cutting impact on the quality 
and effectiveness of legislation in all areas, such as the measures aiming to improve the quality 
and transparency of decision-making in Component 9. In addition, Component 9 aims to improve 
the quality of public spending through expenditure reviews, which can help to identify efficiency 
gains that may lead to  better public services or to cost savings. These reviews complement the 
reforms and investments in Components 1 and 8 which foresee institutional reorganisations in the 
fields  of  education  and  health.  Furthermore,  Component  2  finances  applied  R&D  in  several 

75 

 
 
thematic  areas,  which  may  contribute  to  achieving  the  goals  of  Components  2,  4,  6  and  8  in 
particular.  

Taking into consideration the qualitative assessment of all components of Hungary’s recovery and 
resilience  plan,  their  individual  weight  (importance,  relevance,  financial  allocation)  and  their 
interactions, the plan contains measures for the implementation of reforms and public investments 
which, to a medium extent, represent coherent actions. This would warrant a rating of A under the 
assessment criterion 2.11 of Annex V to the RRF Regulation. 

76 

 
 
 
 
ANNEX – Climate and Digital tagging 

Note: while the total cost of Hungary’s recovery and resilience plan exceeds the total allocation of 
non-repayable financial support to Hungary, Hungary will ensure that all spending related to the 
measures mentioned in this table as contributing to climate and digital objectives are fully financed 
by the funds from the Recovery and Resilience Facility. 

Int. Field = intervention field 

Coeff. = Coefficient for the calculation of support to climate change objectives and to digital transition, 
on the basis of Annex VI and Annex VII of the RRF Regulation 

Measure/Sub-Measure Name 

Budget 
(EUR m) 

Climate 

Digital 

Int. Field  Coeff. % 

Int. 
Field 

Coeff. % 

Measure/ 
Sub-
Measure 
ID  

C1.R1 

C1.I4.1 

C1.I4.2 

C2.R1.1 

C2.R1.2 

C2.I1.1 

C2.I1.2 

C2.I2.1 

Development of competitive 
public education using 21st 
century technology 
Creation of new crèche places - 
Renovation/extension of existing 
buildings 
Creation of new crèche places - 
New buildings 
Modernisation of higher 
education courses – IT services 
and applications 
Modernisation of higher 
education courses – Support to 
digital content production and 
distribution 
Institutional innovation and 
strengthened activities in higher 
education – E-curriculum 
development 
Institutional innovation and 
strengthened activities in higher 
education – Micro-credentials 
Modernisation of infrastructure 
and digitalisation in higher 
education institutions – Capacity 
development activities, including 
organisation of trainings, skill 
development 

C2.I2.2 

Modernisation of infrastructure 
and digitalisation in higher 

026 

40% 

025ter 

40% 

012 

100% 

012 

100% 

021bis 

100% 

108 

100% 

021bis 

100% 

016 

40% 

012 

100% 

391 

16 

98 

0.5 

0.03 

23 

23 

7 

76 

77 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Measure/ 
Sub-
Measure 
ID  

Measure/Sub-Measure Name 

Budget 
(EUR m) 

Climate 

Digital 

Int. Field  Coeff. % 

Int. 
Field 

Coeff. % 

education institutions - Digital 
equipment 

Modernisation of infrastructure 
and digitalisation in higher 
education institutions - Energy 
efficiency renovation 
Modernisation of infrastructure 
and digitalisation in higher 
education institutions - New 
buildings 
Development of digital curricula 
for vocational education and 
training - Digital learning 
materials 
Vocational education and 
training infrastructure for the 21st 
century - Energy efficiency 
renovation 
Vocational education and 
training infrastructure for the 21st 
century - Purchase of ICT 
equipment 
Development of the Central 
Examination Centre - Energy 
efficiency renovation 
Establishment of national 
research and development 
laboratories 
Production and use of renewable 
energy in disadvantaged 
municipalities 

C2.I2.3 

C2.I2.4 

C2.I3.1 

C2.I4.1 

C2.I4.2 

C2.I5.1 

C2.I6 

C3.I2 

C4.R1  Awareness raising 

C4.I1.1 

C4.I1.2 

C4.I2 

Construction of main water 
replacement systems, 
development of new networks 
and systems  
Construction of main water 
replacement systems, 
development of new networks 
and systems – Monitoring system 
at local level 
Establishment of a monitoring 
system 

41 

026bis 

100% 

5 

025ter 

40% 

42 

108 

100% 

22 

026bis 

100% 

17 

108 

100% 

5 

026bis 

100% 

184 

30 

0.1 

029 

040 

100% 

40% 

112 

040 

40% 

0.6 

25 

78 

021 

40% 

055 

100% 

055 

100% 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Measure/ 
Sub-
Measure 
ID  

Measure/Sub-Measure Name 

Budget 
(EUR m) 

Climate 

Digital 

Int. Field  Coeff. % 

Int. 
Field 

Coeff. % 

C4.I3  Nature protection 

7 

040 

40% 

C5.R1 

C5.I1.1 

Deployment of a single national 
tariff, ticketing and passenger 
information system for bus and 
rail by the National Public 
Transport Authority 
Capacity building of suburban 
rail network - Rail Fixed 
infrastructure 

23 

070 

40% 

070 

100% 

554 

069bis 

100% 

C5.I1.2 

Capacity building of suburban 
rail network - Multimodal hubs 

31 

079 

40% 

C5.I1.4 

C5.I2.1 

C5.I2.2 

C5.I3.1 

C5.I3.2 

Capacity building of suburban 
rail network - Rail Signalling and 
Management System 

Rail network congestion 
switching on TEN-T corridor - 
Almásfüzitő-Komárom 

Rail network congestion 
switching on TEN-T corridor - 
Békéscsaba-Lőkösháza 
Development of zero-emission 
bus transport - Electric buses 
Development of zero-emission 
bus transport - Charging stations 

C5.I4 

Deployment of central traffic 
management on TEN-T railways 

C6.I1 

C6.I2.1 

C6.I2.2 

C6.I3 

Classic and smart grid 
development of transmission 
system operator and distribution 
system operators 
Support for the use of residential 
solar panels and heating 
modernisation – PV panels, 
storage and heat pumps 
Support for the use of residential 
solar panels and heating 
modernisation – Renovation 
Installation of energy storage 
facilities for the transmission 
system operator and distribution 
system operators 

113 

070 

40% 

070 

100% 

51 

067 

100% 

372 

143 

16 

76 

067 

100% 

074 

077 

070 

100% 

100% 

40% 

070 

100% 

415 

033 

100% 

033 

40% 

410 

029 

100% 

61 

025 

40% 

147 

033 

100% 

033 

40% 

79 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Measure/ 
Sub-
Measure 
ID  

C6.I4 

Measure/Sub-Measure Name 

Installation of grid energy 
storage facilities for energy 
market participants 

Budget 
(EUR m) 

157 

C6.I5  Dissemination of smart metering 

56 

Climate 

Digital 

Int. Field  Coeff. % 

Int. 
Field 

Coeff. % 

033 

033 

100% 

033 

40% 

100% 

033 

40% 

C7.I1 

C8.I1.1 

C8.I2 

C8.I3 

C9.R8 

C9.R14.2 

C9.R28 

C9.R29 

C9.R30 

Strengthening a smart, innovative 
and sustainable waste 
management industry and 
secondary raw materials market 
Developing the conditions for 
healthcare in the 21st century - 
New construction 

Supporting the digital 
transformation of health 

Remote health monitoring 
programme for the elderly 

Upgrading the cooperation 
systems of the prosecution 
service to tackle corruption 
practices 
Training scheme and support 
scheme for micro-, small and 
medium enterprises to facilitate 
their participation in public 
procurement procedures – 
Development of digital skills 
Support to the data-based 
decision-making and legislative 
process with a view to increasing 
efficiency, transparency and 
reducing risks of irregularities 
Extension of the automatic 
administrative decision-making 
system with a view to increasing 
efficiency, transparency and 
reducing risks of irregularities 
Strengthening the national IT 
equipment management system 
to increase the efficiency of 
public services  

109 

045bis 

100% 

137 

025ter 

40% 

250 

229 

9 

0.8 

4 

6 

42 

80 

095 

100% 

095 

100% 

011 
quater 

100% 

108 

100% 

011 

100% 

011 

100% 

011 

100%