COMMISSION STAFF WORKING DOCUMENT 2023 Country Report - Hungary Accompanying the document Recommendation for a COUNCIL RECOMMENDATION on the 2023 National Reform Programme of Hungary and delivering a Council opinion on the 2023 Convergence Programme of Hungary
Date: 2023-05-24
Institutions: European Commission, Secretariat-General
Subjects: Hungary, economic policy, economic recovery, economic reform, energy policy, green economy, investment, labour market, stability pact, stability programme

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 24.5.2023  SWD(2023) 617 final  COMMISSION STAFF WORKING DOCUMENT 2023 Country Report - Hungary Accompanying the document Recommendation for a COUNCIL RECOMMENDATION on the 2023 National Reform Programme of Hungary and delivering a Council opinion on the 2023 Convergence Programme of Hungary {COM(2023) 617 final}  
 
 
 
 
 
 
 
 
 
 
 
 
ECONOMIC AND EMPLOYMENT SNAPSHOT 

The economy is slowing down, with 
challenges posed by inflation 

The rate at which Hungary is  catching up 
with  the  average  income  level  in  the  EU 
has accelerated since 2017. Hungary’s GDP 
per  person  rose  from  around  69%  of  the  EU 
average in 2017 to 74.7% in 2022. The labour 
market  has  improved  significantly,  with  the 
employment rate (80.2%) rising well above the 
EU  average  and  the  unemployment  rate 
(3.6%)  remaining  well  below  it  in  2022.  The 
main  poverty 
improved, 
indicators  measuring  material 
although 
deprivation  are  still  among  the  highest  in  the 
EU,  indicating  that  some  groups  in  society 
have  benefitted  less  from  economic  growth. 
Hungary  performs  at  or  above  the  average  in 
three  quarters  of  the 
indicators  of  the 
European Pillar of Social Rights. 

indicators  also 

Investment  and  economic  growth  were 
boosted  by  fiscal  and  monetary  policy 
stimulus.  The  budget  deficit  has  been 
consistently above the EU average since 2017, 
and monetary conditions were also supportive 
until  mid-2021.  Capital  accumulation  was 
bolstered by high public investment, as well as 
grants  and  cheap  financing  for  private 
investment. As a result, the investment rate in 
the  Hungarian  economy  was  among  the 
highest in the EU since 2017. 

despite 

The  structure  of  investments  did  not 
favour  productivity  growth.  Growth 
in 
labour productivity was similar to the regional 
aggregate 
a 
average, 
investment  rate  (see  Graph  1.1).  This 
is 
investment  has 
because  the  structure  of 
moved 
productivity-
enhancing machinery and intellectual assets to 
construction.  Furthermore,  little  progress  has 
to 
been  made 

in  addressing  barriers 

since  2017 

higher 

from 

productivity  growth,  especially in  the  areas  of 
innovation  and  the 
education  and  skills, 
business  environment  (see  more  details  in 
Chapter  3  and  Annexes).  In  2022,  labour 
productivity in Hungary was 32% below the EU 
average,  after  adjusting  for  different  price 
levels,  which  indicates  that  there  is  great 
scope to catch up. 

Graph 1.1: Labour productivity in Hungary and 
regional peers, relative to 2015 (2015=100) 

(1) Labour productivity per hour worked, at constant 
prices. (2) Regional peers: BG, CZ, EE,HR, LT, LV, PL, RO, SI 
and SK 
Source: Eurostat 

Expansionary economic and fiscal policies 
contributed  to  the  deterioration  of  the 
external  balance,  rising 
inflation  and 
house  prices,  as  also  reported  in  the  In-
depth Review for Hungary. (1) High demand 
for  imports  had  a  negative  effect  on  the 
current  account,  going  from  a  surplus  to  a 
small  deficit  in  2019.  Strong  demand  and 
wage  growth  and  currency  depreciation  were 
already  contributing  to  a  rise  in  inflation  in 

(1) European Commission (2023) In-Depth Review for 
Hungary, Commission staff working document 
(COM(2023) 639 final), 

2 

9510010511011512020152016201720182019202020212022HungaryRegional peers average 
 
   
                                                 
increases  to  consumer  prices,  some  of  these 
had  to  be  relaxed  or  abandoned  due  to  their 
fiscal cost or their disruptive effects on supply. 
The  economic  outlook  points  to  a  narrowing 
external  deficit  and  lower  inflation,  but  the 
worsening 
the 
economic 
tightening  of  financial  conditions 
remain 
concerns  (see  Annex  22).  A  consistent  policy 
mix,  underpinned  by  a  strong  institutional 
policy framework, is instrumental to safeguard 
external 
anchor 
expectations.  

sustainability 

outlook 

and 

and 

financing 

conditions  and 

Economic  growth 
is  set  to  remain 
subdued in 2023. Economic activity declined 
in  the  second  half  of  2022  as  higher  prices, 
fiscal 
tighter 
consolidation  have  suppressed  consumer 
spending  and  investment.  Real  GDP  growth  is 
forecast to fall from 4.6% in 2022 to 0.5% in 
2023. Inflation is projected to rise from 14.6% 
in  2022  to  16.4%  this  year,  but  recent 
decreases 
in  commodity  prices,  currency 
appreciation  and  falling  consumption  are 
expected  to  reduce  inflation  to  4%  in  2024. 
Weaker  economic  activity  is  also  expected  to 
increase  unemployment  in  2023,  but  wage 
growth  is  set  to  remain  high  due  to  the 
pervasive  shortage  of  skilled  workers.  Thus, 
the  purchasing  power  of  households 
is 
projected  to  rise  again  in  2024,  and  GDP 
growth can pick up to 2.8% in 2024.  

has 

from 

benefitted 

Hungary 
a 
significant  amount of  EU  cohesion  funds, 
to be complemented by the Recovery and 
Resilience  Facility  (see  Section  2).  Since 
joining  the  EU  in  2004,  Hungary  has  received 
the equivalent of around 2% of GDP annually 
from  EU  funds  in  net  terms.  In  the  coming 
years,  EUR  21.7  billion  of  cohesion  policy 
funds in the 2021-27 financial  cycle  and EUR 
5.8  billion  in  grants  under  the  RRF  have  been 
allocated  to  Hungary.  EU  funds  are  a  major 
source  of  foreign  currency  for  the  economy, 
potentially amounting to around 2.5% of GDP 
annually  between  2022  and  2026  in  net 
terms. 

2019. Growth in house prices has been among 
the  fastest  in  the  EU,  fuelled  by  government 
support  schemes.  Housing  construction  was 
hindered  by  high  levels  of  public  investment 
that  overused  capacities  in  construction  and 
increased  costs.  Further  policy  stimulus  in 
inconsistencies  between 
2021-2022  and 
various  policies  have  exacerbated 
these 
trends.  Monetary  policy  has  tightened  since 
mid-2021,  with  the  overnight  deposit  rate  at 
the  central  bank  at  18%  since  October  2022. 
However,  other  policies,  such  as  interest  rate 
ceilings  on  certain  loans  and  large  bank 
deposits,  and  subsidised  loans,  limited  the 
impact  of  higher  interest  rates  on  inflation. 
Fiscal  policy  also  remained  expansionary 
through  2022  and  the  minimum  wage  was 
raised  by  19.4%  and  16%  in  2022  and  2023 
respectively, further fuelling inflation.  

Graph 1.2: Inflation in Hungary and the EU 

(1) HICP, all items 
Source: Eurostat 

Russia’s  war  of  aggression  against 
Ukraine  magnified  the  macroeconomic 
rising  energy  prices 
challenges.  Sharply 
widened the current account deficit to 8.2% of 
GDP  in  2022.  Government  debt  is  still  above 
pre-COVID-19  levels,  and  its  relatively  short 
average  maturity  leads  to  a  rapidly  rising 
burden 
payments.  Higher 
commodity  prices,  currency  depreciation  and 
indirect  tax  increases  raised  HICP  inflation  to 
25.9% in the first quarter of 2023, the highest 
in  the  EU.  While  energy  and  food  price  caps 
delayed  the  pass-through  of  commodity  price 

interest 

of 

3 

051015202530Mar 2017Sep 2017Mar 2018Sep 2018Mar 2019Sep 2019Mar 2020Sep 2020Mar 2021Sep 2021Mar 2022Sep 2022Mar 2023Annual change (%)HungaryEU27 
  
Box 1: 

Energy policy response in Hungary 

Hungary has adopted several  support measures to cushion the impact of energy price 
inflation  on  households  and  businesses.  Their  cost  is  projected  in  the  Commission’s 
2023  spring  forecast  to  amount  to  1.2%  of  GDP  in  2023.  (2)  Most  measures  do  not 
preserve the price signal and are untargeted. 

Since  2013,  Hungary  has  applied  a  system  of  caps  on  gas  and  electricity  prices  for 
households,  which  entail  a  high  level  of  compensation  to  utility  companies  for  the 
losses they incur. In 2022, the caps were scaled back to support only those households 
that  consume  less  than  the  national  average  and  the  price  caps  were  phased  out  for 
most  types  of  non-residential  use  (e.g.  by  micro  enterprises).  This  measure  is 
untargeted,  as  it  is  based  on  the  number  of  children  in  the  household,  not  on  the 
amount  of  income.  However,  the  2022  modification  has  introduced  some  price 
signalling and lead to some energy saving in the economy. The price caps on wholesale 
and  retail  fuel  prices  introduced  in  late  2021  were  phased  out  by  December  2022. 
Hungary  has  put  in  place  national  measures  to  apply  Council  Regulation  (EU) 
2022/1854,  namely  the  contribution  related  to  the  spread  between  Brent  and  Urals 
oil (3),  and  a  contribution  to  the  income  of  energy  suppliers.  Until  the  end  of  2023, 
energy-intensive SMEs and manufacturers may also benefit from grant and subsidised 
loan schemes, including for investments in energy efficiency. 

In  response  to  the  energy  crisis,  the  government  adopted  an  action  plan in  July  2022 
that  includes  the  increase  of  domestic  gas  production  and  imports,  an  export  ban  on 
energy  carriers  and  firewood,  increased  lignite  production  and increased production  at 
the  Matra  lignite-fired  power  plant,  and  an  extended  life-cycle  for  the  Paks  nuclear 
plant.  

Consolidation of public finances 
remains a challenge 

Fiscal  policy  has  been  expansionary  for 
many  years (4)  and  has  limited  the  room 
for  manoeuvre  during  the  current  crisis. 
Budget deficits have remained higher than the 
EU  average  since  2017  despite  relatively 
higher  GDP  growth  (see  the  thematic  chapter 

(2)  For 2022, gross budgetary costs of measures amounted 
to 1.0% of GDP. All of the measures outlined in this box 
were already in place in 2022. 

(3)  Hungary’s oil company MOL continues to import Ural oil 
from Russia, whose price remains below the price of 
more common Brent oil. 

in  the  2023  In-depth  Review).  (5)  During  this 
period,  the  expansionary  policy  may  have 
vulnerabilities, 
fuelled 
contributing to accelerating inflation, widening 
current  account  deficits  and  soaring  housing 
prices.   

macroeconomic 

challenging 

The 
macroeconomic 
environment  has  also  worsened  the 
medium-term  fiscal  outlook.  The  public 
debt  ratio  decreased  from  79.3%  of  GDP  in 
2020  to  73.3%  at  the  end  of  2022.  Still,  the 
debt  burden  is  high  compared  to  most  other 
remains  8 
countries 
percentage  points  above  the  2019  level.  The 
recent fall in the debt ratio was supported by 
robust  economic  recovery  after  the  COVID-19 
crisis and high inflation. The budget deficit fell 
from  7.5%  of  GDP  in  2020  to  6.2%  in  2022, 
but  remained  among  the  highest  in  the  EU, 

region  and 

the 

in 

(4)  Fiscal policy is often called expansionary or “loose” if it 
increases demand in the economy via higher spending 
and tax cuts. 

(5)  European Commission (2023) In-Depth Review for 
Hungary, Commission staff working document 
(COM(2023) 639 final), 

4 

 
                                                 
                                                 
 
and  despite  ongoing  consolidation  efforts  is 
expected  to  remain  elevated  4.0%  of  GDP  in 
2023  and  4.4%  in  2024.  It  may  become 
challenging  to  reduce  the  deficits  to  prudent 
levels  in  the  coming  years.  The  high  costs  of 
the  caps  on  household  energy  and  utility 
prices, the phasing-out of many sectoral taxes 
in  2023,  public  wage  pressures,  and  the 
continued  impact  of  non-temporary  measures 
introduced  in  recent  years  will  exert  pressure 
on  the  budget  in the  medium term.  Given  the 
relatively low average maturity of the debt, (6) 
the current high interest rates will also lead to 
a  sharp  increase  of  debt  servicing  costs. 
Furthermore,  due  to  decreasing  domestic 
demand  for  government  securities  in  2022, 
debt management  had  to  rely  increasingly  on 
foreign 
the 
Commission’s  debt  sustainability  analysis 
based  on  the  2023  Spring  forecast,  Hungary 
faces  high  risks  in  the  medium  term  and 
medium risks in the long term (see Annex 21). 

borrowing. 

According 

to 

to 

come 

retirement  age  increased  labour  supply  from 
2012  onwards  as  fewer  older  workers  could 
leave  the  labour  market.  These  tailwinds  to 
labour  market  participation  ended  in  2022 
when the statutory retirement age reached 65 
for all active workers. However, there are other 
factors  that  may  ease  the  labour  shortage. 
it  easier  for 
The  government  has  made 
certain third 
from 
workers 
countries (7)  by  waiving  the  need  to  have  a 
work  permit.  According  to  provisional  official 
data (8)  more  than  85  000  foreigners  were 
working  in  Hungary  in  January  2023.  Since 
Russia’s  war  of  aggression  started,  33 000 
people  from  Ukraine  registered  in  protection 
schemes in Hungary. There is also a large pool 
of  people  who  could  be  better integrated  into 
the labour market, including women with care 
responsibilities  and  disadvantaged  groups,  in 
particular 
low-skilled  people,  Roma,  and 
persons with disabilities. Unless further efforts 
are made in this area, it will be challenging for 
Hungary  to  reach  the  national  employment 
target of 85% by 2030. 

Structural challenges are holding 
back productivity growth  

A renewed focus on structural reforms is 
key  to  securing  productivity  growth. 
Hungary  would  benefit  from  shifting  from 
labour-intensive 
resource-intensive 
and 
assembly  activities  to  more  advanced  and 
productive  tasks  within  global  value  chains. 
This  requires  more  innovation  and  better-
functioning  markets.  To  achieve 
these, 
Hungary  needs  more  highly  skilled  workers 
and a more predictable business environment. 
low  on  the 
Currently,  Hungary  is  placed 
European 
its 
performance  relative  to  the  EU  has  worsened 
over time (see also Annex 9). 

Innovation  Scoreboard  and 

Untapped reserves of labour could help to 
ease the shortage of skilled workers. The 
labour  market  recovered  quickly  from  COVID-
19 but the lack of skilled workers is hindering 
growth.  The  gradual  raising  of  the  statutory 

(6)  The average maturity of the central government debt 
stood at some 6 years at end 2022. This means that 
the debt securities issued by the treasury will mature, 
on average, in 5 years. 

Weak education and health outcomes are 
obstacles  to  further  productivity  growth. 
The  education  system  does  not  provide 
enough skilled and high-skilled workers, which 
would  be  a  prerequisite  for  high  value-added 
production.  Pupils  with  a  disadvantaged 
background,  including  Roma,  continue  to  face 
challenges in terms of inclusive education and 
have  lower  chances  of  getting  a  quality 
education  and  obtaining  a  university  diploma. 
The  proportion  of  pupils  who  leave  school 
early has not fallen (9) and the share of pupils 
reaching higher education is one of the lowest 
in  the  EU.  The  shortage  of  qualified  teachers 
challenge.  Health 
poses  an 
outcomes, such as life expectancy at birth and 
cancer  mortality,  are  among  the  worst  in  the 
EU. Rates of mortality due to preventable and 
treatable  causes  are  significantly  higher  than 
the EU average, reflecting the high prevalence 

increasing 

(7)  Ukraine, Serbia, Vietnam, the Philippines, Montenegro, 
Belarus, Indonesia, Kazakhstan, North Macedonia and 
Bosnia and Herzegovina. 

(8)  Hungarian Central Statistical Office (in companies with 

five or more employees) 

(9)  In particular, most Roma children are not completing 

upper secondary education. 

5 

 
                                                 
                                                 
low level of education is significantly higher in 
some of the less developed regions than in the 
more  developed  parts  of  the  country.  There 
are also significant disparities within regions in 
terms of social indicators (see Annex 17). 

While  Hungary 
is  making  progress 
towards  achieving  most  of  the  United 
Nations  Sustainable  Development  Goals 
(SDGs), there is still a gap with other EU 
countries. Hungary is improving on indicators 
on environmental sustainability (SDGs 2, 6, 11, 
12  and  13)  but  most  remain  below  the  EU 
average (see Annex 1). Hungary performs well 
on SDG indicators on growth, employment and 
poverty  reduction  (SDGs  1  and  8).  Further 
progress  is  needed  in  a  number  of  areas 
related  to  health,  education  and  gender 
equality  (SDGs  3,  4  and  5)  which  remain  far 
below the EU average. Hungary is also moving 
away from the target on reducing inequalities 
(SDG 10). Finally, Hungary needs to do more to 
catch up with the EU average on peace, justice 
and strong institutions (SDG 16). 

The green and digital transition is 
progressing only slowly  

relies 
Hungary’s  energy  sector  still 
heavily  on  Russia  for  fossil  and  nuclear 
fuels.  While  many  EU  countries  managed  to 
reduce  their  dependency  on  Russian  gas  and 
oil products by the end of 2022, Hungary still 
relies  on  them  to  almost  the  same  extent  as 
before 2022 (Graph 1.3). This is partly due to 
limited  short-term  substitution  possibilities, 
but  also,  partly,  to  limited  policy  efforts  to 
mitigate  demand  and  diversify 
imports. 
Hungary has obtained several exceptions from 
the sanctions on Russian energy products. The 
nuclear  energy  sector,  which  accounted  for 
45%  of  electricity  generated  in  2021,  relies 
heavily  on  Russian  technology  and  nuclear 
fuel,  and  on  Russian  financing  for  the  new 
Paks 2 nuclear power plant. 

of  health  risk  factors  in  the  population  and 
issues with the quality of health services. 

from  generous 

The  unpredictable  business  environment 
increases  the  cost  of  doing  business. 
Compared to the rest of the EU, Hungary has a 
relatively low ranking on business environment 
scoreboards, in line with its level  of economic 
development.  In  recent  years,  there  has  been 
increased government intervention in the form 
of sector-specific taxes, tailor-made legislation 
and  government  decisions  targeting  business 
transactions. However, specific companies and 
industries  benefit 
state 
subsidies  and 
regulation.  A 
supportive 
polarised business environment makes it more 
important  to  have  good  relations  with  the 
authorities  as  this  can  be  a  way  to  benefit 
from government subsidies and avoid targeted 
administrative  measures.  These  interventions 
have  reduced  competition  and  hindered  the 
growth of more efficient companies. Concerns 
remain  about  judicial  independence,  the  anti-
corruption  framework  and  the  quality  of  law-
making,  which  have  an  additional  bearing  on 
the  business  environment.  Firms  may  choose 
not 
targeted 
administrative  measures  in  the  courts  due  to 
concerns  about  judicial  independence (10).  It 
remains  essential  for  Hungary  to  fully  and 
correctly 
reforms, 
addressing different aspects of the rule of law, 
that it has committed to implement in its RRP, 
and that the effects of these reforms are not 
undermined  by  other  means.  The  Commission 
will continue to monitor the functioning of the 
Hungarian justice system. 

remedy  against 

implement 

to  seek 

the 

all 

since  2010  but 

Regional  disparities 
in  Hungary  have 
remain 
decreased 
significant. GDP per capita is still only around 
half the EU average in four of Hungary’s eight 
NUTS-2  regions.  There  are  also  significant 
disparities within these regions, driven by large 
labour  productivity  gaps.  In  2021,  GDP  per 
capita was more than three times higher in the 
capital  region  of  Budapest  than  in  any  of  the 
four least-developed NUTS-2 regions. The less 
developed regions have a higher rate of early 
school leavers and the share of people with a 

(10)  In 2023 only 32% of companies perceive the level of 
independence of courts and judges to be ‘fairly or very 
good’ (Eurobarometer).  

6 

 
                                                 
Graph 1.3: Share of Russian products in 
imports of mineral fuels in Hungary and 
EU27, volume 

not  keep  pace  with  the  economy’s  increasing 
use of energy.    

Graph 1.4: Share of energy from renewable 
sources 

EU27 average without LU and MT. Data for 2022 refer to 
first 11 months 
Source: Eurostat 

and 

plants 

assembly 

industries,  given 

limited  domestic 

The  green  transition  is  partly  slowed  by 
policies  focusing  on  industrialisation  and 
cheap  energy  from  fossil  fuels.  While 
Hungary  has 
energy 
resources,  policies  have  focused  on  attracting 
resource-intensive  production,  such  as  large 
car 
battery 
manufacturing. As part of the green transition, 
the  electrification  of  transport  may  make  it 
necessary to retrain blue-collar workers in the 
car  industry.  Further  efforts  are  needed  on 
in  declining  and 
upskilling  and  re-skilling 
transforming 
low 
the 
participation  of  adults  in  training,  including  in 
energy-intensive  industries.  The  shortage  of 
green  skills  in  construction  might  also  hinder 
the 
in 
improvement  of  energy  efficiency 
buildings.  The  low  level  of  regulated  energy 
for 
prices  has 
households  to  use  fossil  fuels  efficiently. 
Hungary  uses  more  energy  and  materials  to 
produce a unit of income than the EU average. 
Contrary  to  the  general  trend  among  EU 
countries, 
the 
resource  productivity 
Hungarian economy has not improved over the 
past  decade.  In  recent  years,  greenhouse  gas 
emissions  in  the  transport  sector  have  risen 
sharply, damaging air quality and posing risks 
to  public  health.  The  share  of  energy  from 
renewable sources is one of the lowest in the 
EU and has fallen over the last decade (Graph 
1.4)  as  the  generation  of  green  energy  could 

incentives 

limited 

the 

in 

Source: Eurostat 

and 

Water  management 
climate 
adaptation  remain  concerns.  Hungary’s 
water-supply  and  sanitation  system  are  still 
not  fully  compliant  with  the  Drinking  Water 
and  the  Urban  Wastewater  Directives,  with 
specific challenges in access to drinking water 
for  vulnerable  groups.  Investment  in  existing 
systems  is  lagging  due  to  the  cap  on  public 
utility  bills.  With  climate  change  expected  to 
reduce  flow  levels  in  the  country’s  rivers  and 
increase  the  incidence  of  droughts,  more 
attention  should  be  paid to  the  key  issues  of: 
(i)  water  retention (11);  (ii)  restoring  natural 
hydrology; (iii) disincentives to draining land in 
(iv)  adapting 
times  of  higher 
agricultural  practices.  Progress  towards  a 
circular economy is still at an early stage, with 
the  rate  of  use  of  circular  materials  and  the 
rate of recycling far below the EU average.  

rainfall, 

Digital  skills  and  the  use  of  digital 
technologies  are  lagging  behind.  Hungary 
ranks 22nd out of 27 EU Member States in the 
2022  Digital  Economy  and  Society  Index.  It 
shows  greater  vulnerability  than  average  in 

(11)  With a focus on landscape retention, and nature-based 

solutions. 

7 

0%10%20%30%40%50%60%70%80%HungaryEU2710%12%14%16%18%20%22%24%20112012201320142015201620172018201920202021HungaryEU27 
   
          
                                                 
on 

taxes 

internet 

in  the  EU.  Broadband 

the  EU  as  regards  the  resilience  of  its  digital 
dimension. The take-up of very fast broadband 
and  Very  High  Capacity  Network  coverage  is 
high  in  comparison  to  the  rest  of  the  EU,  but 
5G  mobile  internet  coverage  is  one  of  the 
lowest 
is 
relatively  expensive  compared  to  the  average 
income  in  Hungary,  partly  due  to  the  sector-
telecommunications. 
specific 
Broadband  access  is  particularly  low  among 
SMEs (12). The share of companies using basic 
digital technologies is among the lowest in the 
EU  and  the  rate  of  adoption  of  advanced 
technologies  (e.g.  AI,  big  data)  is  also  low, 
especially  in  the  least  developed  regions.  The 
share of people with at least basic digital skills 
the  EU  average,  with 
also 
significant  territorial  differences.    The  use  of 
e-government services in Hungary is above the 
EU  average  and  there  has  been  a  significant 
increase  in  the  number  of  services  available 
online. However, Hungary performed poorly on 
the availability of open data, the transparency 
of online services and the availability of cross-
border services.  

lags  behind 

(12)  See the variable "broadband access by company size" 

(based on ISOC_BDE15B_E of Eurostat) in 
https://commission.europa.eu/strategy-and-
policy/strategic-planning/strategic-foresight/2020-
strategic-foresight-report/resilience-dashboards_en.  

8 

 
                                                 
THE RECOVERY AND RESILIENCE PLAN IS UNDERWAY 

it 

is  significant.  Endorsed 

The  Hungarian  recovery  and  resilience 
in 
plan  (RRP) 
December 2022, with a total of EUR 5.8 billion 
in  grants, 
represents  about  3.8%  of 
Hungary’s  GDP  in  2021.  The  plan  includes 
significant  measures  to  accelerate  the  twin 
green and digital transition, as well as to boost 
economic,  institutional  and  social  resilience, 
including  strengthening  the  rule  of  law.  In  so 
doing, it addresses a significant subset of the 
country-specific  recommendations  addressed 
to Hungary in the past. The plan was approved 
under  the  condition  of  the  full  and  effective 
implementation 
remedial  measures 
undertaken  by  Hungary  under  the  procedure 
pursuant 
Euratom) 
2020/2092  and  milestones  to  ensure  sound 
financial  management  of  the  EU  budget  and 
the protection of the financial interests of the 
EU.  Together  with  other  rule  of  law  reforms 
these 
related 
measures have been translated into 27 ’super 
milestones’. 

to  Regulation 

independence, 

judicial 

(EC, 

of 

to 

Due  to  its  late  adoption  in  December 
2022,  the  implementation  of  Hungary’s 
recovery  and  resilience  plan  has  been 
significantly  delayed.  A  swift  and  steady 
implementation  of  the  plan  would  require  the 
fulfilment  of  27  milestones 
to 
strengthening 
independence  and 
safeguarding  the  protection  of  the  financial 
interests  of  the  Union.  No  payment  under  the 
plan is possible until these milestones are fully 
and 
Hungary’s 
REPowerEU  grant  allocation  amounts  to  EUR 
701.6  million.  Hungary  plans  to  use  the 
REPowerEU  grant  and  additional 
loan  on 
energy related investments. 

implemented. 

correctly 

related 

judicial 

The  green  transition  is  a  key  priority  of 
the  RRP,  with  48.1%  of  its  allocation 
dedicated to  climate-related measures.  A 
wide  range  of  reforms  and  investments  in 
sustainable 
water 
management  and  the  circular  economy  are 

transport, 

energy, 

expected to make a significant contribution to 
this  objective  and  to  the  decarbonisation  of 
Hungary’s economy. 

The  RRP 
includes  a  comprehensive 
package  of  measures  on  energy,  with 
significant 
investments 
reforms  and 
promoting  renewable  energy.  It  includes 
reforms  that  will  remove regulatory  obstacles 
to installing wind turbines, create ‘go-to areas’ 
in  the  windiest  regions  and  improve  the 
procedures for granting permits for renewable 
installations.  To  enable  energy 
energy 
produced  from  renewable  sources  to  be 
securely  and  flexibly  integrated  into  the  grid, 
the  plan  includes  investments  to  improve  the 
electricity  network,  install  storage  facilities, 
finance  solar  panels  for  35 000  households, 
and  put  solar  power  plants  in  the  most 
disadvantaged  settlements.  Further  measures 
address  the  sustainability  of  transport,  water 
management, and the circular economy.  

in 

the 

RRP 

promotes 

investments 

The 
digital 
transformation  of  the  economy  and 
society,  which  is  embedded  in  different 
measures.  Most  parts  (components)  of  the 
RRP  contain 
the  digital 
transition,  with  29.8%  of  the  total  allocation 
to  digital  measures.  Several 
dedicated 
measures  are  set  out 
the 
to 
availability  of  digital  equipment  in  primary, 
vocational  and  higher  education  and,  to  a 
certain  degree,  to  improve  digital  skills.  The 
plan  also 
the 
digitalisation  of  the  public  administration  and 
the health, transport, and energy sectors. 

contains  measures  on 

improve 

Reforms and investments aim to improve 
the  quality  of  education  and  training, 
including for disadvantaged students and 
vulnerable groups. The plan includes several 
measures to strengthen higher and vocational 
education  and  training.  These  include  the 
provision  of  digital  learning  materials,  digital 
equipment  and  renovated  classrooms  for 

9 

 
 
students  in  vocational  education  and  training. 
Reforms  to  improve  the  attractiveness  of  the 
teaching  profession  include  a  framework  to 
gradually  increase  the  salaries  of  teachers  in 
the  public  education  system,  as  well  as 
professional  development.  The  plan  also 
includes  legislative  changes  to  improve  the 
access  of  disadvantaged  pupils  to  quality 
education. 

The plan is expected to improve resilience 
in  the  health  sector.  The  plan  includes 
measures to modernise hospital care, improve 
primary care, expand the use of digital health 
tools  and  strengthen  health 
information 
systems. The measures will also help improve 
preventive care.  

The  plan  includes  initiatives  to  promote 
sustainable  growth  across  several  policy 
areas.  The  plan  contains  measures  that 
support 
the  establishment  of  national 
laboratories  and  the  development  of  research 
and  development  cooperation  to  strengthen 
innovation.  

initiatives 

that 
includes 
The  plan 
territorial 
to  social  and 
contribute 
cohesion. This is achieved through integrated 
economic  and  social  development  in  the  300 
most disadvantaged settlements.  

The  plan  includes  reforms  to  improve 
public  finances.  One  key  reform  aims  to 
promote  the  medium  and  long-term  fiscal 
sustainability  of  the  pension  system,  and 
improve  its  fairness,  by  raising  the  level  of 
pensions 
pensioners. 
Simplification  of  the  tax  system,  measures  to 
address  the  risk  of  aggressive  tax  planning 
and  reviews  of  spending  are  expected  to 
contribute to economic resilience.  

lower-income 

for 

among 

The plan includes a comprehensive range 
of  measures  on  the  rule  of  law.  These 
incorporate, 
the 
commitments  made  under  the  17  remedial 
measures  presented  by  Hungary  in  2022  in 
the 
Conditionality 
Regulation (13).  It  also  includes  reforms  to 

context 

things, 

other 

the 

of 

of 

of 

quality 

decision-making, 
partners 

strengthen judicial independence, and improve 
the 
the 
involvement 
and 
social 
stakeholders,  and  the  transparency  of  and 
access  to  public  information.  Implementing 
these  reforms  would  effectively  address  the 
country-specific  recommendations  made  to 
Hungary  on  the  rule  of  law  and  serve  to 
protect  the  financial  interests  of  the  EU.  Key 
elements  of 
reforms  have  been 
translated  into  27  ’super  milestones’,  which 
must  be  fully  and  correctly  implemented 
before  any  payment  under  the  RRF  can  be 
made  to  Hungary,  and  any  later  reversal  of 
them  would  block  future  payments  under  the 
RRF. 

these 

The  plan  includes  several  measures  to 
reinforce  the  anti-corruption  framework. 
This includes the establishment of an Integrity 
Authority  and  Anti-Corruption  Task  Force  as 
well as introducing the possibility of a judicial 
review of a decision by the prosecution service 
or  the  investigating  authority  to  dismiss  a 
crime report or terminate criminal proceedings 
and  the  adoption  of  a  new  National  Anti-
Corruption  Strategy.  The  plan  also  includes 
the  quality  and 
reforms 
transparency  of  the  decision-making  process 
and to ensure a more systematic involvement 
of stakeholders. 

improve 

to 

includes  measures  to: 

Several  commitments  of  Hungary  aim  to 
strengthen  judicial  independence.  To  this 
end,  the  plan 
(i) 
significantly strengthen the role and powers of 
the  National  Judicial  Council  (which  is  led  by 
judges)  to  limit  arbitrary  decisions  in  the 
administration  of  courts; 
the 
functioning  of  the  Supreme  Court  to  shield  it 
from  political 
the 
influence; 
Constitutional  Court’s  role  in  reviewing  final 
decisions  by  judges  at  the  request  of  public 
to 
authorities; 
preliminary  references  to  the  Court  of  Justice 
of the European Union.  

(iii)  end 

obstacles 

remove 

reform 

(iv) 

(ii) 

Finally,  the  plan  includes  reforms  to 
improve 
public 
procurement.  Hungary  has  committed  to 

competition 

in 

(13)  See Council Implementing Decision (EU) 2022/2506 of 
15 December 2022 on measures for the protection of 

the Union budget against breaches of the principles of 
the rule of law in Hungary. 

10 

 
                                                 
                                                                        
Box 2: 

Key deliverables under the RRP in 2023-2024 

  Set up bodies to prevent and control conflicts of interest and corruption and monitor the rule 
of law (e.g. Integrity Authority, Anti-Corruption Task Force, Directorate for Internal Audit and 
Integrity,  different  working  groups  composed  of  civil  society  representatives)  and  begin  to 
apply strict procedures to protect the EU’s financial interests 

  Strengthen judicial independence 

 

 

 

 

Improve competition in public procurement 

Improve  the  quality  of  decision-making,  the  effective  involvement  of  social  partners  and 
stakeholders and increase the transparency of public information  

Improve  the  permit-granting  process  for  renewable  energy,  remove  regulatory  obstacles  to 
the installation of wind power plants, improve the transparency of grid connection procedure 
and increase the availability of connections to the grid 

Invest  in  residential  solar  panels  and  heating  modernisation,  storage  facilities  and  smart 
meters 

  Carry  out  reforms  in  the  education  sector  targeting  the  teachers’  profession,  digitalisation 

and the inclusion of vulnerable groups 

  Carry out reforms in the health sector, including in digitalisation and the mapping of future 

investments 

 

Implement  integrated  economic  and  social  development  in  the  300  most  disadvantaged 
settlements 

reduce  to  15%  the  high  share  of  calls  for 
tender  that  result  in  a  single  bid.  To  achieve 
this,  Hungary 
is  expected  to  set  up  a 
comprehensive  performance  measurement 
framework,  to  continuously  monitor  the  level 
of  single  bids  and  assess  the  underlying 

reasons  for  them.  It  will  also  develop  and 
implement  an  action  plan,  based  on  best 
practices, 
to  make  public  procurement 
procedures more transparent, and help micro-, 
small  and  medium-sized 
to 
participate in tenders. 

companies 

11 

 
 
FURTHER PRIORITIES AHEAD 

taking 

into  account 

Hungary  faces  additional  challenges  to 
its  recovery  and 
those  tackled  by 
resilience  plan  (RRP).  To  secure  long-term 
growth,  it  will  be  crucial  for  Hungary  to:  (i) 
address  macroeconomic  policy  issues  related 
financing  needs,  external 
to  high  debt 
competitiveness  and  the  housing  market;  (ii) 
improve 
its  business  environment  and 
institutions;  (iii)  upgrade  its  educational  and 
health  systems;  and  (iv)  foster  the  green 
transition, 
territorial 
disparities.  Hungary  will  need  to  address  its 
economy’s reliance on fossil fuels and improve 
the 
residential 
buildings. Hungary also needs to raise its level 
of  ambition  in  policies  targeting  the  labour 
market, skills, and the fight against poverty to 
be able to reach its national European Pillar of 
these 
Social  Rights 
targets.  Addressing 
challenges  will  also  help  make 
further 
progress in achieving the SDGs in which there 
is  room  for  further  improvement  in  Hungary, 
namely Zero hunger (SDG 2), Good health and 
well-being (SDG 3), Reduced inequalities (SDG 
10),  Responsible  consumption  and  production 
(SDG 12), Climate action (SDG 13) and Peace, 
justice, and strong institutions (SDG 16). 

low  energy  efficiency  of 

Energy policy focuses on energy 
security, but decarbonisation 
should also be a priority 

Hungary’s energy sector continues to rely 
heavily  on  Russia, both  for  the supply  of 
fossil  fuels  and  for  nuclear  investments 
and  fuels.  Oil  and  gas  constitute  more  than 
two  thirds  of  Hungary’s  energy  mix.  Three 
quarters  of  Hungary’s  gas  consumption  is 
covered by imports from Russia (14). Due to its 

(14)  Eurostat. In 2020, Hungary’s natural gas imports from 
Russia amounted to 95% of total imports of natural 
gas. However, Hungary was a significant exporter of 
natural gas to neighbouring countries. Accounting for 

geographical  location  Hungary  has  no  direct 
access to overseas liquefied natural gas (LNG) 
and  relies  on  Russian  gas  imports.  Hungary 
has a large gas storage capacity of 6.3 billion 
cubic  metres,  and  fulfilled  its  gas  storage 
last  winter.  Russian  crude  oil 
obligations 
accounts  for  about  60%  of  the  country’s  oil 
imports and the only refinery continues to rely 
largely  on  oil  imports  from  Russia.  Expanding 
the  capacity  of  the  Adria  pipeline  through 
closer  cooperation  with  its  neighbours  would 
improve  Hungary’s  access 
to  alternative 
sources  of  oil.  Moreover,  to  move  away  from 
Russian  crude,  Hungary  will  have  to  invest  to 
enable refineries, which are currently designed 
to  process  Ural  crude  almost  exclusively,  to 
process non-Russian oil.    

of 

Hungary 

some  measures, 

in  the  public  sector  and 

Reducing  Hungary’s  reliance  on  fossil 
fuels  is  an  essential  part  of  ensuring 
has 
supply. 
security 
such  as 
implemented 
measures 
the 
introduction  of  a  two-tier  price  system  for 
households. Due to these measures and other 
factors  gas  consumption  decreased  by  about 
21% between August 2022 and January 2023 
(compared  to  the  average  over  the  previous 
five years). However, comprehensive structural 
efforts  to  decarbonise  the  economy  are 
missing.  Hungary  has  one  of  the  highest 
figures in the EU for fossil fuel subsidies as a 
share  of  GDP.  While  energy  prices  have 
decreased, uncertainty remains regarding next 
winter,  which  requires  continued  efforts  to 
structurally reduce gas demand. 

Renewable  electricity  installations  have 
increased  substantially,  but  constraints 
on grid capacity hinder further and rapid  
deployment.  In  recent  years,  Hungary  has 

these energy exports, Hungary’s import dependency on 
Russia was 76% of gross inland consumption for gas. 
These estimates assume that domestic production and 
imports from third countries are used to cover domestic 
consumption. 

12 

 
 
                                                 
                                                                        
investments 

energy-intensive 

experienced  a  steep  growth  in  solar  energy 
capacity and its share of electricity production 
reached  13.7%  in  2022  compared  to  the  EU 
average  of  7.6%  (Graph  3.1).  The  progressive 
electrification  of  the  economy,  coupled  with 
further 
in 
Hungary are expected to increase the demand 
for  electricity.  This  will  pose  an  additional 
challenge  to  Hungary,  which  already  imports 
around one-third of the electricity it consumes 
each  year.  Despite  the  growing  needs  for 
energy,  investment  in  energy  infrastructure 
was  one  of  the  lowest  in  the  EU  in  the  last 
decade and was amounted to less than half of 
the  investment  made  by  regional  peers (15). 
The 
the  electricity  grid’s 
limitations  of 
the  distribution  and 
capacity,  both  at 
transmission  level,  and  the  lack  of  ability  for 
handling  decentralised,  weather-dependent 
electricity  generation  on  the  demand  and 
supply  sides,  create  a  major  constraint  to  the 
development  of  clean,  renewable  electricity 
production. However, investment in the grid is 
hindered  by  regulatory  measures.  Currently,  a 
the  energy 
government  decree  prevents 
regulator  from  setting  network  tariffs  which 
would  cover  the  cost  of  maintaining  the  grid. 
Suboptimal  integration  into  the  EU  balancing 
energy market is also a missed opportunity to 
optimise  the  grid  for  additional  renewables 
capacity.  

regulatory 

environment 

The 
poses 
several challenges to the development of 
renewable  energy.  In  the  last  decade,  the 
expansion  of  wind  energy  generation  capacity 
has  been  virtually  on  hold  due  to  restrictive 
regulations  and  licensing  procedures.  Since 
2020,  the  feed-in  of  companies’  solar  power 
generators  has  not  been  allowed  and  further 
restrictions were introduced in the summer of 
2022. Since April 2021, no new accession right 
has been granted for solar power plants. In the 
the  government 
last  quarter  of  2022, 
suspended,  for  an 
the 
possibility  for  small  residential  solar  power 
generators  to  feed  in  into  the  grid.  While 
Hungary committed to remove this ban by the 
end  of  2024,  the  sudden  change  in  grid 
connection  rules  and  permitting  have  created 

indefinite  period, 

(15)  Between 2013 and 2021 Hungary’s investment in 
electricity and gas was 0.6% of GDP per year on 
average, compared to 1.3% in regional peers. 

13 

uncertainty  and  hinder  the  deployment  of 
residential  solar  power  systems.  In  October 
2022, the government abolished the generous 
feed-in  tariffs  for  newly  installed  residential 
solar panels, however, the new tariff system is 
still  unknown,  adding  to  the  uncertainty.  A 
sizeable and rapid expansion of renewables, in 
particular  through  new  wind  power  capacities 
and  the  untapped  potential  of  geothermal 
energy  and  biomethane  production,  would 
support the electrification of the economy and 
the shift away from fossil fuels.  

Graph 3.1: Share of solar electricity in total 
electricity generation in Hungary and EU27, 
per month 

Source: Eurostat 

for 

Strengthening  the  energy  efficiency  of 
is 
buildings  through  deep  renovation 
crucial 
further  energy  savings. 
Residential  buildings,  which  account  for  about 
one-third  of  energy  consumption  and  about 
one-third of the total natural gas consumption, 
have 
low  energy  performance.  Reducing 
energy  consumption  would  not  only  lead  to 
less  dependence  on  Russian  fossil  fuels,  but 
also  to  lower  greenhouse  gas  emissions  and 
other  air  pollutants.  Until  summer  2022, 
capped energy prices were amongst the lowest 
in the EU, which did not incentivise households 
to  carry  out  energy  efficiency  renovations. 
Since the amendment in August 2022, capped 
utility prices are only applicable up to average 
household  consumption.  However,  the  current 
capped utility price system still does not allow 
the  price  signal  mechanism  to  work  properly 

0%5%10%15%20%25%2017-012017-052017-092018-012018-052018-092019-012019-052019-092020-012020-052020-092021-012021-052021-092022-012022-052022-09EU27Hungary 
                                                 
   
and  does  not  create  sufficient  incentives  for 
energy  savings.  Price  caps  are  uniformly 
applied  for  all  households.  High 
income 
households  also  benefit  from  subsidised 
administrative price while low-income families 
often  live  in  less  energy-efficient  homes. 
Targeted  schemes  to  low-income  households 
would  be  more  efficient  both  in  supporting 
vulnerable  households  and  generating  energy 
savings.  Ambitious  measures 
increase 
energy  efficiency,  focused  on  the  building 
sector,  including  residential  buildings,  will  be 
necessary  for  Hungary  to  reach  its  2030 
targets and to preserve the competitiveness of 
its  economy.  Promoting  energy  efficiency 
measures  and  strengthening  price  signals  in 
the  retail  market  would  help  make  energy 
savings  more  permanent  and  shield  the 
Hungarian  energy  system  from  future  supply 
and price shocks.  

to 

are 

jobs’ 

green 

‘Green 

requires 

The 
a 
transition 
specialised  workforce,  while  reskilling 
workers in sectors that are transforming 
is  also  needed.  In  2022,  labour  shortages 
were reported in 31 occupations that required 
specific  skills  or  knowledge  for  the  green 
currently 
transition. 
concentrated  around  biofuel  and  biomass 
technologies. Solar, wind and geothermal  jobs 
combined  account  for  less  than  one-tenth  of 
renewable energy jobs. More green jobs would 
be  created  by  tapping  into  the  potential  of 
geothermal, a further deployment of solar and 
wind,  the  roll-out  of  heat  pumps  and  by 
boosting  energy  efficiency  activities.  Policies 
on  upskilling  and  reskilling  for  the  green 
transition  -  including  for  the  people  who  are 
most  affected  -  and  to  promote  inclusive 
labour  markets  will  be  essential  to  accelerate 
the transition to net-zero and ensure that it is 
fair. The Just Transition Fund could support the 
adaptation process. 

Disadvantaged groups have 
difficulties accessing adequate 
social, education, healthcare and 
job-seeking services 

in 

rate. 

groups 

remote 

education, 

healthcare 

There  are 

Poverty  indicators  show  a  mixed  picture. 
While  the  overall  poverty  indicators  have 
improved  over  the  last  decade,  the  relative 
situation  of  certain  disadvantaged  groups, 
low-income  households,  children, 
such  as 
people  with  disabilities,  Roma  and  people 
rural  settlements  has 
living 
worsened.  Disadvantaged 
face 
in  accessing  adequate  social 
difficulties 
assistance, 
and 
assistance  with  seeking  work.  Hungary  is 
among  the  four  worst-performing  Member 
States  in  the  severe  material  and  social 
deprivation 
significant 
disparities  between  regions  when  it  comes  to 
the  share  of  the  population  that  is  at  risk  of 
poverty  or  social  exclusion,  as  well  as  severe 
material  and  social  deprivation.  The  tax 
system  places  a  disproportionate  burden  on 
lower-paid workers through a high income tax 
rate  and  high  consumption  taxes.  The  major 
sources of income for low-income households 
have not kept up with the cost of living in the 
last  decade.  The  minimum  income  is  one  of 
the  lowest  in  the  EU  (21%  of  the  poverty 
threshold  and  16%  of  the  income  of  a  low 
wage  earner,  as  compared  to  59%  and  47%, 
respectively,  in  the  EU).  Further  efforts  are 
needed  to  achieve  the  national  targets  to 
reduce  the  share  of  families  with  children 
facing material and social deprivation to below 
13%  and  thereby  to  lift  at  least  292  000 
people  out  of  poverty  or  social  exclusion  by 
2030. 

Recent  increases  in  energy  and  food 
prices  disproportionately  burden 
low-
income  earners.  Although  a  price  cap  was 
introduced  in  January  2022  on  certain  basic 
food products, the increase in food prices was 
still  among  the  highest  in  the  EU  in  2022 
(47.9%  vs  17.8%  in  the  EU).  This  particularly 
affected the poorest families (Graph 3.2) who 
spend  the  highest  share  of  their  income  on 
food. As energy prices multiplied, the price cap 
on gas and electricity introduced in 2013 was 

14 

 
 
 
 
for 

in  2022 

above-average 
removed 
consumption by households. However, there is 
a 
limited  correlation  between  household 
income  and  energy  consumption.  Low-income 
families  often  live  in  less  energy-efficient 
homes (16).  Targeted  direct  support  for  low-
income  households  would  be  more  effective 
than  the price  cap  on  energy  in  helping  these 
families.  

Graph 3.2: Inflation rate by income deciles, 
December 2022 

Source: Hungarian Statistical Office 

Shortages  of  labour  and  an  unutilised 
workforce  are  present  at  the  same  time. 
New  manufacturing  sites  have  difficulties 
finding  local  workers  and  therefore  recruit 
people  from  other  regions  of  Hungary  or 
employ  foreign  workers.  While  the  overall 
employment  rate  is  relatively  high,  certain 
disadvantaged  groups,  such  as  Roma,  people 
with  a  low  level  of  education,  women  with 
caring 
responsibilities  and  people  with 
disabilities, have difficulties finding jobs due to 
weaknesses  in  the  education,  training  and 
social  assistance  systems  and  in  support 
structures for job seekers.  

The education system is not able to offer 
to 
all  students  equal  opportunities 

acquire  the  necessary  skills.  About  a 
quarter  of  15-year-olds  are  low-achievers  in 
basic  skills,  which  poses  challenges  for  any 
future  efforts  to  upskill  and  reskill  and  for 
their employability. Pupils in 3-year vocational 
schools  perform  significantly  below 
the 
national average, and the low number of hours 
devoted  to  developing  their  basic  skills  does 
not  ensure  an  improvement  by  the  time  they 
graduate at age 17. Less than a third of pupils 
in  vocational  education  and  training  benefit 
from work-based learning, one of the lowest in 
the  EU (17).  The  early  school  leaving  rate  is 
also  high  and  has  not  improved  in  the  last 
decade.  The  share  of  Hungarians  reaching  at 
least  a  basic  level  of  digital  literacy  level  is 
below  the  EU  average,  but  the  situation  is 
much worse among disadvantaged groups.  

While  the  RRP  includes  measures  on 
education,  some  parallel  developments 
may impact their effectiveness. As part of 
the  reforms  in  the  plan,  the  government 
increasing  the  salaries  of 
committed  to 
teachers  in  the  public  education  system  by 
2025 to at least 80% of the average salary of 
workers with higher education, using European 
Social Fund+ co-funding. While the purpose of 
this  measure 
teaching 
profession more attractive, some other factors 
and initiatives have the opposite effect. These 
include  teachers’  high  workload,  the  low  level 
of school autonomy, the limited right to strike 
and  a  recent  draft  law  (the  so-called  ‘Status 
law') worsens teachers’ working conditions.  

to  make 

the 

is 

Inadequate benefits and assistance while 
looking  for  work  put  disadvantaged 
groups  at  risk  of  being  left  behind.  While 
the  unemployment  rate  is  low,  the  share  of 
jobseekers  with  low  basic  skills  is  more  than 
double the national average. The average time 
to find a job was 16 months in 2022, and 40% 
of  registered 
jobseekers  are  without  any 
benefits.  The  short,  3-month  duration  of 
unemployment  benefits  undermines  the  job 
matching and upskilling activities of the public 
employment  service  and  makes  it  difficult  to 
access  to  effective  measures  to  get  people 

(16)  Tóth G., V. Jáger, Zs. Kovalszky. P. Bóday, D. Ádám and 
Á. Kincses (2023): A magyarországi háztartások 
energiafogyasztásának jellemzői az orosz–ukrán háború 
árnyékában, Statisztikai Szemle 101: 118-144 (in 
Hungarian). 

(17)  Less than a third of pupils in vocational education and 
training are exposed to work-based learning, one of the 
lowest rates in the EU.  

15 

202122232425262728293012345678910%Income decile 
  
                                                 
                                                 
into work, training. Despite need for upskilling, 
the  share  of  adults  participating  in  a  learning 
activity  in  the  previous  4  weeks  remains  low, 
at 5.9% in 2021 compared to 10.8% in the EU, 
and  is  significantly  lower  among  low-skilled 
and 
Significant 
investment  in  this  area  is  necessary  for 
Hungary to achieve its national target on adult 
participation in training by 2030, in the context 
of the European Pillar of Social Rights.  

unemployed 

people. 

(the 

tripartite 

Social  dialogue 
in  Hungary  remains 
among  the  weakest  in  the  EU  and  has 
faced  further  challenges  recently.  The 
main 
Permanent 
body 
Consultation  Forum  of  the  Private  Sector  and 
the  Government)  serves  mainly  as  an 
information-sharing  and  consultation  forum 
that  has  no  formal  legal  framework,  with  no 
meaningful  dialogue  except  on  setting  the 
minimum  wage.  It  meets  sporadically  (eight 
meetings  in  2022).  New  legal  provisions, 
adopted  in  May  2022,  define  the  minimum 
level  of service that teachers must provide at 
such  a  high  level  that  it  renders  teachers’ 
strikes  ineffective,  therefore  seriously  curbing 
their  right  to  collective  action.  Furthermore, 
new  legislation,  introduced  in  January  2023 
increased 
without  any 
employers’  ability 
teachers 
participating  in  civil  disobedience  to  protest 
working conditions.   

social  dialogue, 
to  dismiss 

The business environment is 
unequal and hindered by 
regulatory uncertainty 

of 

the 

features 

Some 
business 
environment  are  positive  for  companies. 
The corporate tax rate is the lowest in the EU 
and 
the  government  provides  significant 
support  for  companies’  investment  projects, 
sometimes  amounting  to  more  than  10%  of 
investment  cost.  Moreover,  there  are 
the 
generous  state  subsidies  (the  second  highest 
in  the  EU,  and  16%  of  business  R&D  is 
financed  by  the  state)  for  companies’  R&D 
activities.  The  tax  burden  on  labour  has 
decreased  significantly  since  2016,  and  the 
the  employment  protection 
relaxation  of 

regulation  allows  companies  to  manage  their 
staffing  and  wage  levels  flexibly  and  from  a 
powerful  position.  These  factors  may  have 
increased  the  share  of  capital  income  within 
the  total  of  value  added in  the  last  decade 
(from around 43% to 48% between 2011 and 
2021)  and  made  Hungary  an  attractive 
location for the labour-intensive, cost-sensitive 
production  processes  of  global  value  chains. 
Hungary  is  also  used  for  cross-border  tax 
optimisation (see more details in Annex 19). 

Some firms and industries, however, face 
an  adverse  business  environment.  Taxes, 
price  caps  and  tailor-made  regulations  that 
are  imposed  at  short  notice  and  without  prior 
consultation  on  specific  industries  and  firms 
weaken legal certainty  and are detrimental to 
business  planning.  Budgetary  revenues  from 
sector-specific  taxes  amount  to  1.5%  of  GDP, 
while these industries account for only 10% of 
gross operating surplus in the private sector. In 
comparison,  corporate  income  tax,  whose  tax 
base is ten times larger, provides 1.2% of GDP 
to the budget. Since 2020 the government has 
also  used  its  extraordinary  power  under  the 
‘state  of  danger’  to  introduce  sector-specific 
taxes,  price  controls  and  other  regulations  at 
short notice and without prior consultation. For 
example,  the  government  recently  imposed 
administrative price caps and a 90% profit tax 
on  the  production  of  cement  and  ceramic 
materials, i.e. in industries with high shares of 
foreign  ownership.  In  December  2022,  the 
government  suddenly  increased  the  tax  on 
insurance and pharmaceutical companies. As a 
result  of  the  additional  sector-specific  taxes, 
the  earlier  positive  trend  in  reducing  the 
number  of  taxes  has  reversed  in  2022 (18). 
Banks  were  burdened  by  a  cap  on  flexible 
mortgage rates, impacting their ability to lend 
and  profitability.  Selective  administrative 
inspections,  fines  and  arbitrary  decisions  such 
as  withholding  of  permits  have  been  used  to 
exert  undue  pressure  on  certain  companies. 
Effective  remedy  seems  to  be  lacking  against 
arbitrary measures of the authorities. 

(18)  The number of taxes decreased from around 60 to 51 
from 2016 to 2021, then increased again to 59 in 
2022. 

16 

 
                                                 
telecommunications,  utilities, 

The state is also active in influencing the 
market  structure  in  certain  sectors.  The 
government  frequently  uses  its  power  to 
exempt  transactions  from  merger  control  by 
declaring  them  ‘of  strategic  importance’.  As  a 
result, the impact of such transactions on the 
economy, competition and the single market is 
not  being  assessed.  The  criteria  for  these 
exemptions are not set out transparently,  and 
there is  no  formal  procedure  to  contest  these 
criteria or the decision itself. There have been 
more  than  30  such  interventions  since  2014. 
These interventions have tended to discourage 
or  limit  EU  and  foreign  investment,  in  effect 
enabling the purchase of companies by state-
owned  enterprises  or  private  firms  with  close 
ties to the government (20). As a result, state or 
state-friendly domestic ownership increased in 
banking, 
the 
media,  TV  and  radio  broadcasting  to  the 
detriment  of  foreign  ownership.  Based  on 
announcements 
the 
government,  similar 
transactions  can  be 
expected in insurance, retail and the transport 
sector, notably regarding the Budapest Airport. 
Using  the  regulatory  power,  several  services, 
such  as  textbook  publishing,  fertility  clinics, 
cash-in-transit  market  and  tobacco  wholesale 
and  retail  are  entrusted  to  state-owned  or 
private  firms,  specifically  created  for  these 
purposes,  which  operate  without  competition. 
These  transactions  concern  to  a  significant 
degree  foreign  investors,  also  from  other 
Member States, thereby seriously affecting the 
principles  of 
internal  market.  The 
decreased  presence  of  foreign  capital  (Graph 
3.4) and know-how, in particular in high value 
added 
and 
telecommunication,  risks  curbing  Hungary’s 
opportunities  for  productivity  growth  and 
innovation. 

by  members 

industries 

banking 

like 

the 

of 

Graph 3.3: Allocative efficiency of labour 
within industry between firms 

(1) Positive (or negative) numbers indicate that 
employment is concentrated in firms with above (or 
below) average productivity. (2) Sectors: C: 
Manufacturing, G: Wholesale and retail trade, J: 
Information and communication 
Source: European Commission based on 2018 Orbis 
data 

retail 

is  questionable. 

The  retail  sector  continues  to  face 
unpredictable  regulations.  The  conditions 
for  authorising 
the  establishment  of  or 
changes to shops above 400 m2 do not seem 
to  be  transparent  and  the  availability  of 
judicial  review 
In  retail, 
frequent changes in regulation have created a 
chronically  unstable  business  environment. 
Specific  retail  restrictions  e.g.,  introduction  of 
price  caps  for  certain  foodstuffs,  a  very 
tax (19)  and  mandatory 
progressive 
large  supermarkets 
weekly  promotions 
in 
affect 
and 
efficiency 
prevent 
competition.  For  example,  employment  in  the 
Hungarian  retail  trade  tends  to  be  more 
concentrated in less productive firms, which is 
in contrast with most EU countries (see Graph 
3.3). The recently introduced price caps do not 
seem  to  have  attained  their  objective  of 
containing inflation, which remains the highest 
in  the  EU.  The  tax  on  the  retail  sector 
disproportionately  burdens  larger  companies 
that  do  not  have  their  headquarters 
in 
Hungary.  These  companies  also  allege  that 
disproportionate 
they 
enforcement 
the 
to 
related 
implementation of the price caps. 

subject 

actions 

gains 

are 

to 

(19)  The tax rate is 0% up to HUF 0.5 billion, 0.15% up to 
HUF 30 billion, 1% up to HUF 100 billion and 4.1% of 
the turnover above HUF 100 billion. 

(20)  For example, in February 2023, the state and a private 
firm close to the government bought Vodafone, the 
second largest telecommunication company in Hungary, 
for EUR 1.9 billion.   

17 

-0.3-0.2-0.100.10.20.30.40.50.6CGJinterquartile range (p25-p75) of EU countriesHU 
   
                                                 
                                                 
Graph 3.4: FDI stock in Hungary, 2008-2021 

Ensuring a prudent fiscal policy is 
a priority and calls for a more 
robust budgetary framework 

(1) Services: NACE Rev2 code: G,H,I,J,K,L,M,N,O,P,Q,R,S) 
Source: National Bank of Hungary 

are 

objective 

education 

increasing 

There  is  a  lack  of  highly  skilled  workers. 
The  education  system  may  provide  a 
workforce 
producing 
for  manufacturers 
products with low value-added, but to achieve 
higher  productivity,  more  students  with  a 
university 
The 
needed. 
government  modified 
the  management 
structure of almost all universities (21) with the 
their 
of 
stated 
performance.  The  positions  in  the  boards  of 
the  public 
the 
universities  were  filled  with  politicians  and 
people  close  to  the  government  and  the 
boards  took  over  responsibilities  from  the 
academic communities. The reduced academic 
freedom  of  universities,  together  with  the 
shortage  of  skilled  researchers  and  scientists, 
is  having  a  negative  impact  on  R&D  activity. 
Spending on R&D by public institutions is very 
low,  and  almost  all  of  it  comes  from  the  EU. 
This has an impact on the competitiveness of 
the economy. 

trusts  managing 

interest 

of 

the  macroeconomic 
leading 

The  budgeting  practices  of  recent  years 
have  exacerbated  the  procyclicality  of 
fiscal  policy (22).  Since  2016,  the  annual 
budgets  have  been  adopted  in  early  summer, 
several  months  earlier  than  is  customary 
among  OECD  countries.  The  early  preparation 
of  the  budgets  has  reduced  the  quality  and 
reliability 
and 
budgetary  forecasts, 
to  recurring 
positive  growth  surprises  and  unplanned 
additional  revenues.  Given  various  flexibility 
rules  embedded  in  the  annual  budget  laws, 
those  additional  revenues  were  used  for 
higher discretionary spending above the limits 
set  in  the  budgetary  appropriations/ceilings. 
This has led to a more procyclical fiscal stance 
than  initially  planned  in  the  adopted  budgets 
(see the 2020 country report and Chapter III of 
the  2023  In-Depth  Review).  Ad  hoc  spending 
decisions  were  often  made  at  the  end  of  the 
budgetary 
enacted  by 
government  decrees  throughout  the  year 
without adequate parliamentary oversight and 
public consultation, in turn reducing the budget 
transparency. 
also 
consistently  included  large  reserves  which 
were spent if the official deficit target was on 
track.  All  these  aspects  of  the  planning  and 
execution  of  the  budget  have  increased  the 
likelihood  of  high  deficits  in  good  economic 
times.  

year  or  were 

budgets 

have 

The 

The  fiscal  framework  does  not  provide  a 
strong  enough  foundation  for  a  prudent 
and transparent fiscal policy.  According to 
the EU fiscal governance indicators, the design 
of Hungary’s national fiscal rules and medium-
term  budgetary  frameworks  is  among  the 
weakest  in  the  EU.  The  annual  deficit  targets 
set  out  in  the  medium-term  plans  are  often 

(21)  The management and financing of most public 

universities in Hungary have been transferred to private 
trust funds. Meanwhile, university staff have become 
private instead of public employees, which reduces their 
protection against dismissal. All important decisions are 
made by the boards of trustees, whose members have 
close ties to the government and were initially 
appointed by the government for life.  

(22)  Fiscal policy can be described as procyclical when 
government increases government spending and 
reduces taxes during an economic expansion, but 
reduces spending and increases taxes during a 
recession. Procyclical policies magnify economic or 
financial fluctuations and may contribute to a build-up 
of vulnerabilities in the economy. 

18 

010203040506070EUR billionManufacturingServices 
  
                                                 
                                                 
to  a  sharp  drop  in  housing  transactions  and 
mortgage  applications  since  summer  2022, 
which  foreshadows  a  correction  of  house 
prices and weaker construction activity. 

higher-income 

Weakly  targeted  subsidy  schemes  have 
contributed  to  recent  price  increases. 
Grants  and  subsidised  loan  schemes  were 
in  2016.  These 
significantly  expanded 
measures  are  now  less  targeted,  which  has 
allowed 
that 
already  own  a  dwelling  to  benefit  from  these 
schemes  for  investment  purposes.  In  2022, 
subsidised  schemes  accounted  for  37%  of  all 
household loan disbursements. These schemes 
remain  in  place  for  the  time  being,  but  the 
government  has  hinted  at  their  possible 
reform later in 2023.  

households 

Regulatory  uncertainty  has  negatively 
affected  the  housing  supply.  The  VAT  rate 
on  new  housing  has  changed  five  times  since 
2016 as a temporary rate cut was repeatedly 
extended  and  a  new  reduction  for  certain 
brownfield  projects  was 
introduced.  The 
application  of  stricter  energy  efficiency 
standards 
for  new  buildings  has  been 
postponed  three  times.  Labour  and  material 
shortages  in  the  construction  sector  were 
further bottlenecks to homebuilding, and were 
aggravated by years of high public investment 
that have driven up costs. 

Rental  markets  are  hampered  by  under-
regulation  and  a  shortage  of  social 
housing  for  rent.  Housing  institutions  and 
policies  are  geared  towards  homeownership. 
More developed rental markets could alleviate 
labour shortages in fast-developing regions by 
making  it  easier  for  people  to  move  location 
and make housing more affordable for young 
and  low-income  households.  Currently,  some 
8%  of  households  are  tenants,  and  3.5%  pay 
subsidised  rents.  The  rental  of  dwellings  is 
loosely regulated in Hungary, which can hinder 
long-term  contracts.  Renting  is  also  burdened 
by  a  high  VAT  rate,  further  discouraging 
professional  investors  from  entering  private 
rental  markets. Regulatory  issues  include  the 
lack  of  clarity  over  the  responsibilities  of  the 
parties  in  a  rental  contract,  and  the  lack  of 

it 

features,  as 

revised  and  have  only  limited  bearing  on  the 
longer-term  planning  of  the  budgets.  The 
effective constraint on fiscal policy at national 
level is set by the debt reduction rule set out in 
the  Fundamental  Law (23).  This  rule,  however, 
has  procyclical 
induces 
restrictions  on  fiscal  policy  when  growth  and 
inflation  are  moderate,  and  allows  for  more 
spending  and  tax  reductions  when  there  is 
higher  growth  and 
inflation.  The  budget 
balance rules set out in the 2011 Stability Act, 
which  are  aimed  at  aligning  annual  budgets 
with  the  3%  deficit  ceiling  and  with  the 
medium-term  budgetary  objective  defined  by 
the  European  fiscal  rules,  play  only  an 
auxiliary  role  during  the  adoption  of  the 
budget (24). The national fiscal council’s limited 
mandate  and  low  operational  capacities  limit 
its effectiveness in steering public discussions 
on  fiscal  issues.  Further  analysis  of  the  fiscal 
framework is available in the thematic chapter 
of the In-Depth Review. 

Housing policies have boosted 
demand and prices more than 
supply  

House  prices  have  grown  strongly  in 
Hungary  in  the  last  decade,  while  the 
housing  supply  has  remained  limited. 
House prices have doubled in Hungary over the 
last  decade.  The  affordability  of  housing  has 
become a more pressing issue with the price-
to-income ratio now exceeding its peak before 
the  global  financial  crisis  of  2008-2009.  In 
contrast, 
residential  building  activity  has 
remained low  by  historical  standards  and  has 
been  unable  to  meet  the  housing  demand. 
However, tighter financing conditions have led 

(23)  According to the debt rule, if the general government 
debt exceeds 50% of GDP, the Parliament may only 
adopt an act on the central budget that leads to a 
reduction in the debt of at least 0.1% of GDP in normal 
economic times. 

(24)  The legal grounding of the budget balance rules in the 
fiscal framework is weaker, as non-compliance with 
those rules ex ante does not prevent the Parliament 
from adopting the budget and there are no predefined 
consequences in case of ex post non-compliance (those 
have been deactivated by the national escape clauses 
since the COVID-19 crisis). 

19 

 
                                                 
efficient  mechanisms  to  resolve  disputes (25). 
The supply of social rental is limited, with the 
number  of  dwellings  owned  by  municipalities 
accounting for 2.3% of housing stock in 2021. 

(25)  See e.g. MNB (2019): Housing Market Report, May 

2019. Magyar Nemzeti Bank. See also Habitat (2020): 
Feketelakás 3.0, Habitat for Humanity Magyarország (in 
Hungarian). 

20 

 
                                                 
KEY FINDINGS 

Hungary’s  RRP 
includes  measures  to 
address a  series  of  structural challenges 
through:  

  reforming  the  pension  system  to  improve 
long-term  sustainability  of  public 
the 
finances,  while  preserving  its  adequacy,  in 
particular 
income 
inequalities; 

addressing 

by 

  simplifying 

the 

tax 
it  against 

system,  while 
risk  of 

the 

strengthening 
aggressive tax planning; 

  better integration of women into the labour 
market  and  helping  working  parents by 
increasing the number of places in crèches; 

  reducing 

territorial 

disparities 

and 
supporting  access 
to  social  services, 
healthcare  and  adequate  housing  for  all, 
including  by  building  or  renovating  social 
housing  and  providing  support  for  energy 
costs  for  the  inhabitants  of  the  300  most 
disadvantaged settlements;  

  improving  education  outcomes  by  making 
the teaching profession more attractive and 
of 
promoting 
disadvantaged 
quality 
mainstream education;  

participation 
in 

greater 

groups 

  improving  access to  quality  preventive  and 
primary  care  services  by  modernising 
hospital care, and through the digitalisation 
of services; 

  increasing  investment  in  digitalisation  and 
green  and  digital  skills  by  increasing  the 
use  of  digital  equipment  in  education,  the 
digitalisation  of  the  public  administration 
and  the  health,  transport  and  energy 
sectors,  and  through  support  for  research 
and innovation; 

  increased 

competition 

public 
procurement  by  reducing  the  share  of 
single  bid  procedures  and  increasing  the 
transparency of procedures;  

in 

by 

  strengthening  judicial  independence  and 
reinforcing  the  anti-corruption  framework, 
including 
prosecutorial 
improving 
efforts,  setting  up  an  integrity  authority, 
judicial  review 
introducing  an  effective 
against  the  decisions  of  the  prosecution 
service,  and  facilitating  public  access  to 
information;  

  improving  the  quality  and  transparency  of 
through 
and 

the  decision-making  process 
regular 
appropriate impact assessments;  

consultations 

public 

  speeding  up  the  deployment  of  renewable 
energy,  in  particular  by  streamlining  the 
procedures  for  permits  and  upgrading  the 
electricity infrastructure;  

  reducing  the  dependency  on  fossil  fuels  in 
buildings  and  transport  by  stepping  up 
efforts  on  energy  efficiency  measures  for 
all,  especially  in  residential  houses  and  in 
the electrification of transport;  

  promoting  sustainable  water  and  waste 
management  and  the  circularity  of  the 
economy. 

Hungary  should  urgently  fulfil  the  required 
milestones and targets in order to allow for a 
its 
swift  and  steady 
recovery  and  resilience  plan,  and  swiftly 
finalise the REPowerEU chapter with a view to 
rapidly starting its implementation. 

implementation  of 

Beyond  the  reforms  and  investments  in 
the RRP, Hungary would benefit from: 

  Pursuing  effective  coordination  and  clear 
demarcation of policies to ensure fiscal and 
external sustainability; 

21 

 
 
the  smooth 

  phasing out price and interest rate caps  to 
facilitate 
transmission  of 
monetary  policy  and  targeting  support 
measures  in  the  housing  sector  to  low-
income households; 

  strengthening  the  medium-term  budgetary 

framework; 

  better  aligning  the  preparation  of  annual 
budgets  with  the  budgetary  year  and 
limiting  discretion  in  the  use  of  budgetary 
appropriations and budgetary reserves; 

  better 

of 

integration 

the  most 
disadvantaged groups, such as Roma, in the 
through 
labour  market, 
upskilling 
better 
unemployment benefits;  

in  particular 
ensuring 

and 

  ensuring better social assistance and equal 
access  for  all  to  essential  services  and 
decent housing;  

  increasing  investment  in  the  digitalisation 

of businesses; 

in 

  improving  the  regulatory  framework  and 
competition 
services  by  avoiding  
selective  and  arbitrary  administrative 
interventions  and  the  use  of  tailor-made 
legislation  providing  undue  advantage  or 
disadvantage to specific companies; 

  applying 

scrutiny 
competition 
systematically to business transactions and 
reducing  the  use  of  emergency  measures 
to what is the strictly necessary;  

  ensuring effective social dialogue; 

  reducing  overall  reliance  on  fossil  fuels  by 
accelerating the deployment of renewables, 
including  wind  energy,  geothermal  and 
sustainable  biomethane  in  particular  by 
streamlining  the  permit  procedures,  while 
conducting  regular  environmental  impact 
assessments  and  by  creating  a  supportive 
and predictable regulatory environment; 

  reforming  balancing  energy  market  rules 
and tariff setting to allow for cost recovery 
and an optimum use of the grid and, where 
electricity 
necessary, 

upgrade 

the 

infrastructure,  including  grid  and  storage 
capacities; 

  diversifying 

imports  of  fossil  fuels  to 
significantly  decrease  dependence  on 
Russia, 
strengthening 
cooperation  with  other  Member  States, 
including 
on 
infrastructure; 

necessary 

including 

where 

by 

  improving energy efficiency, in particular in 
buildings,  and  continue  efforts  to  reduce 
overall gas consumption; 

  adjusting  the  current  system  of  regulated 
energy  prices  to  encourage  energy  saving 
while  providing  targeted  support  for  low-
income households;    

to 

  improving energy efficiency and continuing 
consumption; 
reduce  gas 
efforts 
reducing  dependency  on  fossil  fuels  in 
buildings,  particularly  by  stepping  up 
efforts  to  roll  out  heat  pumps;  promoting 
for  all, 
energy  efficiency  measures 
especially in residential buildings; 

  using  appropriate  financial  instruments  to 
overcome  market  barriers  and  remove 
barriers  to  the  price  signalling  on  energy, 
while  providing  targeted  direct  support  for 
low-income households;  

  stepping  up  policy  efforts  aimed  at  the 
provision  and  acquisition  of  the  skills 
needed for the green transition. 

22 

 
ANNEXES 

 
 
 
 
LIST OF ANNEXES 

Cross-cutting indicators 

A1.  Sustainable Development Goals 

A2.  Progress in the implementation of country-specific recommendations 

A3.  Recovery and resilience plan - overview 

A4.  Other EU instruments for recovery and growth 

A5.  Resilience 

Environmental sustainability 

A6.  European Green Deal 

A7.  Energy security and affordability 

A8.  Fair transition to climate neutrality 

Productivity 

A9.  Resource productivity, efficiency and circularity 

A10.  Digital transformation 

A11.  Innovation 

A12.  Industry and single market 

A13.  Public administration 

Fairness 

A14.  Employment, skills and social policy challenges in light of the European Pillar of Social Rights 

A15.  Education and training 

A16.  Health and health systems 

A17.  Economic and social performance at regional level 

Macroeconomic stability 

A18.  Key financial sector developments 

A19.  Taxation 

A20.  Table with economic and financial indicators 

A21.  Debt sustainability analysis 

A22.  Macroeconomic imbalance procedure assessment matrix 

25 

28 

28 

30 

33 

35 

37 

38 

38 

42 

47 

50 

50 

52 

54 

56 

60 

62 

62 

65 

67 

69 

71 

71 

74 

76 

77 

80 

 
 
 
LIST OF TABLES 

A2.1. 
Summary table on 2019-2022 CSRs 
A3.1. 
Key elements of the Hungary’s RRP 
A5.1. 
Resilience indices summarising the situation across RDB dimensions and areas 
A6.1. 
Indicators tracking progress on the European Green Deal from a macroeconomic perspective 
A7.1. 
Key energy indicators 
A8.1. 
Key indicators for a Fair Transition in Hungary 
A9.1. 
Overall and systemic indicators on circularity 
A10.1.  Key Digital Decade targets monitored by DESI indicators 
A11.1.  Key innovation indicators 
A12.1. 
Industry and the Single Market 
A13.1.  Public administration indicators 
A14.1.  Social Scoreboard for Hungary 
A14.2.  Situation of Hungary on 2030 employment, skills and poverty reduction targets 
A15.1.  EU-level targets and other contextual indicators under the European Education Area strategic framework 
A16.1.  Key health indicators 
A17.1.  Selected indicators at regional level in Hungary 
A18.1.  Financial soundness indicators 
A19.1.  Taxation indicators 
A20.1.  Key economic and financial indicators 
A21.1.  Debt sustainability analysis - Hungary 
A21.2.  Heat map of fiscal sustainability risks - Hungary 
A22.1.  Assessment of macroeconomic imbalances matrix 

LIST OF GRAPHS 

A1.1. 
Progress towards the SDGs in Hungary in the last 5 years 
A2.1. 
Hungary’s progress on the 2019-2022 CSRs (2023 European Semester) 
A3.1. 
Share of RRF funds contribution to each policy pillar 
A3.2. 
Fulfilment status of milestones and targets 
A3.3. 
Total grants disbursed under the RRF 
A4.1. 
Cohesion policy funds 2021-2027 in Hungary: budget by fund 
A4.2. 
Synergies between cohesion policy funds and the RRF with its six pillars in Hungary 
A4.3. 
Cohesion policy funds contribution to the SDGs in 2014-2020 and 2021-2027 in Hungary 
A6.1. 
Thematic – greenhouse gas emissions from the effort sharing sectors in Mt CO2eq, 2005-2021 
A6.2. 
Thematic - Energy mix (top) and electricity mix (bottom), 2021 
A6.3. 
Thematic – environmental investment needs and current investment, p.a. 2014-2020 
A7.1. 
Share of gas consumption per sector, 2021 
A7.2. 
Gas consumption per industrial sector 2021 (% of total industry gas consumption) 
A7.3. 
Underground gas storage levels in Hungary 
A7.4. 
Hungary´s retail energy prices for industry (top) and households (bottom) 
A8.1. 
Fair transition challenges in Hungary 
A8.2. 
Distributional impacts of energy prices due to rising energy expenditure (2021-2023) 
A9.1. 
Trend in material use 
A9.2. 
Treatment of municipal waste 
A11.1.  EIS performance Hungary 2015-2022 
A11.2.  R&D intensity in 2021 
A12.1.  Total factor productivity growth 
A12.2.  Productivity performance by sector 
A12.3.  Business environment and productivity drivers 
A13.1.  Public administration. Share of women and men in senior positions (2022 data) 
A13.2.  Hungary. a) Share of 25-64 year olds with tertiary education attainment level by sector and occupation, b) Participation 

rate of 25-64 year olds in adult learning (%) by sector and occupation 
A15.1.  Number of initial teacher education (ITE) applications between 2016 and 2022 
A16.1.  Life expectancy at birth, years 
A16.2.  Projected increase in public expenditure on healthcare over 2019-2070 
A17.1.  GDP per capita (2010) and GDP growth (2011-2020) in Hungary 

26 

31 
33 
37 
38 
42 
47 
51 
52 
54 
56 
60 
62 
64 
65 
67 
69 
71 
74 
76 
77 
78 
80 

29 
30 
33 
34 
34 
35 
35 
36 
38 
39 
40 
42 
42 
43 
44 
47 
48 
50 
50 
54 
54 
56 
56 
58 
60 

61 
65 
67 
67 
69 

 
 
A18.1.  Evolution of credit activity 
A18.2.  Housing prices 
A19.1.  Tax wedge for single and second earners, % of total labour costs, 2022 
A19.2.  Stocks of assets and liabilities held through Special Purpose Entities (SPEs) as a % of the respective total asset and liability 

stocks of Foreign Direct Investment (FDI) in 2021 

71 
73 
75 

75 

27 

 
 
 
 
 
CROSS-CUTTING INDICATORS 
ANNEX 1: SUSTAINABLE DEVELOPMENT GOALS 

This  Annex  assesses  Hungary’s  progress  on 
the  Sustainable  Development  Goals  (SDGs) 
along  the  four  dimensions  of  competitive 
sustainability.  The  17  SDGs  and  their  related 
indicators  provide  a  policy  framework  under  the 
UN’s  2030  Agenda  for  Sustainable  Development. 
The  aim  is  to  end  all  forms  of  poverty,  fight 
inequalities  and  tackle  climate  change  and  the 
environmental crisis, while ensuring that no one is 
left  behind.  The  EU  and  its  Member  States  are 
committed  to  this  historic  global  framework 
agreement  and  to  playing  an  active  role  in 
maximising  progress  on  the  SDGs.  The  graph 
below  is  based  on  the  EU  SDG  indicator  set 
developed  to monitor progress  on  the  SDGs  in  an 
EU context.  

While  Hungary  is  improving  on  some  SDGs 
related to environmental sustainability (SDGs 
9, 11), for the rest (SDGs 2, 7, 12, 13) it still 
needs  to  catch  up  with  the  EU  average.  On 
SDG  7  (Affordable  and  clean  energy),  Hungary  is 

moving  away  from  the  EU  average.  Hungary’s 
share  of  renewable  energy  in  gross  final  energy 
production  decreased  from  14.4%  in  2016  to 
14.1%  in  2021  and  lags  significantly  behind  the 
EU  average  (21.8%  in  2021).  There  is  a  lot  of 
space  for  improvement  as  regards  the  circular 
economy  with  low  and  stagnating  indicators  such 
as  the  rate  of  recycling  for  municipal  waste  and 
the  circular  material  use  rate.  On  a  positive  note, 
Hungary’s net greenhouse gas emissions (SDG 13; 
6.0 tonnes per capita in 2021) are kept below the 
EU  average  (7.4  tonnes  per  capita  in  2021).  The 
country performs well for the share of buses and 
trains  in  passenger  transport  (SDG  9;  21.2%  in 
2020 against the EU average of 12.8%) as well as 
for  the  share  of  rail  and  inland  waterways  in 
freight  transport  (SDG  9;  30.8%  in  2021  against 
the  EU  average  of  22.7%).  The  RRP  includes 
the  development  of 
measures 
renewable  energy  and  improve  the  sustainability 
of  transport,  water  management,  and  the  circular 
economy. 

facilitate 

to 

Graph A1.1: Progress towards the SDGs in Hungary in the last 5 years 

For detailed datasets on the various SDGs, see the annual Eurostat report ‘Sustainable development in the European Union’; for 
details on extensive country-specific data on the short-term progress of Member States: Key findings - Sustainable development 
indicators - Eurostat (europa.eu). The status of each SDG in a country is the aggregation of all the indicators for the specific goal 
compared to the EU average. A high status does not mean that a country is close to reaching a specific SDG, but signals that it is 
doing better than the EU on average. The progress score is an absolute measure based on the indicator trends over the past 5 
years. The calculation does not take into account any target values as most EU policy targets are only valid for the aggregate EU 
level. Depending on data availability for each goal, not all 17 SDGs are shown for each country. 
Source: Eurostat, latest update of early April 2023, except for the EU Labour Force Survey (LFS) indicators released on 27 April 
2023. Data mainly refer to 2016-2021 or 2017-2022. 

28 

 
 
 
 
 
 
institutions).  For  SDG  16,  in  order  to  catch  up 
with  the  rest  of  the  EU,  Hungary  could  make 
considerable  progress  on,  in  particular,  general 
government  total  expenditure  on 
law  courts, 
perceived independence of the judicial system, and 
the Corruption Perceptions Index. The RRP includes 
reforms  to  improve  public  finances,  measures  in 
areas  related  to  the  rule  of  law  and  the  anti-
corruption  framework  as  well  as  reforms  to 
strengthen judicial independence. 

As the SDGs form an overarching framework, any 
links  to  relevant  SDGs  are  either  explained  or 
depicted with icons in the other Annexes. 

In  the  field  of  fairness,  Hungary  performs 
(poverty  and 
well  on  SDGs  1  and  8 
employment),  while  it  is  moving  away  from 
SDG  10  (reduced  inequalities)  and  needs  to 
catch  up  with  the  EU  average  in  other  SDGs 
(SDGs  3,  4,  5).  Hungary  recorded  significant 
progress  in  the  indicators  linked  to  people  at  risk 
of poverty or social exclusion (SDG 1; from 28.6% 
of the population in 2016 to 19.4% in 2021) and 
the  severe  material  and  social  deprivation  rate 
(SDG 1; from 20.6% of the population in 2016 to 
10.2% in 2021). It also performs well on people at 
risk of income poverty  after social transfers (SDG 
1; 12.6% of the population in 2021 against the EU 
average of 16.8%). Regarding SDG 3 (Good health 
and  well-being),  Hungary  needs  to  catch  up, 
primarily  on  decreasing  the  obesity  rate  and 
standardised  avoidable  mortality.  In  education, 
Hungary needs to catch up with the EU on tertiary 
educational  attainment  (SDG  4;  31.9%  of  the 
population aged 25 to 34 in 2022 against the EU 
average  of  422%).  The  gender  pay  gap 
in 
unadjusted form (SDG 5; 17.2% of average gross 
hourly  earnings  for  men  in  2020  against  the  EU 
average of 13%) is still above the EU average. The 
RRP supports social development in disadvantaged 
settlements  and  aims  at  improving  higher  and 
vocational  education  and  at  modernising  the 
health sector. 

Hungary  is  improving  on  all  SDGs  related  to 
productivity (SDGs 4, 8, 9). Its investment share 
of  GDP  (SDG  8;  27.4%  in  2021)  continues  to  be 
above  the  EU  average  (23.2%)  even  though  the 
country’s gross domestic expenditure on R&D (SDG 
9;  1.65%  of  GDP  in  2021)  still  needs to  catch  up 
with the EU average (2.26% in 2021). Applications 
to  the  European  Patent  Office  (SDG  9)  is  another 
indicator  in  which  Hungary  needs  to  catch  up  to 
the  EU  average.  The  country  recorded  exceptional 
development,  particularly 
the  share  of 
households  with  a  high-speed  internet  connection 
(SDG 9; 78.6% of households in 2021 compared to 
24%  of  households  in  2016)  surpassing  the  EU 
average  (70.2%  of  households  in  2021).  The  RRP 
includes measures to support the development of 
research  and  development  cooperation  and  to 
in  education,  public 
accelerate  digitalisation 
administration as well as of the health, transport, 
and energy sectors. 

in 

Hungary  is  improving  on  both  SDGs  related 
to  macroeconomic  stability  (SDGs  8  and  17) 
but  needs  to  catch  up  with  the  EU  average 
justice  and  strong 
for  SDG  16  (Peace, 

29 

 
 
ANNEX 2: PROGRESS IN THE IMPLEMENTATION OF COUNTRY-SPECIFIC 
RECOMMENDATIONS 

Graph A2.1: Hungary’s progress on the 2019-2022 
CSRs (2023 European Semester) 

Source: European Commission 

The Commission has assessed the 2019-2022 
country-specific  recommendations  (CSRs) (26) 
addressed  to  Hungary  as  part  of  the 
European  Semester.  These  recommendations 
concern  a  wide  range  of  policy  areas  that  are 
related to  14  of  the  17  Sustainable Development 
Goals  (see  Annexes  1  and  3). The  assessment 
considers  the  policy  action  taken  by  Hungary  to 
date (27) and the commitments in its recovery and 
resilience  plan  (RRP) (28).  At  this  stage  of  RRP 
implementation,  20%  of  the  CSRs  focusing  on 
structural  issues  from  2019-2022  have  recorded 
at  least  ‘some  progress’,  while  68%  recorded 
‘limited  progress’  (see  Graph  A2.1).  As  the  RRP  is 
implemented  further,  considerable  progress  in 
addressing structural CSRs is expected in the years 
to come. 

(26)  2022 CSRs: EUR-Lex - 32022H0901(17) - EN - EUR-Lex 

(europa.eu) 

      2021 CSRs: EUR-Lex - 32021H0729(17) - EN - EUR-Lex 

(europa.eu) 
2020 CSRs: EUR-Lex - 32020H0826(17) - EN - EUR-Lex 
(europa.eu) 
2019 CSRs: EUR-Lex - 32019H0905(17) - EN - EUR-Lex 
(europa.eu) 

(27)  Including policy action reported in the national reform 

programme and in Recovery and Resilience Facility (RRF) 
reporting (twice a year reporting on progress in implementing 
milestones and targets and resulting from the payment 
requests assessment). 

(28)  Member States were asked to effectively address all or a 

significant subset of the relevant country-specific 
recommendations issued by the Council in 2019 and 2020 in 
their RRPs. The CSR assessment presented here considers the 
degree of implementation of the measures included in the 
RRP and of those carried out outside of the RRP at the time 
of assessment. Measures laid down in the Annex of the 
adopted Council Implementing Decision on approving the 
assessment of the RRP, whihch are not yet adopted or 
implemented but considered credibly announced, in line with 
the CSR assessment methodology, warrant ‘limited progress’. 
Once implemented, these measures can lead to 
‘some/substantial progress or full implementation’, 
depending on their relevance. 

30 

No progress12%Limited progress68%Some progress13%Substantial progress7% 
 
                                                 
   
 
 
 
Table A2.1: Summary table on 2019-2022 CSRs 

(Continued on the next page) 

31 

HungaryAssessment in May 2023*RRP coverage of CSRs until 2026**Relevant SDGs2019 CSR 1Not relevant anymoreEnsure compliance with the Council Recommendation of 14 June 2019 with a view to correcting the significant deviation from the adjustment path towards the medium-term budgetary objective.Not relevant anymoreNot applicableSDG 8, 162019 CSR 2Limited progressContinue the labour market integration of the most vulnerable groups, in particular through upskilling, andLimited progressRelevant RRP measures planned as of 2023, 2024, and 2026.SDG 4, 8, 10improve the adequacy of social assistance and unemployment benefits.No progressSDG 1, 2, 10Improve education outcomes and increase the participation of disadvantaged groups, in particular Roma in quality mainstream education.Limited ProgressRelevant RRP measures planned as of 2022, 2023, 2024 and 2025.SDG 4, 8, 10Improve health outcomes by supporting preventive health measures and strengthening primary healthcare.Limited progressRelevant RRP measures planned as of 2021, 2023, 2024 and 2026.SDG 3, 162019 CSR 3Limited progressFocus investment-related economic policy on research and innovation,Limited progressRelevant RRP measures planned as of 2023 and 2026.SDG 9, 10, 11 low-carbon energy, Some progressRelevant RRP measures planned as of 2021,  2022, 2023, 2024 and 2025.SDG 7, 9, 10, 11, 13transport infrastructure, and Some progressRelevant RRP measures planned as of 2023, 2024 and 2026.SDG 10, 11waste management and Limited ProgressRelevant RRP measures planned as of 2023 and 2026.SDG 6, 10, 11, 12, 15energy and resource efficiency, taking into account regional disparities.Limited progressRelevant RRP measures planned as of 2023, 2024 and 2026.SDG 6, 7, 10, 11, 12, 15Improve competition in public procurement.Limited progressRelevant RRP measures planned as of 2022 and 2023.SDG 92019 CSR 4Limited ProgressReinforce the anti-corruption framework, including by improving prosecutorial efforts and access to public information, and Limited ProgressRelevant RRP measures planned as of 2022 and 2023.SDG 16strengthen judicial independence.Some ProgressRelevant RRP measures planned as of 2023.SDG 16Improve the quality and transparency of the decision-making process through effective social dialogue and engagement with other stakeholders and through regular, appropriate impact assessments. Limited ProgressRelevant RRP measures planned as of 2022.SDG 8, 16Continue simplifying the tax system, while strengthening it against the risk of aggressive tax planning. Limited progressRelevant RRP measures planned as of 2023, 2024 and 2025.SDG 8, 10, 12, 16Improve competition and regulatory predictability in the services sector.No progressSDG 9, 162020 CSR 1Limited progressTake all necessary measures, in line with the general escape clause of the Stability and Growth Pact, to effectively address the COVID-19 pandemic, sustain the economy and support the ensuing recovery. When economic conditions allow, pursue fiscal policies aimed at achieving prudent medium-term fiscal positions and ensuring debt sustainability, while enhancing investment. Not relevant anymoreNot applicableSDG 8, 16Addressshortagesofhealthworkersandensureanadequatesupplyofcriticalmedicalproductsandinfrastructure to increase the resilience of the health system.Limited ProgressRelevant RRP measures planned as of 2021, 2023, 2024 and 2026.SDG 3 Improve access to quality preventive and primary care services.Limited progressRelevant RRP measures planned as of 2021, 2023, 2024 and 2026.SDG 32020 CSR 2Limited progressProtect employment through enhanced short-time working arrangements and effective active labour-market policies and extend the duration of unemployment benefits.Limited progressRelevant RRP measures planned as of 2023, 2024, and 2026.SDG 1, 2, 8, 10Improve the adequacy of social assistance and ensure access to essential services andLimited ProgressRelevant RRP measures planned as of 2023, 2024, and 2026.SDG 1, 2, 10quality education for all. Limited ProgressRelevant RRP measures planned as of 2022, 2023, 2024 and 2025.SDG 42020 CSR 3Some progressEnsure liquidity support to SMEs.Substantial progressSDG 8, 9Front-load mature public investment projects andSome progressSDG 8, 16promote private investment to foster the economic recovery. Substantial progressSDG 8, 9Focusinvestmentonthegreenanddigitaltransition,inparticularcleanandefficientproductionanduseof energy, Limited ProgressRelevant RRP measures planned as of 2021,  2022, 2023, 2024 and 2025.SDG 7, 9, 13sustainable transport, Some progressRelevant RRP measures planned as of 2023, 2024 and 2026.SDG 11water and waste management, Limited ProgressRelevant RRP measures planned as of 2023, 2024 and 2026.SDG 6, 12, 15research and innovation, andLimited progressRelevant RRP measures planned as of 2023 and 2026.SDG 9digital infrastructure for schools. Some ProgressRelevant RRP measures planned as of 2022 and 2024.SDG 4, 9, 162020 CSR 4Limited progressEnsurethatanyemergencymeasuresbestrictlyproportionate,limitedintimeandinlinewithEuropeanandinternationalstandardsanddonotinterferewithbusinessactivitiesandthestabilityoftheregulatory environment. No ProgressSDG 16Ensure effective involvement of social partners and stakeholders in the policy-making process.No progressRelevant RRP measures planned as of 2022 and 2024.SDG 8, 16Improve competition in public procurement.Limited progressRelevant RRP measures planned as of 2022 and 2023.SDG 92020 CSR 5Limited progressStrengthen the tax system against the risk of aggressive tax planning.Limited ProgressRelevant RRP measures planned as of 2023, 2025 and 2026.SDG 8, 162021 CSR 1Some progressIn2022,maintainasupportivefiscalstance,includingtheimpulseprovidedbytheRecoveryandResilience Facility, and preserve nationally financed investment.Substantial ProgressNot applicableSDG 8, 16Wheneconomicconditionsallow,pursueafiscalpolicyaimedatachievingprudentmedium-termfiscalpositions and ensuring fiscal sustainability in the medium term.Limited ProgressNot applicableSDG 8, 16At the same time, enhance investment to boost growth potential.(cid:13)Payparticularattentiontothecompositionofpublicfinances,onboththerevenueandexpendituresidesofthenationalbudget,andtothequalityofbudgetarymeasuresinordertoensureasustainableandinclusiverecovery.Prioritisesustainableandgrowth-enhancinginvestment,inparticularinvestmentsupporting the green and digital transition.Limited ProgressNot applicableSDG 8, 16Giveprioritytofiscalstructuralreformsthatwillhelpprovidefinancingforpublicpolicyprioritiesandcontributetothelong-termsustainabilityofpublicfinances,including,whererelevant,bystrengtheningthe coverage, adequacy and sustainability of health and social protection systems for all.Limited ProgressNot applicableSDG 8, 16 
 
 
 
  
 
Table (continued) 

Note: 
* See footnote (26)  
** RRP measures included in this table contribute to the implementation of CSRs. Nevertheless, additional measures outside the 
RRP are necessary to fully implement CSRs and address their underlying challenges. Measures indicated as 'being implemented' 
are only those included in the RRF payment requests submitted and positively assessed by the European Commission.  
Source: European Commission. 

32 

2022 CSR 1Some ProgressIn2023,ensurethatthegrowthofnationallyfinancedprimarycurrentexpenditureisinlinewithanoverallneutralpolicystance,takingintoaccountcontinuedtemporaryandtargetedsupporttohouseholdsandfirmsmostvulnerabletoenergypricehikesandtopeoplefleeingUkraine.Standreadyto adjust current spending to the evolving situation. Substantial ProgressNot applicableSDG 8, 16Expandpublicinvestmentforthegreenanddigitaltransitions,andforenergysecuritytakingintoaccounttheREPowerEUinitiative,includingbymakinguseoftheRecoveryandResilienceFacilityandother Union funds.Limited ProgressNot applicableSDG 8, 16Fortheperiodbeyond2023,pursueafiscalpolicyaimedatachievingprudentmedium-termfiscalpositions. Limited ProgressNot applicableSDG 8, 16Improvethelong-termsustainabilityofthepensionsystem,whilepreservingadequacyinparticularthrough addressing income inequalities.Limited progressRelevant RRP measures planned as of 2023.SDG 82022 CSR 2SwiftlyfinalisethenegotiationswiththeCommissiononthe2021–2027cohesionpolicyprogrammingdocuments with a view to starting their implementation.2022 CSR 3Limited progressContinuethelabour-marketintegrationofthemost-vulnerablegroups,inparticularthroughupskilling,and extend the duration of unemployment benefits.Limited progressRelevant RRP measures planned as of 2023, 2024, and 2026.SDG 1, 2, 4, 8, 10Improvetheadequacyofsocialassistanceandensureaccesstoessentialservicesandadequatehousing for all. Limited progressRelevant RRP measures planned as of 2023, 2024, and 2026.SDG 1, 2, 10Improveeducationoutcomesandincreasetheparticipationofdisadvantagedgroups,inparticularRoma, in quality mainstream education. Limited progressRelevant RRP measures planned as of 2022, 2023, 2024 and 2025.SDG 4, 8, 10Improve access to quality preventive and primary care services.Limited progressRelevant RRP measures planned as of 2021, 2023, 2024 and 2026.SDG 32022 CSR 4Limited progressReinforcetheanti-corruptionframework,includingbyimprovingprosecutorialeffortsandaccesstopublic information, andLimited progressRelevant RRP measures planned as of 2022 and 2023.SDG 16strengthen judicial independence.Some progressRelevant RRP measures planned as of 2023.SDG 16Improvethequalityandtransparencyofthedecision-makingprocessthrougheffectivesocialdialogue,engagement with other stakeholders and regular impact assessments. Limited progressRelevant RRP measures planned as of 2022.SDG 16Continue simplifying the tax system. Limited progressRelevant RRP measures planned as of 2023, 2024 and 2025.SDG 8, 10, 12Improveregulatorypredictabilityandcompetitionintheservicessector,inparticularinretailandutilities, and apply competition scrutiny systematically in business transactions. No progressSDG 9Improve competition in public procurement.Limited progressSDG 92022 CSR 5Limited progressPromotereformandinvestmentonsustainablewaterandwastemanagementandthecircularityoftheeconomy, Limited progressRelevant RRP measures planned as of 2023, 2024 and 2026.SDG 6, 12, 15the digitalisation of businesses, Limited progressSDG 9green and digital skills, and Limited progressRelevant RRP measures planned as of 2022, 2023 and 2026.SDG 4research and innovation.Limited progressRelevant RRP measures planned as of 2023 and 2026.SDG 92022 CSR 6Limited progressReduce overall reliance on fossil fuels No progressRelevant RRP measures planned as of 2022 and 2026.SDG 7, 9, 13by accelerating the deployment of renewables, in particular by streamlining the permitting procedures Limited progressRelevant RRP measures planned as of 2023 and 2024.SDG 7, 8, 9, 13and the upgrading of the electricity infrastructure.Limited progressRelevant RRP measures planned as of 2022, 2023 and 2025.SDG 7, 9, 13Diversifyimportsoffossilfuelsby,interalia,strengtheninginterconnectionwiththeparticipationofother countries.No progressSDG 7, 9, 13Reducethedependencyonfossilfuelsinbuildingsandtransportbysteppingupeffortsonenergy-efficiency measures for all, especially in residential houses Limited progressRelevant RRP measures planned as of 2023, 2024 and 2026.SDG 7and on sustainable transport, in particular through electrification.Some progressRelevant RRP measures planned as of 2023, 2024 and 2026.SDG 11Progress on the cohesion policy programming documents is monitored under the EU cohesion policy. 
 
  
 
ANNEX 3: RECOVERY AND RESILIENCE PLAN - OVERVIEW 

The  Recovery  and  Resilience  Facility  (RRF)  is 
the centrepiece of the EU’s efforts to help it 
recover  from  the  COVID-19  pandemic,  speed 
up  the  twin  transition  and  strengthen 
resilience  against  future  shocks.  The  RRF 
also  contributes  to  implementation  of  the 
SDGs  and  helps  to  address  the  Country 
Specific  Recommendations  (see  Annex 4). 
its  current  recovery  and 
Hungary  submitted 
resilience  plan  (RRP)  on  12  May  2021.  The 
Commission’s 
on  30 
November  2022  and  Council’s  approval  on  15 
December  2022  paved  the  way  for  disbursing 
EUR 5.811 billion in grants under the RRF over the 
2021-2026 period. 

assessment 

positive 

Hungary’s  progress  in  implementing  its  plan 
is  published  in  the  Recovery  and  Resilience 
Scoreboard (29).  The  Scoreboard  also  gives  an 
overview  of  the  progress  made  in  implementing 
the RRF as a whole, in a transparent manner. The 
graphs below show the current state of play of the 
milestones and targets to be  reached by Hungary 
and  subsequently  assessed  as  satisfactorily 
fulfilled by the Commission. 

Table A3.1: Key elements of the Hungary’s RRP 

Source: European Commission  

Since  the  entry 
into  force  of  the  RRF 
Regulation  and  the  assessment  of  the 
national  recovery  and  resilience  plans, 
geopolitical  and  economic  developments 
have caused major disruptions across the EU. 
In  order  to  effectively  address  these  disruptions, 
the  (adjusted)  RRF  Regulation  allows  Member 
States to amend their recovery and resilience plan 
for  a  variety  of  reasons.  In  line  with  article  11(2) 
of the RRF, the maximum financial contribution for 
all Member States were updated on 30 June 2022. 
Given  that  the  Council  approved  Hungary’s  RRP 
after  this  update,  the  updated  amount  of  EUR 
5.811  billion  in  grants  was  incorporated  into  RRP. 
Hungary  has  not  submitted  its  request  for  RRP 
amendment  by  the  time  of  publication  of  this 
report. 

No  funds  have  so  far  been  disbursed  to 
Hungary  under the  RRF  as  it  has  yet to  submit 
its first payment request.  

(29)  https://ec.europa.eu/economy_finance/recovery-and-

resilience-scoreboard/country_overview.html 

33 

Current RRPScope Initial planCID adoption date15 December 2022Total allocation EUR 5.8 billion in grants (3.77% of 2021 GDP)Investments and reforms 54 reforms and 31 investmentsTotal number of milestones and targets270 
 
 
  
 
 
                                                 
 
Graph A3.1: Share of RRF funds contribution to each policy pillar 

Note: Each measure contributes towards two policy areas of the six pillars, therefore the total contribution to all pillars displayed 
on this chart amounts to 200% of the estimated cost of the RRP. The bottom part represents the amount of the primary pillar, the 
top part the amount of the secondary pillar. 
Source: RRF Scoreboard https://ec.europa.eu/economy_finance/recovery-and-resilience-scoreboard/country_overview.html 

Graph A3.2: Fulfilment status of milestones and 
targets 

Graph A3.3: Total grants disbursed under the RRF 

This graph displays the share of satisfactorily fulfilled 
milestones and targets. A milestone or target is satisfactorily 
fulfilled once a Member State has provided evidence to the 
Commission that it has reached the milestone or target and 
the Commission has assessed it positively in an implementing 
decision. 
Source: RRF Scoreboard 
https://ec.europa.eu/economy_finance/recovery-and-resilience-
scoreboard/country_overview.html 

Note: This graph displays the amount of grants disbursed so 
far under the RRF. Grants are non-repayable financial 
contributions. The total amount of grants given to each 
Member State is determined by an allocation key and the 
total estimated cost of the respective RRP. 
Source: RRF Scoreboard 
https://ec.europa.eu/economy_finance/recovery-and-resilience-
scoreboard/country_overview.html 

34 

Satisfactorily fulfilledNot fulfilled€ 0billion0%10%20%30%40%50%60%70%Green transitionDigitaltransformationSmart,sustainable andinclusive growthSocial andterritorialcohesionHealth, andeconomic, socialand institutionalresiliencePolicies for thenext generation 
 
   
 
   
 
  
 
 
   
ANNEX 4: OTHER EU INSTRUMENTS FOR RECOVERY AND GROWTH 

The  EU  budget  of  over  EUR  1.2  trillion  for 
2021-2027  is  geared  towards  implementing 
the  EU’s  main  priorities.  Cohesion  policy 
investment amounts to EUR 392 billion across the 
EU and represents almost a third of the overall EU 
budget, including around EUR 48 billion invested in 
line with REPowerEU objectives. 

Graph A4.1: Cohesion policy funds 2021-2027 in 
Hungary: budget by fund 

(1) billion EUR in current prices, % of total; (total amount 
including EU and national co-financing) 
Source: European Commission, Cohesion Open Data 

In  2021-2027,  in  Hungary,  cohesion  policy 
funds (30)  will  invest  EUR  11.4  billion  in  the 
green  transition  and  EUR  1  billion  in  the 
digital  transformation  as  part  of  the 
country’s total allocation of EUR 26.1 billion. 
In  particular,  the  European  Regional  Development 
Fund  (ERDF) will  develop  research  and  innovation 
capacities,  enhance  the  competitiveness  of  SMEs 
and  support  the  digitalisation  of  28 000  SMEs.  It 
will  contribute  to  increased  renewable  energy 
production  and  the  reduction  of  primary  energy 
consumption. Particular attention should be paid to 
reducing  territorial  disparities  between  the  four 
least  developed  regions  and  the  rest  of  the 
country.  For  this  purpose,  65%  of  ERDF  and 
European  Social  Fund  Plus  (ESF+)  resources  for 
less  developed  regions  will  be  allocated  to  these 
four  regions  in  2021-2027.  The  Just  Transition 
Fund  will  address  the  socio-economic  effects  of 
three  counties,  by 
in 
the  green 
supporting  reskilling  and  upskilling,  environmental 
sustainability  in  enterprises  and  domestic  green 
energy  production.  The  ESF+  allocates  EUR  2.38 
billion  to  education  and  training,  dedicating  EUR 
1.9  billion  to  improving  the  quality  of  school 

transition 

(30)  European Regional Development Fund (ERDF), Cohesion Fund 
(CF), European Social Fund+ (ESF+), Just Transition Fund 
(JTF), excluding Interreg programmes. The total amount 
includes national and EU contributions. Data source: 
Cohesion Open Data.  

education, including through measures to increase 
the  attractiveness  of  the  teaching  profession, 
tackle 
support 
early 
disadvantaged pupils. 

leaving  and 

school 

Of  the  investments  mentioned  above,  EUR 
2.7  billion  will  be  invested  in  line  with 
REPowerEU objectives. This is on top of the EUR 
1.9  billion  dedicated  to  REPowerEU  under  the 
2014-2020  budget.  EUR  1.4  billion  (2021-2027) 
and  EUR  1.2  billion  (2014-2020)  is  for  improving 
energy efficiency; EUR 0.7 billion (2021-2027) and 
EUR  0.7  billion  (2014-2020)  is  for  renewable 
energy  and  low-carbon  R&I;  and  EUR  0.7  billion 
(2021-2027) is for smart energy systems. 

Graph A4.2: Synergies between cohesion policy 
funds and the RRF with its six pillars in Hungary 

(1) million EUR in current prices (total amount, including EU 
and national co-financing)   
Source: European Commission  

In  2014-2020,  cohesion  policy  funds  made 
EUR 22.5 billion available to Hungary (31) with 
an  absorption  of  88% (32). 
Including  national 
financing,  the  total  investment  amounts  to  EUR 
26.5 billion - around 3% of GDP for 2014-2020.  

Hungary  continues  to  benefit  from  cohesion 
policy flexibility to support recovery, step up 
convergence  and  provide  vital  support  to 
regions  following  the  COVID-19  pandemic. 
The  Recovery  Assistance  for  Cohesion  and  the 
Territories  of  Europe  instrument  (REACT-EU) (33) 
under NextGenerationEU provides EUR 986 million 
the  2014-2020  cohesion  policy 
on 
allocation  for  Hungary.  It  has  helped  safeguard 

top  of 

(31)  Cohesion policy funds include the ERDF, CF, ESF and the 

Youth Employment Initiative. According to the ‘N+3 rule’, the 
funds committed for 2014-2020 must be spent by 2023. 
REACT-EU is included in all figures. The total amount includes 
EU and national co-financing. Data source: Cohesion Open 
Data. 

(32)  2014-2020 Cohesion policy EU payments by MS is updated 

daily on Cohesion Open Data.   

(33)  REACT-EU allocation on Cohesion Open Data. 

35 

3.0 , 12%16.4 63%6.3 24%0.3 1%CFERDFESF+JTF10,0249296,2405,87791285411,4141,0014,9304,2671543,394020004000600080001000012000Green transitionDigitaltransformationSmart, sustainableand inclusivegrowthSocial and territorialcohesionHealth, economic,social andinstitutionalresiliencePolicies for the nextgenerationEU CP 2014-2020 (million EUR)EU CP 2021-2027 (million EUR) 
 
  
                                                 
   
                                                 
 
 
more than 60 000 jobs through wage subsidies in 
the  sectors  impacted  by  the  pandemic,  boosted 
economic  recovery  through  loans  to  over  8 000 
SMEs,  supported  energy  efficiency  measures  and 
secured  the  purchase  of  EU-approved  vaccines. 
With  SAFE  (Supporting  Affordable  Energy),  the 
2014-2020  cohesion  policy  funds  may  also  be 
mobilised  by  Hungary  to  support  vulnerable 
households, 
jobs  and  companies  particularly 
In  addition, 
affected  by  high  energy  prices. 
Cohesion’s  Action  for  Refugees  in  Europe  (CARE) 
supports  Hungary  and  its  regions  in  providing 
emergency  assistance  to  people  fleeing  from 
Russia’s invasion of Ukraine with a total budget of 
EUR 13.7 million. 

Graph A4.3: Cohesion policy funds contribution to 
the SDGs in 2014-2020 and 2021-2027 in 
Hungary 

Deal while ensuring long-term food security. They 
promote  social,  environmental  and  economic 
sustainability  and  innovation  in  agriculture  and 
rural  areas,  in  coordination  with  other  EU  funds. 
The European Maritime, Fisheries and Aquaculture 
Fund  makes  EUR  37.7  million  available  in  2021-
2027. 

Hungary  also  benefits  from  other  EU 
programmes,  notably  the  Connecting  Europe 
Facility,  which  under  CEF  2  (2021-2027)  has  so 
far  allocated  EU  funding  of  EUR  39.25  million  to 
transport 
11  specific  projects  on  strategic 
networks.  Similarly,  Horizon  Europe  has  so  far 
allocated  nearly  EUR  57  million  to  Hungarian  R&I 
actors,  while  in  the  previous  programming  period, 
Horizon  2020  earmarked  EUR  371  million.  The 
Public  Sector  Loan  Facility  established  under  the 
Just Transition Mechanism makes EUR 19.8 million 
of grant support from the Commission available in 
2021-2027,  which  will  be  combined  with  loans 
from  the  EIB  to  support  investments  by  public 
sector entities in just transition regions. 

under 

support 

received 

the 
Hungary 
European  instrument  for  temporary  support 
to  mitigate  unemployment  risks 
in  an 
emergency  (SURE)  to  finance  similar  measures 
to  short-time  work  schemes  and,  as  an  ancillary 
health-related  measure  to  mitigate  the  impact  of 
COVID-19. 
financial 
Council 
assistance to Hungary of EUR 651 million in loans, 
which supported around 8% of workers and 3% of 
firms in 2020, and around 5% of workers and 2% 
of firms in 2021. 

granted 

The 

Instrument 
designing 

(TSI) 
The  Technical  Support 
and 
supports  Hungary 
in 
implementing  growth-enhancing 
reforms.  
Hungary  has  received  significant  support  since 
2018.  Examples  include:  fully  implementing  the 
just  transition  and  improving  the  quality  of  adult 
learning 
learning 
accounts (35). 

individual 

piloting 

by 

(1) 5 largest contributions to SDGs in million (EUR) current 
prices 
Source: European Commission  

In both 2014-2020 and 2021-2027, cohesion 
policy  funds  have  contributed  substantially 
to 
the  Sustainable  Development  Goals 
(SDGs).  These  funds  support  11  of  the  17  SDGs, 
innovation  and 
‘industry, 
notably  SDG  9 
infrastructure’  and  SDG  8 
‘decent  work  and 
economic growth’ (34). 

Other  EU  funds  make  significant  resources 
available for Hungary. The common agricultural 
policy  (CAP)  made  EUR  16.2  billion  available  in 
2014-2022, and will continue to support Hungary 
with  EUR  8.4  billion  in  2023-2027.  The  two  CAP 
Funds  (European  Agricultural  Guarantee  Fund  and 
European 
Rural 
Development),  contribute  to  the  European  Green 

Agricultural 

Fund 

for 

(34)  Other EU funds contribute to the implementation of the 
SDGs. In 2014-2022, this includes both the European 
Agricultural Fund for Rural Development (EARDF) and the 
European Maritime and Fisheries Fund (EMFF). 

(35)  Country factsheets on reform support are available here. 

36 

7,1077,0532,3912,3491,4958,0993,9733,8322,8051,90901,0002,0003,0004,0005,0006,0007,0008,0009,000SDG 9 Industry,innovation,infrastructureSDG 8 Decent workand economicgrowthSDG 4 QualityeducationSDG 7 Affordableand clean energySDG 1 No povertyEU CP 2014-2020 (millions EUR)EU CP 2021-2027 (millions EUR) 
   
                                                 
                                                 
indicators. 

in  all  four 

It  has  medium 

Compared to the EU average, Hungary shows 
an overall lower level of capacities across all 
RDB 
resilience 
capacities 
resilience  dimensions. 
Hungary  shows  stronger  capacities  than  the  EU 
average in the areas ‘digital for public space’, ‘raw 
material and energy supply’ and ‘value chains and 
trade’.  There  is  room  for  improving  capacities 
compared to the EU regarding the digitalisation of 
the personal space and ‘security and demography’, 
among others.  

Table A5.1: Resilience indices summarising the 
situation across RDB dimensions and areas 

Data are for 2021, and EU-27 refers to the value for the EU 
as a whole. Data underlying EU-27 vulnerabilities in the area 
‘value chains and trade’ are not available as they comprise 
partner concentration measures that are not comparable with 
Member States’ level values. 
Source: JRC Resilience Dashboards - European Commission 

ANNEX 5: RESILIENCE 

This  Annex  illustrates  Hungary’s  relative 
resilience capacities and vulnerabilities using 
the  Commission’s 
resilience  dashboards 
(RDB) (36).  Comprising  a  set  of  124  quantitative 
indicators,  the  RDB  provide  broad  indications  of 
Member  States’  ability  to  make  progress  across 
four interrelated dimensions: social and economic, 
green, digital, and geopolitical. The indicators show 
vulnerabilities (37)  and  capacities (38)  that  can 
become  increasingly  relevant,  both  to  navigate 
ongoing  transitions  and  to  cope  with  potential 
future shocks. To this end, the RDB help to identify 
areas  that  need  further  efforts  to  build  stronger 
and  more  resilient  economies  and  societies.  They 
in  Table  A5.1  as  synthetic 
are  summarised 
resilience 
illustrate  the  overall 
relative  situation  for  each  of  the  four  dimensions 
and  their  underlying  areas  for  Hungary  and  the 
EU-27 (39). 

indices,  which 

in 

vulnerabilities 

According  to  the  set  of  resilience  indicators 
under the RDB, Hungary generally displays a 
similar  level  of  vulnerabilities  compared  to 
the  EU  average.  Hungary  shows  medium-low 
the  social  and  economic 
vulnerabilities 
dimension  of  the  RDB,  medium  vulnerabilities  in 
the  green  and  geopolitical  dimensions,  and 
digital 
medium-high 
dimension. It has higher vulnerabilities than the EU 
average  in  the  areas  ‘inequalities  and  social 
impact  of  the  transitions’,  the  digitalisation  of 
personal  space  and  industry,  ‘cybersecurity’  and 
‘financial globalisation’. Hungary has relatively low 
vulnerabilities  in  'climate  change  mitigation  and 
adaptation’, 'sustainable use of resources’ (mainly 
due  to  below-average  GHG  emissions,  carbon 
footprint  and  waste  generation),  as  well  as 
‘economic 
and 
financial 
sustainability’, among others. 

stability 

and 

the 

in 

(36)  For details see https://ec.europa.eu/info/strategy/strategic-
planning/strategic-foresight/2020-strategic-foresight-
report/resilience-dashboards_en; see also 2020 Strategic 
Foresight Report (COM(2020) 493). 

(37)  Vulnerabilities describe features that can exacerbate the 

negative impact of crises and transitions, or obstacles that 
may hinder the achievement of long-term strategic goals. 

(38)  Capacities refer to enablers or abilities to cope with crises 
and structural changes and to manage the transitions.  

(39)  This Annex is linked to Annex 1 on SDGs, Annex 6 on the 
green deal, Annex 8 on the fair transition to climate 
neutrality, Annex 9 on resource productivity, efficiency and 
circularity, Annex 10 on the digital transition and Annex 14 
on the European pillar of social rights. 

37 

HUEU-27HUEU-27Vulnerabilities IndexHighMedium-highMediumMedium-lowLowNot availableCapacities IndexHighMedium-highMediumMedium-lowLowNot availableDimension/AreaVulnerabilitiesCapacitiesSocial and economicHealth, education and workInequalities and social impact of the transitionsGreenEconomic & financial stability and sustainabilitySustainable use of resourcesClimate change mitigation & adaptationDigitalEcosystems, biodiversity, sustainable agricultureDigital for industryDigital for personal spaceCybersecurityDigital for public spaceRaw material and energy supplyGeopoliticalValue chains and tradeFinancial globalisationSecurity and demography 
 
                                                 
 
  
 
 
 
ENVIRONMENTAL SUSTAINABILITY 
ANNEX 6: EUROPEAN GREEN DEAL 

several  aspects 
air 

Hungary’s  green  transition  requires  actions 
on 
energy 
efficiency, 
and  water 
management.  Implementation  of  the  European 
Green  Deal  is  underway  in  Hungary;  this  Annex 
provides a snapshot of the key areas involved (40). 

including 

quality, 

less 

Hungary  is  projected  to  reach  its  new  2030 
climate target for the effort sharing sectors, 
if  it  implements  the  additional  measures 
planned (41).  Data 
for  2021  on  Hungary’s 
greenhouse  gas  emissions  in  the  effort  sharing 
to  show 
sectors  are  expected 
the  country 
generated 
its  annual  emission 
than 
allocations (42).  Current  policies  in  Hungary  are 
projected to reduce these emissions by 7% relative 
to  2005  levels  in  2030,  sufficient  to  reach  the 
effort sharing target before it was adjusted in line 
with  the  EU’s  55%  objective.  The  additional 
measures 
the  emission 
reductions  to  22%,  exceeding  the  new  target  to 
reduce by 18.7% (43). In its recovery and resilience 
plan  (RRP),  Hungary  has  allocated  48.1 %  of  its 
Recovery  and  Resilience  Facility  grants  to  key 
to  attain  climate 
reforms  and 

tabled  would  bring 

investments 

(40)  The overview in this Annex is complemented by the 

information provided in Annex 7 on energy security and 
affordability, Annex 8 on the fair transition to climate 
neutrality and environmental sustainability, Annex 9 on 
resource productivity, efficiency and circularity, Annex 11 on 
innovation, and Annex 19 on taxation. 

(41)  Member States’ greenhouse gas emission targets for 2030 
(‘effort sharing targets’) were increased by Regulation (EU) 
2023/857 (the Effort Sharing Regulation) amending 
Regulation (EU) 2018/842, aligning the action in the 
concerned sectors with the objective to reach EU-level, 
economy-wide greenhouse gas emission reductions of at 
least 55% relative to 1990 levels. The Regulation sets 
national targets for sectors outside the current EU Emissions 
Trading System, notably: buildings (heating and cooling), road 
transport, agriculture, waste, and small industry. Emissions 
covered by the EU ETS and the Effort Sharing Regulation are 
complemented by net removals in the land use sector, 
regulated by Regulation (EU) 2018/841 (the Land Use, Land 
Use Change and Forestry (LULUCF) Regulation) amended by 
Regulation (EU) 2023/839. 

(42)  Hungary’s annual emission allocations for 2021 were some 
49.7 Mt CO2eq, and its approximated 2021 emissions were 
46.8 Mt (see European Commission, Accelerating the 
transition to climate neutrality for Europe’s security and 
prosperity: EU Climate Action Progress Report 2022, 
SWD(2022)343). 

(43)  See the information on the distance to the 2030 climate 

policy target in Table A6.1. Existing and additional measures 
as of 15 March 2021.  

38 

objectives (44). Hungary’s climate law of 2020 sets 
the  2030  objective  to  reduce  all  domestic 
greenhouse  gas  emissions  by  40%  relative  to 
1990  levels (45)  and  the  objective  to  achieve 
climate neutrality by 2050. This will require faster 
action on decarbonisation after 2030. 

Graph A6.1: Thematic – greenhouse gas emissions 
from the effort sharing sectors in Mt CO2eq, 
2005-2021 

Source: European Environmental Agency. 

Hungary  has  potential  to  boost  the  capacity 
of  its  land  use  sector  to  achieve  net  carbon 
removals.  Hungary’s  forests  achieve  a  major 
share  of  net  carbon  removals  through  land  use. 
Besides,  annually  cultivated  (arable)  land  is  a 
major  source  of  greenhouse  gas  emissions.  For 
2030, Hungary’s target for the land use, land use 
change  and  forestry  sector  (LULUCF)  implies  to 
remove 5 724 ktCO2e (see Table A6.1) (46). 

Hungary’s  energy  mix  is  still  heavily  reliant 
on  fossil  fuels,  which  in  2021  provided  72%  of 
total  energy  consumption.  In  2021,  natural  gas 
made  up  the  bulk  of  the  energy  mix,  accounting 
for  36%  of  the  total,  one  percentage  point  more 
than  in  2020  (see  Graph  A6.2).  In  2021,  44%  of 
Hungary’s  electricity  supply  was  provided  by 
nuclear  energy,  while  natural  gas  and  renewables 

(44)  For example, investments in residential solar power systems 
and in the strengthening of the electricity grid, combined with 
comprehensive reforms, support for the building renovations 
of buildings, and measures to make transport more 
sustainable, such as investments in railways, rolling out the 
deployment of electric buses and a reform of the tariff 
system.  

(45)  This target has been included in Hungary’s national energy 
and climate plan (NECP). An update of the plan, mandated 
by Regulation (EU) 2018/1999 (the Governance Regulation), 
is underway. 

(46)  This value is indicative and will be updated in 2025 (as 

mandated by Regulation (EU) 2023/839. 

0510152025303540455020052021Domestic transport (excl. aviation)Buildings (under ESR)AgricultureSmall industryWaste 
 
 
                                                 
   
                                                 
 
 
provided 27% and 20% of electricity  respectively. 
To prepare for the widespread electrification of the 
economy and the consequent projected increase in 
demand for electricity, the country intends to scale 
up  significantly  the  roll-out  of  solar  power 
capacity.  Gas  is  still  expected  to  provide  key 
balancing  capacity  to  integrate  renewable  energy 
in  the  grid  over  the  medium  term.  Nuclear 
generation capacity is also expected to increase by 
2030, when the new Paks operation unit is set to 
enter into operation. 

Graph A6.2: Thematic - Energy mix (top) and 
electricity mix (bottom), 2021 

improve  the  legal  framework  of  the  electricity 
market for electricity prosumers. Hungary´s target 
of 21% share of energy from renewable sources in 
gross  final  energy  consumption  by  2030  included 
in  the  NECP  was  considered  unambitious  in  the 
2020  assessment  by  the  Commission.  Hungary 
will need to substantially strengthen its renewable 
energy  target  in  the  updated  NECP  to  reflect  the 
more  ambitious  EU  climate  and  energy  targets  in 
the Fit for 55 Package and in the REPowerEU Plan.  

Hungary plans energy efficiency actions that 
implementation.  Hungary’s 
warrant  swift 
targets  for  primary  and  final  energy  consumption 
(PEC and FEC), as enshrined in its National Energy 
and  Climate  Plan,  were  considered  of  very  low 
ambitious  in  the  2020  Commission  Assessment. 
Based  on  the  energy  consumption  trajectory  for 
2018-2021, Hungary is expected to be on track to 
meet  its  2030  target  for  PEC  and  but  it  is  not 
expected  to  be  on  track  to  meet  its  2030  target 
for  FEC,  as  these  were  notified  in  its  NECP (47).  
Reducing  Hungary’s  exposure  to  fossil  fuels,  in 
particular  natural  gas,  and  improving  its  energy 
security  requires  significant  energy  efficiency 
improvements.  It  strengthens  energy  efficiency 
requirements 
renovations  and 
supports  the  use  of  residential  renewable  energy 
the 
production  and  measures 
heating  systems  of  residential  buildings.  It  also 
supports  energy  efficiency  measures  to  refurbish 
higher  education  institutions  with  the  aim  of 
saving  on  average  30%  of  their  primary  energy 
consumption.  In  November  2022,  the  government 
started  an  energy  efficiency  programme 
in 
industry. 

to  modernise 

for  building 

The energy mix is based on gross inland consumption, and 
excludes heat and electricity. The share of renewables 
includes biofuels and non-renewable waste.  
Source: Eurostat. 

Hungary´s  recovery  and  resilience  plan 
supports  the  deployment  of  renewable 
energy  including  by  a  broad  overhaul  of 
Hungary´s  electricity  regulatory  framework. 
The  recovery  and  resilience  plan  will  improve  the 
regulatory  environment  for  renewable  energy 
production  and  provide  financial  support  for  the 
installation  of  residential  solar  panel  systems.  It 
includes investments in the electricity network and 
storage facilities to enable the flexible and secure 
integration  of  renewable  energy  sources  in  the 
electricity  grid.  The  plan  also  includes  reforms  to 

Despite  the  recent  take-off  of  e-mobility, 
transport  emissions  are  increasing,  and  air 
quality  is  a  concern.  On  the  number  of  public 
charging  points  for  electric  cars  and  the  share  of 
zero-emission passenger cars in new registrations, 
Hungary  scores  below  the  EU  average  but  has  a 
leading  position  in  central  Europe,  and  these 
numbers are steadily growing. But Hungary is one 
of  the  most  traffic-congested  EU  countries (48). 
railroads  are  electrified. 
About  42%  of 

its 

(47)  After the conclusion of the negotiations for a recast EED, the 
ambition of both the EU and national targets as well as of 
the national measures for energy efficiency to meet these 
targets is expected to increase 

(48)  With more than 42 hours per year, the number of hours lost 
per driver per year in 2020 – mainly in urban areas – was 
above the EU average, and increasing.  

39 

5%36%31%15%13%Solid fossil fuels,peat and oil shaleGasOilNuclearRenewables9%27%20%44%Solid fossil fuels,peat and oil shaleGasRenewablesNuclear 
     
                                                 
Graph A6.3: Thematic – environmental investment 
needs and current investment, p.a. 2014-2020 

Persistent  breaches  of  air  quality  requirements, 
specifically concerning PM10 and NO2, have severe 
impacts on public health and the environment (49). 
This can partly be linked to traffic congestion and 
pollution  in  Budapest.  Exceedances  of  PM10  limits 
also prevail in rural areas, due to heating systems. 
With  the  energy  crisis,  a  switch  to  more  polluting 
heating  sources  may  increase  pressure  on  air 
quality;  better monitoring would  be  helpful  in this 
regard. 

tackling 

pollution, 

Hungary  would  benefit  from  investing  more 
in  environmental  protection,  protecting 
biodiversity, 
and 
promoting  the  circular  economy.  Between 
2014  and  2020,  its  environmental  investment 
needs (50)  were  estimated  to  be  at  least  EUR 3.6 
billion  while  investment  was  at  about  EUR 2.3 
billion, leaving a gap of at least EUR 1.3 billion per 
year  (see  Graph  A6.3) (51).  The  gap  is  highest  for 
biodiversity  and  ecosystems  protection,  at 
EUR 605.3  million  per  year.  The  EU  Natura  2000 
network  covers  21.4%  of  Hungary’s  territory (52), 
but it has not yet allocated sufficient resources or 
staff  to  work  on  related  tasks.  The  management 
and  restoration  of  grasslands,  wetlands  and 
forests are major challenges. 

(49)  Economic activities have a strong impact on air quality. The 
share of industry in Hungary’s GDP is above the EU average 
(22.5% of GDP against 18.7% in 2021 (source: Share of 
industry in GDP - Data Portal - United Nations Economic 
Commission for Europe). In 2018, the CJEU delivered a 
judgment confirming the non-compliance of several air 
quality zones in Hungary with the PM10 limit values required 
by the EU legislation. In 2020, the years of life lost caused to 
air pollution by PM2.5 was almost twice as high in Hungary 
than in the on average (1056.1 years per 100.000 
inhabitants, against 581.6 years). 

(50)  Environmental objectives include pollution prevention and 

control, water management and industries, circular economy 
and waste, biodiversity and ecosystems (European 
Commission, 2022, Environmental Implementation Review, 
country report Hungary). 

(51)  When also accounting for needs estimated at EU level only 

(e.g., water protection, higher circularity, biodiversity 
strategy). 

(52)  In 2021, Hungary had 22.2% terrestrial protected areas 

(Natura 2000 and nationally designated areas), against the 
EU average of 26.4% (European Environment Agency, 2023, 
Natura 2000 Barometer). 

40 

Source: European Commission 

Climate  change  has  caused  more  frequent 
and  intense  extreme  weather  events,  with 
challenges  including  on  water  management. 
The  average  temperature  has  risen  significantly 
since  the  1980s.  Droughts  have  become  longer 
and  more  intense.  Many  regions  suffer  from both 
water  abundance  and  scarcity  in  the  same  year. 
The  yearly  distribution  of  precipitation  has 
changed,  with  heavier  rainfall  but  fewer  rainy 
days.  Several  sectors  are  highly  vulnerable  to 
climate  change, 
including  some  agricultural 
activities,  forestry,  ecosystem  services,  water 
management, energy, health, and tourism (53). Only 
a  small  proportion  of  Hungary’s  rivers  and  lakes 
are 
in  good  ecological  status.  Anthropogenic 
changes to water regimes exert pressure on water 
bodies. Recently, the priority given to irrigation for 
agriculture has raised concerns; a shift  to nature-
based  solutions  and  more  resource  efficient  and 
resilient  practices  would  help  climate  adaptation. 
recovery  and 
Hungary’s 
resilience  plan  has 
measures 
on  water  management.  Water 
infrastructure  is  not  meeting  EU  requirements  for 
wastewater  collection,  reduction  of  leaks  and 
drinking water supply. 

Hungary  provides  fossil  fuel  and  other 
environmentally harmful subsidies that could 
be  considered  for  reform,  while  ensuring 
food  and  energy  security  and  mitigating 
social  effects.  Fossil  fuel  subsidies  in  Hungary 
amounted to EUR 540 million in 2020, putting low 

(53)  Source: European Environmental Agency, Climate-Adapt, 

country profile Hungary. 

3047155764932525929017891.0992690,0200,0400,0600,0800,01000,01200,0Pollutionprevention andcontrolWater (industries,excl. protection)Circular economy(incl. waste)Biodiversity andecosystemsR&I&D and otherEUR million (at current prices)Current investmentTotal need 
                                                 
      
                                                 
Table A6.1: Indicators tracking progress on the European Green Deal from a macroeconomic perspective 

Source:  

a 

at 

alternatives 

initial  assessment, 

carbon 
disadvantage. 
Environmentally  harmful  subsidies  have  been 
in  the 
identified,  via  an 
agriculture,  forestry  and  fishing,  electricity,  gas, 
steam  and  air  conditioning,  transportation  and 
storage  and  other  services  sectors.  Examples  of 
such  subsidies  include  the  excise  tax  refund  for 
diesel fuel used in agriculture, the reduced energy 
tax rate for light fuel oil used in mobile machinery, 
the excise tax exemption on the use of natural gas 
or  the  reimbursement  of  excise  duty  on  diesel 
used in freight and other categories of passenger 
transport (54).  A  mapping  of  all  environmentally 

(54)  Fossil fuel figures in EUR of 2021 from the 2022 State of 

the Energy Union report. Initial assessment of 
environmentally harmful subsidies done by the Commission 
in the 2022 toolbox for reforming environmentally harmful 
subsidies in Europe, using OECD definitions, and based on the 
following datasets: OECD Agriculture Policy Monitoring and 
Evaluations; OECD Policy Instruments for the Environment 
(PINE) Database; OECD Statistical Database for Fossil Fuels 
Support; IMF country-level energy subsidy estimates. Annex 4 

41 

harmful subsidies by Hungary would help prioritise 
candidates for reform. 

taxes  equalled 

Hungary  has  the  potential  to 
increase 
environmental taxation. In 2020, revenue from 
environment-related 
the  EU 
average,  at  2.2%  of  GDP.  Hungary’s  tax  revenues 
raised  on  energy  and  transport  are  below  the  EU 
average,  and  environmental  taxes  on  resources 
and pollution are above the EU average (see Annex 
19). There is room to increase environmental taxes 
to  further  internalise the cost  of  air  pollution  and 
to  limit  water  pollution (55),  for  example  on  solid 
fuels  like  biomass  in  the  residential  sector,  or  on 
waste such as beverage containers. 

of the toolbox contains detailed examples of subsidies on 
the candidates for reform. 

(55)  European Commission, 2021, Green taxation and other 

economic instruments – Internalising environmental costs to 
make the polluter pay, Ensuring that polluters pay. 

2030200520172018201920202021target/valueWEMWAMGreenhouse gas emission reductions in effort sharing sectors (1)Mt CO2eq; %; pp48,0-10%-10%-7%-9%--18,7%-11,73,3Net carbon removals from LULUCF (2)kt CO2eq-5.998-5.365-4.812-5.388-7.110-7.197-5724n/an/a200520172018201920202021Share of energy from renewable sources in gross final consumption of energy (3)%7%14%13%13%14%14%21%Energy efficiency: primary energy consumption (3)Mtoe26,324,524,524,623,924,9no target setEnergy efficiency: final energy consumption (3)Mtoe18,718,518,518,618,019,118,7201620172018201920202021201920202021Environmental taxes (% of GDP)% of GDP2,52,42,32,32,22,02,42,22,2Environmental taxes (% of total taxation)(4)% of taxation 6,56,46,26,26,05,95,95,65,5Government expenditure on environmental protection% of total exp.1,11,41,41,61,51,51,71,61,6Investment in environmental protection (5) % of GDP0,40,40,50,7--0,40,40,4Fossil fuel subsidies (6)EUR2021bn0,50,60,70,50,5-53,050,0-Climate protection gap (7) score 1-41,31,21,5Net greenhouse gas emissions1990 = 10066,069,069,069,067,067,076,069,072,0Greenhouse gas emission intensity of the economykg/EUR'100,600,600,570,530,55-0,310,300,26Energy intensity of the economykgoe/EUR'100,230,230,220,210,21-0,110,11-Final energy consumption (FEC)2015=100102,0106,3106,5106,9103,5110,1102,994,6-FEC in residential building sector2015=100103,1105,497,595,1100,2107,6101,3101,3106,8FEC in services building sector2015=10099,197,895,293,090,894,2100,194,4100,7Smog-precursor emission intensity (to GDP) (8)tonne/EUR'101,61,61,51,31,3-0,90,9-Years of life lost due to air pollution by PM2.5per 100.000 inh.1349,11456,91419,61011,21056,1-581,6544,5-Years of life lost due to air pollution by NO2per 100.000 inh.192,5224,0206,7194,2154,7-309,6218,8-Nitrates in ground watermg NO3/litre------21,020,8-Land protected areas% of total22,022,2-22,222,222,226,226,426,4Marine protected areas% of total------10,7-12,1Organic farming% of total utilised agricultural area3,53,73,95,76,05,88,59,1-201720182019202020212022202020212022Share of zero-emission vehicles (9)% in new registrations0,60,91,22,23,54,35,48,910,7Number of AC/DC recharging points (AFIR categorisation)---130128853579188626330028432518Share of electrified railways%40,540,541,9n/an/a42,456,6n/a56,6Hours of congestion per commuting driver per year27,627,330,229,8n/an/a28,7n/an/a'Fit for 55'DistanceProgress to policy targetsNational contribution to 2030 EU targetHungaryEUMobilityFiscal and financialindicatorsEnergyPollutionBiodiversityClimate 
                                                 
                                                                              
 
   
 
ANNEX 7: ENERGY SECURITY AND AFFORDABILITY 

Hungary  continues  to  depend  heavily  on 
Russian  fossil  fuels,  and  efforts  to  reduce 
this  dependency  are  progressing  too  slowly. 
This  Annex (56)  sets  out  actions  carried  out  by 
Hungary  to  achieve  the  REPowerEU  objectives, 
including  through  the 
its 
recovery  and  resilience  plan,  in  order  to  improve 
energy 
affordability  while 
accelerating  the  clean  energy  transition,  and 
contributing to enhancing the EU’s competitiveness 
in the clean energy sector (57).  

implementation  of 

security 

and 

Hungary  continues  to  depend  on  Russia  for 
most of its gas imports raising uncertainties 
in terms of security of supply.  Gas constitutes 
more  than  one  third  of  its  energy  mix  (Annex  6) 
and  will  likely  continue  to  constitute  a  significant 
part of it until  2030, when the Matra lignite-fired 
power  plant  is  expected  to  be  replaced  by  a  500 
MW gas-fired plant. Most of the gas is consumed 
by  households  (35.3%  is  2021),  in  the  energy 
sector (29.9%) and by industry (21.1%), where the 
chemical  and  petrochemical  sector  is  by  far  the 
largest  consumer  with  a  share  close  to  40%.  In 
September 2021, Hungary signed a long-term gas 
supply  agreement  with  Gazprom.  The  15-year 
agreement 
includes  3.5  billion  cubic  metres 
(bcm)/year through the TurkStream pipeline and a 
further  1  bcm/year  through  a  pipeline  from 
Austria.  On  15  August  2022,  Hungary  signed  a 
temporary  modification  of 
the  existing  gas 
contract  with  Gazprom,  with  a  view  to  increase 
flows to Hungary through the TurkStream pipeline 
that  transports  gas  via  Bulgaria  and  Serbia  by 
additional  5.8  million  cubic  metres/day  of  natural 
gas  to  replace  missing  quantities  from  the 
Austrian route.  

Hungary  continues  to  rely  heavily  on  oil 
imports  from  Russia  through  the  Druzhba 
pipeline,  although  it  has  become  much  less 
dependent in the last decade. Russian crude oil 
constitutes  around  58%  of  the  country’s  oil 

(56)  It is complemented by Annex 6 as the European Green Deal 
focuses on the clean energy transition, by Annex 8 on the 
actions taken to mitigate energy poverty and to protect the 
most vulnerable ones, by Annex 9 as the transition to a 
circular economy will unlock significant energy and resource 
savings, further strengthening energy security and 
affordability, and by Annex 12 on industry and single market 
complementing ongoing efforts under the European Green 
Deal and REPowerEU.. 

(57)  in line with the Green Deal Industrial Plan COM(2023) 62 
final, and the proposed Net-Zero Industry Act COM(2023) 
161 final 

imports.  Most  of  the  rest  of  Hungary’s  imports 
come  from  Iraq  and  Kazakhstan.  Domestic  oil 
production  accounts  for  around  13%  of  its  total 
crude consumption. Expanding the capacity of the 
Janaf/Adria  pipeline  in  Croatian  territory  would 
make  it  possible  for  Hungary  to  compensate  for 
the phasing out of the Druzhba route.  

Graph A7.1: Share of gas consumption per sector, 
2021 

Source: Eurostat 

Graph A7.2: Gas consumption per industrial sector 
2021 (% of total industry gas consumption) 

Source: Eurostat 

Well-developed transmission and distribution 
infrastructures  and  ongoing  interconnection 
gas projects are improving security of supply 
in  Hungary  and  in  the  region  in  general. 
Hungary  has  a  large  storage  capacity  of  around 
6.3  bcm (58),  equal  to  almost  56%  of  its  gas 
consumption in 2021 (11.3 bcm). Hungary fulfilled 
its  gas  storage  obligations  last  winter,  reaching 

(58)  Hungary operates five underground storage facilities 

managed by two operators: HEXUM (UGS Szöreg-1) and HGS 
(Pusztaederics, Zsana-Nord, Kardoskút-Pusztaszolos, 
Hajdúszoboszló). 

42 

29.9%21.1%0.4%11.8%35.3%1.5%EnergyIndustryTransportServices and public sectorHouseholdsAgriculture, forestry andfishery0.0%5.0%10.0%15.0%20.0%25.0%30.0%35.0%40.0%45.0%Iron and steelChemical and petrochemicalNon-ferrous metalsNon-metallic mineralsTransport equipmentMachineryMining and quarryingFood, beverages and tobaccoPaper, pulp and printingWood and wood productsConstructionTextile and leather 
 
                                                 
      
 
      
                                                 
 
 
with 

Romania, 

86.01%  by  1  November,  and  ended  the  heating 
season  with  the  gas  storage  capacity  filled  at 
43.45% by  15  April  2023 (59).  Hungary  has  gas 
interconnectors 
Austria 
(unidirectional  flow  from  Austria  to  Hungary), 
Croatia,  Slovakia,  Serbia  and  Ukraine.  With  the 
expansion  of  the  Slovakia-Hungary  interconnector 
and  the  Krk  liquefied  natural  gas  (LNG)  terminal, 
and of the evacuation pipelines in Croatia, Hungary 
could  increase  its  access  to  LNG  in  Poland  and 
Croatia 
for 
additional internal network reinforcements. In June 
2020,  MVM  (the  state-owned  gas  and  electricity 
company) signed a seven-year deal for the import 
of 1 bcm/year from the Krk LNG facility. It is also 
reported to have imported some volumes from Krk 
in  2021.  The  completion  of  the  BRUA  phase  II 
project, on the 5th Project of Common Interest list, 
would  also  enable  Hungary 
to  considerably 
improve its import capabilities from Romania.  

respectively,  with 

limited  need 

Graph A7.3: Underground gas storage levels in 
Hungary 

Source: JRC calculation based on AGSI+ Transparency 
Platform, 2022 (Last update 2 May 2023) 

variable 

produced 

electricity 
and 

the  electricity  networks 

to 
Preparing 
by 
integrate 
generation 
decentralised 
capacities  is  the  most  pressing  need  for  the 
future,  requiring  significant  investments  in 
Hungary’s  grid,  balancing  and  storage 
capacities.  The  government  plans  to  increase 
energy  storage  capacity  to  at  least  1 000  MW  by 
2026  and  to  add  100  MW  capacity  of  demand-
side response by 2030. 

(59)  Regulation of the European Parliament and of the Council 
amending Regulations (EU) 2017/1938 and (EC) No 
715/2009 with regard to gas storage and Implementing 
Regulation (EU) 2022/2301 of 23 November 2022 setting 
the filling trajectory with intermediary targets for 2023 for 
each Member State with underground gas storage facilities 
on its territory and directly interconnected to its market area. 

43 

The  nuclear  energy  sector,  which  accounted 
for  around  45%  of  Hungary’s  electricity 
consumption 
in  2021,  still  depends  on 
Russian technology and nuclear fuel. The two 
new nuclear power plants units (Paks II) have also 
a  Russian  vendor  (Russian  design  VVER-1 200). 
They will be built in Paks, each with a capacity of 
1 200 MW. Construction is planned to be finalised 
by  2030  but  might  be  subject  to  delays.  The 
decommissioning  of  the  current  Paks  operating 
units, originally planned for the second half of the 
2030s, will be  further postponed to bridge delays 
in the realisation of the new Paks units. 

increasing  gas 

Hungary has implemented some measures to 
decrease  gas  consumption,  especially  in  the 
public  sector.  Over  the  period  August  2022-
March  2023,  20%  of  gas  consumption  has  been 
saved  in  Hungary  compared  to  the  previous  5-
years  average.  In  July  2022,  the  government 
declared a state of emergency and announced an 
action  plan  to  deal  with  it.  The  plan  includes 
increasing domestic gas production to 2 bcm from 
import 
the  current  1.5  bcm, 
volumes above the quantities set out in long-term 
contracts  to  fill  storage,  banning  the  export  of 
energy  carriers  and  firewood,  boosting  lignite 
production and the lifetime extension of the Paks-I 
nuclear  plant. 
In  September  2022,  Hungary 
imposed  a  25%  reduction  in  gas  consumption  on 
state  agencies  and  state-owned  companies  and 
set  an  18C  heating  cap  for  public  buildings.  High 
gas  prices  have  also  made  more  attractive  the 
government’s  subsidy  scheme  supporting  the 
installation  of  rooftop  solar  panels,  energy-
efficient  heating  systems  as  well  as  home 
renovations.  

Hungary  is  a  net  electricity  importer,  with 
the  net  import  level  stable  since  the  second 
half  of  the  2010s,  at  around  one  third  of 
total consumption. The progressive replacement 
of  fossil  fuels  with electricity in  all  sectors  of  the 
economy,  coupled  with the  government’s  strategy 
to  attract  energy-intensive  industries,  is  likely  to 
increase  energy  demand.  As  a  result,  Hungary’s 
security  of  electricity  supply  will  increasingly 
depend on successfully speeding up the roll-out of 
renewable  electricity  capacity.  This  will  require 
strengthening  the  transmission  and  distribution 
grids,  particularly  by  increasing  the  flexibility  of 
the  electricity  network  and 
to 
accommodate  an  increasing  share  of  renewable 
sources.  Government  decree  No.  413/2022  of  26 
October  2022  suspended  the  possibility  for  small 

its  capacity 

 
 
                                                 
power  generation  installations,  for  which  the 
application was submitted after 31 October 2022, 
of  feeding  electricity  into  the  public  grid.  The 
government  attributed  its  decision  to  the  lack  of 
spare  grid  connection  capacities.  Moreover, 
government decree 484/2022 prevents the energy 
regulator  from  setting  network  tariffs  which 
ensure  cost  recovery.  Its  abolition  is  therefore 
necessary  to  ensure  the  sustainable  and  secure 
operation of the electricity network as well as the 
integration of more renewable capacity. Moreover,  
encouraging  more  cross  border  exchanges  of 
including  via  a  deeper 
balancing  energy, 
integration  in  the  EU  balancing  market,  opening 
the  balancing  market 
to  newcomers,  and 
encouraging demand-side participation would also 
help keep the cost of balancing in check and make 
it  easier  to  integrate  more  intermittent  capacity. 
The commissioning and entry into operation of the 
Hungary-Slovenia  electricity 
in 
December 2022 electrically connected Hungary to 
all 
its  neighbours,  further  strengthening  the 
security of its electricity supply.  

interconnector 

for 
Retail  gas  and  electricity  prices 
households  have  been  frozen  since  2013, 
giving  them  few  incentives  to  be  energy-
efficient  and  save  energy.  Gas  and  electricity 
bills  are  significantly  lower  than  the  EU  average 
and  government  support  reached  up  to  10  times 
the  regulated  price  of  gas  in  2022.  Starting  on 
August 1st 2022, the government has adjusted the 
mechanism,  limiting  the  price  cap  to  the  level  of 
average consumption. Shifting the focus of energy 
subsidies  towards  targeted  support  for  energy 
poverty and structural energy efficiency measures 
would increase the incentive for energy efficiency 
improvements and energy savings. 

Graph A7.4: Hungary´s retail energy prices for 
industry (top) and households (bottom) 

(1) On electricity, the band consumption is DC for households 
and ID for industry 
(2) On gas, the band consumption is D2 for households and I4 
for industry 
Source: Eurostat 

The outlook for renewable energy is mixed. In 
the last decade, the share of renewables has been 
generally  stable,  at  around  12%,  with  the  bulk 
made up of biomass (around 68% in 2021). Solar 
power  deployment  has been  a  central  part  of  the 
government’s strategy to boost  renewables in the 
power  sector.  Solar  PV  capacity  has  quadrupled 
since  2018,  reaching  3  GW  in  2022,  although 
growth has come to a halt in 2022, when Solar PV 
deployments  have  virtually  stopped (60).  The 
government  objective  to  reach  6  GW  of  installed 
capacity  by  2030  seems  attainable.  By  contrast, 
the development of wind energy has been slow in 
the  last  decade,  stalling  at  around  323  MW,  with 
no  new  capacities  added,  mainly  due  to  an 
increasingly  unfavourable  regulatory  environment. 
A  2016  government  decree (61)  states  that  wind 
turbines  cannot  be  installed  in  a  radius  of  less 
than  12 km  from  populated  areas.  In  its  recovery 
and  resilience  plan,  Hungary  has  committed  to 
amend 
legislative 
framework  to  remove  unnecessary  restrictions  on 

currently  applicable 

the 

(60)  IRENA, Renewable capacity statistics 2023 

(61)  Section 1 of the amendment to legislation relating to the 
establishment of renewable power plants, Government 
Decree 253/1997 of 20 December 1997 on national 
community planning and construction requirements. 

44 

050100150200250300350€/MWhGas HungaryGas EUElectricity HungaryElectricity EU050100150200250300€/MWhGas HungaryGas EUElectricity HungaryElectricity EU 
  
                                                 
the  installation  of  wind  power  plants  in  the 
country.  

and  therefore  possible  missed  energy  and  CO2 
savings (62). 

The  potential  to  reduce  energy  consumption, 
most  of  which  is  in  the  building  sector, 
remains largely untapped. Hungary was able to 
reach its 2020 energy efficiency target only due to 
the  economic  fallout  of  the  COVID-19  Pandemic. 
However,  in  the  last  decade,  its  final  energy 
consumption has constantly been on an increasing 
trend.  Ambitious  measures  to  increase  energy 
efficiency,  focused  on  the  building  sector,  will  be 
crucial  for Hungary to reach its 2030 targets and 
to  preserve 
its  economy’s  competitiveness. 
Buildings  account  for  about  one  third  of  final 
energy  consumption  and  40%  of  primary  energy 
use.  They  also  account  for  about  50%  of 
Hungary’s  natural  gas  consumption.  Most  of  this 
energy  consumption  is  in  the  residential  sector. 
Reducing 
residential  energy  consumption  by 
renovating  buildings  will  also  help  to  decrease 
Hungary’s  dependency  on  natural  gas,  as 
households  were  responsible  for  almost  36%  of 
total  gas  consumption  in  2021.  Reducing  energy 
related  greenhouse  gas 
consumption  and 
emissions  in  buildings  is  a  key  part  of  the 
structural  changes  being  wrought  for  long-term 
decarbonisation  and 
citizens  and 
businesses  cope  with  the  high  energy  prices 
caused by the current crisis. In its national energy 
and  climate  plan,  Hungary  committed  itself  to 
introducing  a  new  energy  efficiency  obligation 
scheme,  providing  support  for  energy  service 
residential  and  public 
companies, 
buildings, 
improving  district  heating 
systems  and  supporting  greater  deployment  of 
renewable  energy  for  heating  and  cooling.  By 
2030,  Hungary’s  long-term  renovation  strategy 
(LTRS) aims to reach 20% CO2 emissions reduction 
in  the  energy  use  of  domestic  housing  stock,  to 
increase  the  renovation  rate  to  3%/year,  and  to 
reduce  CO2  emissions  by  18%  and  increase  the 
renovation  rate  to  5%/year  for  public  buildings. 
The  scarcity  of  a  specialised  workforce  makes  it 
difficult  to  improve  buildings’  energy  efficiency. 
The LTRS also envisages the training and reskilling 
of about 20 000 professionals in order to improve 
their  skills  in  energy  renovation  and  renewable 
energy  and  to  be  able  to  meet  the  estimated 
increase in demand. Hungary is carrying out a very 
low number of checks on products covered by eco-
design and energy labelling. This generates serious 
concerns  with  respect  to  the  level  playing  field 
among  economic  operators  and  uncertainty  as  to 
the  compliance  levels  of  the  concerned  products, 

renovating 

to  help 

further 

Hungary’s  research  and  development  (R&D) 
spending  on  Energy  Union  priorities  is  low 
and below the EU average. Public spending has 
been  stagnating  since  2014,  while  private 
spending  halved  between  2010  and  2019.  GDP 
devoted  to  public  research  and  innovation  (R&I) 
spending  on  Energy  Union  priorities  is  low,  with 
only a slight increase observed between 2014 and 
2020.  Private  R&I  spending  has  declined  by 
0.013%  since  2019.  Venture  capital  investments 
in climate tech firms in 2021 amounted to EUR 0.1 
million,  one  third  of  the  total  recorded  in  2020. 
Hungary  has  yet  to  fully  harness  its  potential  to 
develop  geothermal  energy.  As  geothermal-rich 
Pannonian  Basin  has  Soviet-era  district  heating 
grids  are 
is  a 
potentially  low-cost,  clean  alternative  to  fossil 
fuels  for  heating.  Hungary’s  national  climate 
development  strategy  expects  technologies,  such 
as  carbon  capture,  utilisation  and  storage  (CCUS) 
and hydrogen, to become available between 2030 
and  2040.  Up  to  2030,  Hungary  plans to produce 
16 000 tonnes of hydrogen a year, storing surplus 
energy  from  solar  PV,  for  example  through  the 
Aquamarine  pilot  project.    Hungary  enjoys  a 
leading  position  in  e-mobility  and  batteries,  with 
major  R&D  capacities  and  top  Asian  producers 
planning  to  establish  production  centres  in  the 
country.  Hungary  has  a  sizable  automotive 
production  industry,  including  the  manufacturing 
of e-mobility and battery production. 

in  place,  geothermal  energy 

(62)  The internet-supported information and communication 
system for the pan-European market surveillance 

45 

 
                                                 
Table A7.1: Key energy indicators 

(1) The ranking of the main supliers is based on the latest available figures (for 2021) 
(2) FSRU included 
(3) Venture Capital investments include Venture Capital deals (all stages) and Private Equity Growth/Expansion deals (for 
companies that have previously been part of the portfolio of a VC investment firm). 

Source: Eurostat, Gas Infrastructure Europe (Storage and LNG Transparency Platform), JRC SETIS (2022), JRC elaboration based 
on PitchBook data (06/2022) 

46 

EU20182019202020212018201920202021Import Dependency [%] 58%70%57%54%58%61%57%56%of Solid fossil fuels 48%46%44%39%44%44%36%37%of Oil and petroleum products 86%87%87%87%95%97%97%92%of Natural Gas 78%115%76%67%83%90%84%83%Dependency from Russian Fossil Fuels [%]of Hard Coal16%10%22%18%40%44%49%47%of Crude Oil68%75%61%58%30%27%26%25%of Natural Gas 95%95%95%95%40%40%38%41%20152016201720182019202020212022Gross Electricity Production (GWh)30,36031,90232,91532,06734,29134,93036,120-Combustible Fuels13,39514,58315,40714,72515,42915,35815,301-Nuclear15,83416,05416,09815,73316,28816,05515,990-Hydro234259220222219244212-Wind693684758607729655664-Solar 1412443496291,4972,4593,796-Geothermal 00112181612-Other Sources637882139111143145-Net Imports of Electricity (GWh)13,68612,71112,87814,34812,58411,67712,754-   As a % of electricity available for final consumption 36%33%32%35%30%28%29% -Electricity Interconnection (%)--58.30%58.75%53.1%35.3%32.5%41.4%20152016201720182019202020212022Gas Consumption (in bcm)9.19.710.410.110.210.611.29.5Gas Imports - by type (in bcm)6.87.69.87.711.77.97.5-Gas imports - pipeline6.87.69.87.711.77.97.5-Gas imports - LNG0.00.00.00.00.00.00.0-Gas Imports - by main source supplier (in bcm) (1)-Russia6.57.29.47.411.17.57.1-Not specified0.30.40.50.40.60.40.4-2019202020212022LNG TerminalsNumber of LNG Terminals (2)LNG Storage capacity (m3 LNG)Underground StorageNumber of storage facilities5555Operational Storage Capacity (bcm)7.17.16.96.92019202020212022VC investments in climate tech start-ups and scale-ups (EUR Mln) (3)0.00.30.1n.a.as a % of total VC investments in Hungary0.0%0.3%0.0%n.a.Research & Innovation spending in Energy Union R&i priorites (2)Public R&I (EUR mln)7.017.264.4n.a.Public R&I (% GDP)0.005%0.012%0.042%n.a.Private R&I (EUR mln)20.3n.a.n.a.n.a.Private R&I (% GDP)0.01%n.a.n.a.n.a.DIVERSIFICATION OF GAS SUPPLIESCLEAN ENERGYHUNGARYENERGY DEPENDENCEELECTRICITY 
 
  
 
 
 
ANNEX 8: FAIR TRANSITION TO CLIMATE NEUTRALITY 

training 

This  Annex  monitors  Hungary’s  progress  in 
ensuring  a  fair  transition  towards  climate 
neutrality  and  environmental  sustainability, 
notably  for  workers  and  households 
in 
vulnerable  situations.  While  participation  in 
education  and 
in  energy-intensive 
industries has declined, Hungary needs investment 
in  relevant  up-  and  re-skilling,  especially  for 
workers  in  declining  and  transforming  sectors,  in 
order to ensure a fair green transition in line with 
the Council Recommendation (63). The recovery and 
resilience  plan  (RRP)  outlines  some  investments 
for  a  fair  green  transition,  complementing  the 
territorial 
transition  plans  and  actions 
supported  by  the  European  Social  Fund  Plus 
(ESF+). The Hungarian RRP aims to provide 35 000 
lower-  and  middle-income  families  with  140-
175MW of residential solar panel capacity as well 
as to provide 5 000 poor families in the 300 most 
deprived  municipalities  with  25MW  of  community 
solar panel park capacity. 

just 

Graph A8.1: Fair transition challenges in Hungary 

Source: Eurostat, EMPL-JRC GD-AMEDI/AMEDI+ projects and 
World Inequality Database (see Table A8.1). 

The  greening  of  the  economy  has  not  yet 
accelerated  and  employment  in  sectors  most 
affected  by  the  green  transition  remains  stable, 
while  workers  in  declining  activities  need  active 
support.  Employment 
in  Hungary’s  energy-
intensive  industries  (EII)  represented  a  stable 
share  of  3.6%  of  total  employment  in  2021  (in 
2020:  3.9%  vs  3.0%  in  the  EU)  (see  Graph A8.1 
and  Table A8.1),  and  employment  in  construction, 
transportation  and  storage  has  been  steadily 
increasing.  Simultaneously,  employment  in  mining 
and quarrying has nearly halved since 2015 and a 

(63)  Council Recommendation of 16 June 2022 on ensuring a fair 
transition towards climate neutrality, 2022/C 243/04, covers 
employment, skills, tax-benefit and social protection 
systems, essential services and housing. 

47 

is 

decrease 

expected  with 

further 
the 
transformation  of  the  lignite  units  of  the  Mátra 
plant  to  low-carbon  emission  technologies.  This 
underlines the need to ensure the development of 
green  jobs  and  skills  for  a  successful  and  fair 
green transition (64).  Hungary plans to support the 
adaptations required of workers and enterprises in 
the counties most affected by the green transition 
(Baranya,  Heves,  Borsod-Abaúj-Zemplén)  by 
allocating EUR 48 million from the Just Transition 
Fund. 

Upskilling  and  reskilling  in  declining  and 
transforming sectors require further efforts. 
In  Hungary,  30%  of  citizens  believe  they  do  not 
have the necessary skills to contribute to the green 
transition (EU: 38%) (65).  In 2022, the job vacancy 
rate  in  construction  was  below  the  EU  average 
(1.8% vs 4.0%) (66).  In energy-intensive industries, 
workers’ participation in training has declined from 
9.7% in 2015 to 6.3% in 2022 and is below the EU 
average 
(10.4%).  The  overall  national  adult 
participation rate in learning is low (see Annex 14), 
with  very  low  participation  among  vulnerable 
groups  in  particular.  To  address  this,  at  least 
EUR 71.5  million  of  ESF+  funding  in  Hungary 
contributes  to  green  skills  and  jobs.  Measures 
include  labour  market  and  in-company  training, 
wage subsidies and the modernisation of curricula 
in  vocational  education  and  training  to  develop 
green professional skills.  

Energy  poverty  indicators  have  improved  in 
recent  years,  but  the  spike  in  energy  prices 
can  be  expected  to  aggravate  the  situation. 
The  share  of  the  total  population  unable  to  keep 
their  homes  adequately  warm  fell  from  9.6%  in 
2015  to  4.2%  in  2020  but  then  rose  to  5.4%  in 
2021  (below  6.9%  in  the  EU) (67).  In  particular, 
16.3%  of  the  population  at  risk  of  poverty  (EU: 
16.4%)  and  4%  of 
lower  middle-income 
households (in deciles 4-5) were affected in 2021 
(EU:  8.2%).  Before  the  energy  price  hikes,  an 
estimated  64.5%  of  the  total  population  and 
(expenditure-based)  at-risk-of-
82.4%  of 

the 

(64)  Data on environmental goods and services sector 

employment is unavailable for Hungary (see Annex 9 for 
circular jobs specifically).  

(65)  Special Eurobarometer 527. Fairness perceptions of the 

green transition (May – June 2022). 

(66)  Eurostat (JVS_A_RATE_R2)   

(67)  Energy poverty is a multi-dimensional concept. The indicator 
used focuses on an outcome of energy poverty. Further 
indicators are available at the Energy Poverty Advisory Hub. 

00.20.40.60.811.21.4GHG per workerEmployment EIIEducation &training EIIEnergy povertyTransportpoverty(proxy)CarboninequalityEU LatestHU Latest (vs EU Latest)HU 2015 (vs EU Latest) 
 
  
                                                 
                                                 
 
the  share  of  individuals  living  in  households  with 
budget shares for private transport fuel (71) above 
6% would have increased by 3.4 pps, i.e. less than 
the  EU  average  (5.3 pps),  reaching  21.3%  in 
January  2023  (EU:  37.1%).  Transport  fuel  price 
increases  in  Hungary  tend  to  be  progressive, 
affecting the middle and higher income groups the 
most.  

Public  transport  perceptions  are  generally 
favourable,  but  carbon  inequality  is  above 
the  EU  average.  Citizens  perceive  public 
transport to be relatively available (71% vs 55% in 
the EU), affordable (71% vs 54% in the EU) and of 
good  or  fairly  good  quality  (69%  vs  60%  in  the 
EU).  The  urban-rural  divide  in  these  perceptions 
appears to be small. Accordingly, for rural areas in 
Hungary,  transport  perceptions  stand  out  as 
comparison (72). 
favourable 
However,  the  carbon  footprint  of  the  top  10%  of 
emitters  (i.e.  households  in  the  highest  income 
decile)  was  about  5.9  times  that  of  the  bottom 
50%  of  emitters  (EU  5.0  times)  (see  Graph A8.1). 
In  Hungary,  the  average  levels  of  air  pollution  in 
2020  stood  above  the  EU  average  (14.5  vs  11.2 
µg/m  PM2.5),  with  all  regions  exposed  to  critical 
levels  of  air  pollution (73),  leading  to  significant 
health impacts, in particular on vulnerable groups, 
and 9 502 premature deaths annually (74). 

in  an  EU-wide 

poverty (AROP) population had expenditure shares 
on electricity, gas, and other fuels (68)  above 10% 
of 
their  household  budget,  well  above  the 
estimated  EU  average  of  26.9%  and  48.2%, 
respectively.  

Graph A8.2: Distributional impacts of energy prices 
due to rising energy expenditure (2021-2023) 

Mean change of energy expenditure as a percentage (%) of 
total expenditure per income decile (D) due to observed price 
changes (August 2021 – January 2023 relative to the 18 
months prior), excl. policy support and behavioural responses. 
Source: EMPL-JRC GD-AMEDI/AMEDI+ projects, based on 
Household Budget Survey 2015 and Eurostat inflation data 
for CP0451 and CP0452. 

The  increased  energy  prices  in  2021-2023 
negatively  affected  households’  budgets,  in 
particular for low-income groups. Most citizens 
(85%)  consider  rising  energy  prices  a  serious 
problem (69).  As  a  result  of  energy  price  changes 
during  the  August  2021  to  January  2023  period 
relative to the 18 months prior (cf. Annex 7), in the 
absence  of  policy  support  and  behavioural 
responses (but accounting for price interventions), 
the  fraction  of  individuals  living  in  households 
spending  more  than  10%  of  their  budget  on 
energy  would  have  increased  by  9.5  percentage 
points  (pps)  for  the  whole  population  and  by 
5.9 pps  among  the  (expenditure-based)  AROP 
population, which are lower increases than the EU 
average  (16.4 pps  and  19.1 pps,  respectively) (70). 
lower-middle 
Expenditure  shares  of 
income  groups  would  have  increased  the  most, 
with the increase most pronounced for gas (similar 
to  EU-wide  effects),  as  shown  in  Graph A8.2. 
Among  the  (expenditure-based)  AROP  population, 

low  and 

(71)  ECOICOP: CP0722. 

(68)  Products defined according to the European Classification of 
Individual Consumption according to Purpose (ECOICOP): 
CP045. 

(72)  The figures for respondents living in country villages are, 

respectively 68%, 71%, and 73%for HU, against 46%, 48%, 
56% for the EU. Special Eurobarometer 527. 

(69)  Special Eurobarometer 527. 

(70)  EMPL-JRC GD-AMEDI/AMEDI+ ; see details in the related 

(73)  Two times higher the recommendations in the WHO Air 

Quality Guidelines (annual exposure of 5µg/m3) 

technical brief. 

(74)  EEA- Air Quality Health Risk Assessment 

48 

0.0%0.5%1.0%1.5%2.0%2.5%3.0%ElectricityGasElectricityGasElectricityGasElectricityGasElectricityGasElectricityGasElectricityGasElectricityGasElectricityGasElectricityGasD1D2D3D4D5D6D7D8D9D10HU GasHU ElectricityEU GasEU Electricity 
   
                                                 
                                                 
Table A8.1: Key indicators for a Fair Transition in Hungary 

Source: Eurostat (env_ac_ainah_r2, nama_10_a64_e, ilc_mdes01), custom extraction from the EU Labour Force Survey (break in 
times series in 2021), EMPL-JRC GD-AMEDI/AMEDI+ projects and World Inequality Database (WID). 

49 

IndicatorDescriptionHU 2015HU LatestEU LatestGHG per workerGreenhouse gas emissions per worker - CO2 equivalent tonnes1210.7 (2021)13.7 (2021)Employment EIIEmployment share in energy-intensive industries, including mining and quarrying (NACE B), chemicals (C20), minerals (C23), metals (C24), automotive (C29) - %3.63.9 (2020)3 (2020)Education & training EIIAdult participation in education and training (last 4 weeks) in energy-intensive industries - %9.76.3 (2022)10.4 (2022)Energy povertyShare of the total population living in a household unable to keep its home adequately warm - %9.65.4 (2021)6.9 (2021)Transport poverty (proxy)Estimated share of the AROP population that spends over 6% of expenditure on fuels for personal transport - %17.921.3 (2023)37.1 (2023)Carbon inequalityAverage emissions per capita of top 10% of emitters vs bottom 50% of emitters5.45.9 (2020)5 (2020) 
 
  
 
PRODUCTIVITY 
ANNEX 9: RESOURCE PRODUCTIVITY, EFFICIENCY AND CIRCULARITY 

circular economy strategy identifying three priority 
areas – food/biomass, construction, and plastics  – 
to  become  a  more  competitive  circular  economy 
by 2040, but the strategy has yet to be published. 

Graph A9.1: Trend in material use 

Source: Eurostat 

Graph A9.2: Treatment of municipal waste 

The  circular  economy  transition  is  key  to 
climate  and 
delivering  on 
the  EU’s 
environmental  goals  and  provides 
large 
socio-economic  benefits. It  spurs  job  growth, 
innovation  and  competitiveness  and 
fosters 
resilience  and  resource  security.  The  circularity 
transition  of  industry,  the  built  environment  and 
agri-food  can  generate  significant  environmental 
improvements (see Annex 6), as they rank among 
the most resource-intensive systems. 

Despite  some  progress,  Hungary’s  circular 
economy  transition  is  insufficient  and  needs 
accelerating  to  meet  the  EU’s  circular 
economy  goals.  The  2020  circular  economy 
action  plan  (CEAP)  aims  at  doubling  the  circular 
material  use  rate.  In  Hungary,  that  rate  remains 
low  at  6.8%  in  2021  (below  the  EU  average  of 
11.7%).  The  CEAP  also  aims  to  significantly 
decrease  the  EU’s  material  footprint,  which  in 
2020  in  Hungary  was  slightly  above  the  EU-27 
average  (14.7  vs  13.7  tonnes  per  head).  This 
confirms  the  upward  trend  in  Hungary  and  the 
increase  of  raw  material  extraction  to  support 
economic growth. The labour market benefits from 
the circular transition are weak, with a decrease in 
direct  circular  jobs  since  2016  (see  Annex  8).  At 
the  same  time,  accidents  related  to  safety  and 
health 
in  waste  and  materials  recovery  are 
significantly above the average for other sectors in 
Hungary and the EU average for this sector (75). 

Hungary  recently  adopted  new  policies  to 
address  circular  economy  challenges,  but 
more  efforts  are  needed  Hungary  adopted  a 
Climate and Nature Protection Action Plan, in 2020 
and  amended  the  Act  on  Waste  (Act  CLXXXV  of 
in  2021.  The  amendment  aimed  at 
2012) 
eliminating  illegal  waste  dumps,  setting  up  a 
’deposit-return  system’  and  rationalising  waste 
economic activity. However, the measures are still 
to  be  fully  implemented  and  more  legislation  is 
planned 
for  2023,  notably  a  new  waste 
management  model  for  July  2023.  Hungary 
launched 
application 
('HulladékRadar’)  to report illegally dumped waste 
and  encourage  public  participation  in  fighting 
illegal  waste.  As  part  of  the  structural  reform 
support  programme,  Hungary  is  working  on  a 

a  mobile 

in  2022 

(75)  Eurostat [HSW_N2_02] for NACE Rev. 2 sector E38; 8.77 

fatal accidents p. 100 000 employed in 2018-2020 vs 1.9 
for all sectors in HU; 6.33 in the EU-27 for sector E38 

50 

Source: Eurostat 

in 

performance 

waste 
Hungary’s 
management  is  insufficient.  Hungary  missed 
the EU target of 50% of municipal waste recycled 
(with  only  34.9%  in  2021  vs  the  EU  average  of 
49.6%).  Hungary  also  risks  missing  the  EU  2025 
targets  for  municipal  and  packaging  waste.  51% 
of Hungary’s municipal waste was still landfilled in 
2021  (double  the  EU  average  of  22.8%).  Illegal 

0.020.040.060.080.0100.0120.00.02.04.06.08.010.012.014.016.018.0201620172018201920202021kg/capitatonnes/capitaMaterial footprint Hungary (tonnes/capita)Material footprint EU-27 (tonnes/capita)Trade in recyclable raw materials Hungary (imports extra EU, kg/capita)Trade in recyclable raw materials EU-27 (imports extra EU, kg/capita)379385381387403416-1000100200300400500600201620172018201920202021Kg per capita Difference waste generated/treatmentLandfill/disposalTotal incineration (including energy recovery)Composting and digestionMaterial recyclingEU-27 
 
 
                                                 
           
 
      
 
waste dumps remain an issue, diverting materials 
and  resources  that  could  be  reused  or  recycled 
with  further  improvements  in  separate  collection 
and  treatment,  notably  for  biowaste.  In  Hungary, 
composting  and  digestion  are  low  (39 kg  per 
person vs the EU average of 100 kg in 2021). 

The  industrial  system’s  circularity  is  below 
the  EU  average.  The  resource  productivity  of 
Hungary has been stagnating since 2016, with 1.6 
purchasing power standard per kilogramme vs 2.3 
for the EU in 2021. The country has still significant 
potential  to  boost  repair,  reuse,  and  the  use  of 
secondary  raw  materials.  As  part  of  the  Recovery 
and Resilience  Plan, Hungary intends to tackle this 
lack of circularity and commits to more ambitious 
rules on extended producer responsibility by 2023. 

The  built  environment  system  provides  an 
opportunity  to  increase  resource  efficiency. 
The  construction  and  demolition  waste’s  recovery 
rate  is  above  the  EU  average  (98%  vs  89%  in 
2020). Soil sealing progressed between 2015 and 
2018  at  the  same  rate  as  the  EU-27  average. 
There  is  scope  for  renovating  and  improving  uses 
of existing buildings instead of building new ones. 

The  agri-food  system  has  yet  to  design  out 
food  waste  and  efficiently  manage  water 
resources.  Further  development  of  treatment 
capacity 
support  of  home 
composting,  and  development  of  national 

for  biowaste, 

standards  for  compost  could  enhance  Hungary’s 
autonomy.  Not  all  water  abstractions  are 
registered, and water bodies are under significant 
pressure  from  human-induced  changes  in  water 
regimes.  Both  flood  and  drought  risks  are  high, 
and  Hungary’s  irrigation  strategy  needs  to  make 
further efforts to increase natural water retention 
and promote more resource-efficient and resilient 
production 
sustainable 
management  of  the  water  resource  and  the 
capacity to adapt to climate change (see Annex 6). 
Maintaining  traditional  agricultural  model  based 
on irrigation and water abstraction would increase 
pressure on the environment and water resources. 

practices 

the 

for 

A  financing  gap  remains  in  the  circular 
economy,  including  in  waste  management.  
Additional  investments  will  be  required  to 
address  growing  needs.  Between  2014  and 
2020,  the  financing  gap  was  estimated  at  EUR 
213  million  per  year  and  investment  needs  were 
estimated to be at least EUR 789 million per year 
while  investment  baselines  were  EUR  576  million 
per  year  (see  Annex  6).  Investing  in  the  circular 
economy is key to achieving the transition, notably 
in  eco-design,  repair,  reuse,  remanufacturing,  and 
uptake  of  new  business  models.  The  current 
separate  waste  collection  system  and  treatment 
infrastructures,  notably  for  plastic  and  biowaste, 
are not sufficient to divert waste from landfilling.  

Table A9.1: Overall and systemic indicators on circularity 

(1) Persons employed in the circular economy only tracks direct jobs in selected sub-sectors of NACE codes E, C, G and S; (2) the 
circular material use rate measures the share of material recovered and fed back into the economy in overall material use; (3) the 
recovery rate of construction and demolition waste includes waste which is prepared for reuse, recycled or subject to material 
recovery, including through backfilling operations; (4) soil sealing: 2016 column refers to 2015 data; (5) food waste includes 
primary production, processing and manufacturing, retail and distribution, restaurants and food services, and households.  
Source: Eurostat, European Environment Agency 

51 

AREA201620172018201920202021EU-27 Latest year EU-27Overall state of the circular economyMaterial footprint (tonnes/capita)11.713.514.815.814.7-13.72020YoY growth in persons employed in the circular economy (%)15.5-2.14.3-2.0--2.92019Water exploitation index plus (WEI+) (%)1.21.41.41.3--3.62019IndustryResource productivity (purchasing power standard (PPS) per kilogram)1.61.51.41.41.61.62.32021Circular material use rate (%)26.56.97.07.35.26.811.72021Recycling rate (% of municipal waste)34.735.037.435.932.034.949.62021Built environmentRecovery rate from construction and demolition waste (%)399.0-99.0-98.0-89.02020Soil sealing index (base year = 2006)4105.2-108.3---108.32018Agri-foodFood waste (kg per capita)5----93.0-131.02020Composting and digestion (kg per capita)30.032.032.036.039.039.0100.02021 
 
           
 
ANNEX 10: DIGITAL TRANSFORMATION 

transformation  by  2030, 

Digital  transformation  is  key  to  ensuring  a 
resilient and competitive economy. In line with 
the  Digital  Decade  Policy  Programme,  and  in 
particular  with  the  targets  in  that  Programme  for 
digital 
this  Annex 
describes  Hungary’s  performance  on  digital  skills, 
digital 
the 
digitalisation  of  businesses  and  public  services. 
Where relevant, it makes reference to progress on 
implementing  the  Recovery  and  Resilience  Plan 
(RRP).  Hungary  allocates  29.8%  of  its  total  RRP 
budget to digital (EUR 1.737 billion) (76). 

infrastructure/connectivity 

and 

The  Digital  Decade  Policy  Programme  sets 
out a pathway for Europe’s successful digital 
transformation  by  2030.  The  Programme 
provides  a  framework  for  assessing  the  EU’s  and 
Member States’ digital transformation, notably via 
the  Digital  Economy  and  Society  Index  (DESI).  It 
also  provides  a  way  for  the  EU  and  its  Member 
States  to  work  together,  including  via  multi-
country  projects,  to  accelerate  progress  towards 
the  Digital  Decade  digital  targets  and  general 
objectives (77).  More  generally,  several  aspects  of 
digital  transformation  are  particularly  relevant  in 
the current context. In 2023, the European Year of 
Skills, building the appropriate skillset to make full 
use of the opportunities that digital transformation 
offers  is  a  priority.  A  digitally  skilled  population 
increases the development and adoption of digital 
technologies  and  leads  to  productivity  gains (78). 
Digital  technologies,  infrastructure  and  tools  all 
play  a  role  in  the  fundamental  transformation 
needed to adapt the energy system to the current 
structural challenges (79). 

Hungary  scores  below  the  EU  average  on 
digital  skills.  Only  about  half  of  the  population 
possess at least basic digital skills. The proportion 
of  specialists  in  information  and  communications 

(76)  The share of financial allocations that contribute to digital 
objectives has been calculated using Annex VII of the RRF 
Regulation. 

(77)  The Digital Decade targets as measured by DESI indicators 
and complementary data sources are integrated to the 
extent currently available and/or considered particularly 
relevant in the MS-specific context.  

(78)  See for example OECD (2019): OECD Economic Outlook, 

Digitalisation and productivity: A story of complementarities, 
OECD Economic Outlook, Volume 2019 Issue 1 | OECD 
iLibrary (oecd-ilibrary.org). 

(79)  The need and possible actions for a digitalisation of the 
energy system are laid out in the Communication 
‘Digitalisation the energy system – EU action plan’ 
(COM(2022)552. 

52 

technology  (ICT)  in  the  Hungarian  workforce  has 
increased  slightly  in  recent  years  but  remains 
relatively low. The Hungarian RRP includes several 
measures that target digital skills. 

Broadband  connectivity  remains  above  the 
EU  average  and  on  5G,  Hungary  has  again 
made  considerable  progress  during  the  last 
year.  Fixed  very  high  capacity  network  (VHCN) 
coverage  went  up  from  72%  in  2021  to  80%  in 
2022, surpassing the EU average of 72%. Overall 
5G coverage in Hungary increased to 58% in 2022 
(up  by  40  percentage  points  from  the  previous 
year), however it is still significantly lower than the 
EU average which stands at 81%. 

The  digitalisation  of  businesses  remains  a 
major challenge in Hungary. Only 52% of SMEs 
in Hungary had at least a basic digital intensity in 
2022 (compared with an EU average of 69%). The 
use  of  advanced  digital  technologies,  such  as  big 
data  and  artificial  intelligence,  is  half  and  less 
than  half  the  EU  average,  and  13  percentage 
points  lower  for  the  use  of  cloud  computing 
services (21% in Hungary against 34% in the EU). 
Further investments and large-scale, targeted and 
effective measures are necessary to speed up the 
digital  transformation  of  businesses,  especially 
SMEs including the development of digital skills in 
order  to  increase  SMEs’  use  of  digital  technology 
and to develop digital start-ups.  

Hungary  continued  to  progress  on  the 
digitalisation  of  public  services,  but 
its 
performance  still  remains  below  the  EU 
average.  Hungary’s  scores  for  providing  digital 
public services to both businesses and citizens are 
below  the  EU  average,  mainly  because  of  low 
scores  on  cross  border  services.  For  electronic 
identification (eID), cross border e-identification is 
expected  to  become  available  in  2023  via  the 
eIDAS  scheme.  The  use  of  national  eID  cards 
remains  limited,  as  most  users  prefer  the  client 
trusted  profile (80).  The  Hungarian  RRP 
gate 
includes  several  measures  that  focus  on  further 
digitalisation  in  healthcare.  Regarding  the  access 
to electronic health records Hungary scores above 
the  EU  average  with  a  score  of  79  out  of  100.

(80)  In the fourth quarter of 2021 there were approximately 5.7 
million national eID cards capable of e-identification in 
Hungary (covering 58% of the population). At the end of 
2022, the client gate trusted profile had 5.54 million active 
profiles. In more than 97.75 % of the cases the basic Client 
Gate was used, while the national eID card was chosen by 
1.5 % of the users. 

 
 
                                                 
                                                 
 
 
Table A10.1: Key Digital Decade targets monitored by DESI indicators 

(1) The 20 million target represents about 10% of total employment.  
(2) The Fibre to the Premises coverage indicator is included separately as its evaluation will also be monitored separately and 
taken into consideration when interpreting VHCN coverage data in the Digital Decade.      
(3) At least 75 % of Union enterprises have taken up one or more of the following, in line with their business operations: (i) cloud 
computing services; (ii) big data; (iii) artificial intelligence.   

Source: Digital Economy and Society Index 

53 

DESI 2021DESI 2022DESI 2023DESI 2023(EU)Digital skillsAt least basic digital skillsNA49%49%54%80%% individuals2021202120212030ICT specialists (1)3.8%3.9%3.9%4.5%20 million% individuals in employment aged 15-7420202021202120212030Digital infrastructure/connectivityFixed Very High Capacity Network (VHCN) coverage49%72%80%73%100%% households20202021202220222030Fibre to the Premises (FTTP) coverage (2)49%64%70%56%-% households20202021202220222030Overall 5G coverage7%18%58%81%100%% populated areas202020212022202220305G coverage on the 3.4-3.8 GHz spectrum bandNANA21%41%-% populated areas202220222030Digitalisation of businessesSMEs with at least a basic level of digital intensityNANA52%69%90%% SMEs202220222030Big data (3)7%7%7%14%75%% enterprises20202020202020202030Cloud (3)NA21%21%34%75%% enterprises2021202120212030Artificial Intelligence (3)NA3%3%8%75%% enterprises2021202120212030Digitalisation of public servicesDigital public services for citizensNA646877100Score (0 to 100)2021202220222030Digital public services for businessesNA747684100Score (0 to 100)2021202220222030Access to e-health recordsNANA7971100Score (0 to 100)202320232030 
 
 
 
 
  
 
 
ANNEX 11: INNOVATION 

This  Annex  provides  a  general  overview  of  the 
performance of Hungary’s research and innovation 
system,  which  is  essential  for  delivering  the  twin 
green and digital transition. 

Hungary  is  an  ‘emerging  innovator’  with 
performance  at  68.9%  of  the  EU  average. 
According  to  the  European  Innovation  Scoreboard 
(EIS)  2022 (81)  Hungary’s  innovation  performance 
is  above  the  average  of  the  emerging  innovators 
(50%).  

Graph A11.1: EIS performance Hungary 2015-2022 

Source: European Innovation Scoreboard 2015-2022 

the 

country’s 

Public  spending  on  R&D  remains  low  and 
scientific 
undermines 
performance.  Total  R&D  intensity (82)  reached 
1.65%  of  GDP  in  2021  and  has  not  reached  the 
EU2020 target initially set at 1.8%. While business 
spending  on  R&D  relative  to  GDP  almost  doubled 
between 2010 and 2021 (83), public expenditure on 
R&D,  which  stood  at  0.39%  of  GDP  in  2021, 
remained  below  the  EU  average  of  0.76%.  The 
share  of  scientific  publications  by  Hungarian 
authors  that  were  among  the  most  cited  in  the 
world  has  been  increasing  over  the  years  and 
reached  6.3%  in  2019  but  remained  below  the 
9.8%  EU  average.  Strengthening  Hungary’s  public 
research  system  will  be  key  to  achieving  the 
government’s vision of being one of the five most 

competitive  countries  in  the  EU  and  spending  3% 
of the GDP on R&D by 2030 (84). 

Graph A11.2: R&D intensity in 2021 

Source: Eurostat, 2022 

The  lack  of  skilled  human  resources  is 
holding  back  scientific  and 
innovation 
the  number  of  new 
performance.  While 
graduates  in  science  and  engineering  doubled  in 
the  last  decade, the percentage  of  the  population 
aged  25-34  who  have  successfully  completed 
tertiary  education  was  just  32.9%  in  2021 (85)  – 
well  below  the  EU  average  of  41.2%  and  one  of 
the  lowest  in  the  EU.  The  lack  of  skilled  human 
resources  and  high  brain  drain (86)  puts  the 
country’s  innovation  output  at  risk  in  the  medium 
and long term. Several Hungarian universities were 
brought under the ownership and management of 
a  board  of  trustees  lead  by  government  officials 
and  business  people  closely  associated  with  the 
government. Concerns remain about teachers’ and 
researchers’  autonomy  in  this  process.  While  the 
new  formations  have  not  brought  the  desired 
performance 
the  government’s 
increasing  influence  over  higher  education  and 
scientific  institutions  may  hinder  the  country’s 
capacity to retain its talent. (87) (See also annex 15 
on education). 

improvements, 

Despite generous public funding for business 
R&I, innovation remains driven by big foreign 

(81)  2022 European Innovation Scoreboard (EIS), Country profile: 
Hungary https://ec.europa.eu/assets/rtd/eis/2022/ec_rtd_eis-
country-profile-hu.pdf The EIS provides a comparative 
analysis of innovation performance in EU countries, including 
the relative strengths and weaknesses of their national 
innovation systems (also compared to the EU average). 

(82)  Defined as gross domestic expenditure on R&D (GERD) as a 

percentage of GDP 

(83)  It increased from 0.68% of GDP in 2010 to 1.24% of GDP in 

2021. 

(84)  Hungary’s research development and innovation strategy 

2021-2030. 

(85)  Eurostat: change in definition in 2021. 

(86)  Source: EC, Knowledge ecosystems in the new ERA, 2022. 

(87)  The situation in Hungary suggests that the latest 

organisational/institutional changes are increasing 
uncertainty among researchers – not knowing what 
institutions will be like or what they might expect – which is 
affecting researchers´ confidence in the future. Source: EC, 
Knowledge ecosystems in the new ERA, 2022. 

54 

3050709011020152016201720182019202020212022EUHU00.511.522.5R&D IntensityPublic expenditurePrivate expenditureas % of GDPEUHU 
 
   
                                                 
   
 
                                                 
 
Table A11.1: Key innovation indicators 

(1) EU average for the latest available year or the year with the highest number of country data. 
Source:  Eurostat, OECD, DG JRC, Science-Metrix (Scopus database and EPO’s Patent Statistical database), Invest Europe       

in 

public-private collaboration. The small scale of 
business  enterprise  funding  for  public  research 
reveals  an  asymmetry 
the  public-private 
relationship.  Public  expenditure  on  R&D  financed 
by  business  enterprise  (national)  as  a  percentage 
of GDP is one of the lowest in the EU and shrank 
by  20.2%  between  2010  and  2021.  The  roll-out 
out  of  the  eight  higher  education  and  industry 
cooperation centres (FIEKs) during the 2014-2020 
programming 
well-
established  cooperation  between  science  and 
industry.  Maintaining 
linkages  would 
strengthen knowledge and technology transfer. 

demonstrated 

period 

these 

in  medium- 

firms.  In  the  EU,  Hungary  is  leading  in  financing 
business  enterprise  expenditure  on  R&D  (BERD) 
from  public money.  At  0.201%  of  GDP,  Hungary’s 
publicly funded BERD is twice the EU average. The 
country’s  innovation  output  is  led  by  big  firms 
engaging 
high-tech 
manufacturing (88).  When 
it  comes  to  patent 
applications,  the  decreasing  trend  shows  that  the 
foreign firms tend to repatriate results away from 
to  headquarters (89).  However, 
Hungary  back 
Hungary  has  many  non-innovators  with  potential 
to innovate  – 44.9% compared  with the EU share 
of 19.9%. (90) 

and 

Businesses do not systematically seek out  

(88)  Value added in high-tech manufacturing as % of total value 
added is above the EU average and in leading in Europe. 

(89)  See key innovation indicators table: Patent Cooperation 
Treaty per billion GDP (in purchasing power standards) 

(90)  Source: EIS. 

55 

R&D intensity (GERD as % of GDP)1.131.341.471.591.652.26Public expenditure on R&D as % of GDP0.430.340.360.360.390.76Business enterprise expenditure on R&D (BERD) as % of GDP0.680.981.111.221.241.49Scientific publications of the country within the top 10% most cited publications worldwide as % of total publications of the country 54.96,3:::9.8PCT (Patent Cooperation Treaty) patent applications per billion GDP (in PPS)1.41.51.1::3.3Public-private scientific co-publications as % of total publications8.8910.710.511.27.1Public expenditure on R&D financed by business enterprise (national) as % of GDP0.0570.0290.01::0.054New graduates in science & engineering per thousand pop. aged 25-347.210.79.317.6:16Total public sector support for BERD as % of GDP0.2650.3530.245::0.194R&D tax incentives: foregone revenues as % of GDP0.1630.1480.053::0.100Environment-related patents12,1 10,8 11::13,3 Venture capital (market statistics) as % of GDP0.010.0390.0610.080.0870.074Employment in fast-growing enterprises in 50% most innovative sectors7.58.78.1::5.5Finance for innovation and economic renewalEU average (1)Key indicators Quality of the R&I systemAcademia-business cooperationHuman capital and skills availabilityPublic support for business enterprise expenditure on R&D (BERD)Green innovation Hungary20102015201920202021 
                                                 
 
  
 
ANNEX 12: INDUSTRY AND SINGLE MARKET 

Hungarian  businesses  are  confronted  by  a 
tough  economic  climate  related  to  high  and 
rising  inflation  and  energy  prices.  The  energy 
crisis  is  having  a  substantial  impact  on  the 
operations  of  businesses,  especially  for  energy-
intensive  industries  and  small  and  medium  sized 
enterprises (SMEs), which dominate the Hungarian 
economy.  By  late  2022  producer  prices  were 
increasing  more  rapidly  than  in  almost  all  other 
Member  States (91).  The  confidence  indicator  in 
industry  was  also  plummeting (92),  adversely 
affected  notably  by  the  decrease 
in  orders 
recorded in manufacturing.  

Hungary’s  growth  has  relied  on  employment 
growth,  but  prospects  need  a  stronger 
contribution  from  productivity.  Productivity 
growth  has  been  slow  since  the  financial  crisis, 
with  productivity  per  person  per  hour  worked 
27.3%  less  than  for  the  EU27.  Real  labour 
productivity  per  person  employed  increased  by 
6.0% in 2021 after the pandemic-related declines 
of 2020. It is forecast to have increased by 3.4% 
in  2022.  For  industry,  real  labour  productivity  per 
person  increased  by  4%  in  2021,  above  EU 
performance;  gross  value  added  per  person 
employed at constant prices increased by 5.2% in 
2021,  below  the  EU  average  of  7%.  Total  factor 
productivity  performance  has 
this 
decade  but  remains  below  direct  peers,  indicating 
further  potential  for  productivity  growth  (chart 
A12.1).  

improved 

Productivity varies significantly according to 
exposure  to  international  markets  and  by 
size  of  firm  (chart  A12.2).  There  are  large 
productivity  differences  between  globally  oriented 
large  firms  and  the  rest  of  the  economy, 
particularly  small  and  domestically  orientated 
firms.  The  difference  between  traded  and  non-
traded  sectors  points  to  the  importance  of  global 
competition in promoting higher productivity.  

Hungarian  firms  are  often  in  the  low  value-
added  stage  of  global  supply  chains,  focused 
on midstream activities, which would explain their 
poor  relative  productivity  performance,  and  make 
to  value  chain 
them  particularly  vulnerable 
disruptions.  Productivity  performance 
the 
construction  sector  is  consistently  below  the  EU 

in 

(91)  Statistics | Eurostat (europa.eu) Producer prices in industry, total 

- quarterly data 

(92)  Statistics | Eurostat (europa.eu) Industrial confidence 

indicator 

(ESAF) 

average,  and  that  of  manufacturing  and  market 
services.  According  to  the  2021  SME  Access  to 
Finance 
the  European 
Index (under 
Investment Fund) (93), Hungarian SMEs faced some 
of the least favourable financing conditions in the 
EU. Access to public financial support is below the 
EU  average,  and  in  a  context  of  a  dominant 
number  of  SMEs  in  the  economy  -  this  can  be  a 
considerable  constraint  to  the  scaling  up  and 
growth of these companies. 

Graph A12.1: Total factor productivity growth 

Source: European Commission calculations based on AMECO 

Graph A12.2: Productivity performance by sector 

Source: European Commission calculations based on AMECO 

Despite  an  ambitious  national  target,  the 
share  of  renewable  sources  in  gross  final 
energy  consumption  is  among  the  lowest  in 
the  EU.  In  2020  electricity  production  capacity 

(93)  EIF working_paper_2022/83.pdf 

56 

8090100110120130140050607080910111213141516171819202122*23*24*(2005=100)HUDECZSKEU6080100120140160180020406081012141618202002=100Market services (G_N)Manufacturing (C)Construction (F)Tradable (A_E, G_J)Non tradable (F, K_U) 
 
                                                 
     
 
     
                                                 
 
 
from  renewable  sources,  at  16%,  was  one  of  the 
lowest in the EU (94). Most progress has been made 
under  solar  power  generation,  which  has  seen  a 
28%  increase  in  generating  capacity  since  the 
beginning of 2021.  

Progress  is  at  least  partially  hindered  by 
permitting  delays.  Administrative  authorisation 
is  governed  regionally  or  locally,  which  has  the 
benefit  of  reflecting  specific  local  aspects,  but  it 
has fragmented the interpretation of national laws 
and regulations. The administrations approach and 
interpret guidelines differently, leading to differing 
permitting procedures from locality to locality. This 
fractures the regulatory framework and introduces 
instability for investors. 

performs 

Hungary ranked 22nd amongst Member States 
in  the  2022  Digital  Economy  and  Society 
Index  (DESI),  with  performances  below  the 
in  several 
EU  average  and  objectives 
on 
dimensions.  Hungary 
best 
broadband  connectivity  and  worst  on 
the 
integration of digital technology in firms’ activities. 
The  COVID-19  pandemic  highlighted  weaknesses 
in  the  areas  of  digital  skills,  digitalisation  of 
companies and digital public services. According to 
the 2022 Digital Economy and Society index, only 
45% of SMEs have at least a basic level of digital 
intensity, compared with a just under 60% for the 
EU (95). 

Hungary 
is  an  open  economy,  highly 
integrated into the single market and relying 
heavily on EU sources (27.3% of value added 
is sourced from the rest of the EU compared 
to an EU average of 19.7%). However, barriers 
to competition increasingly threaten this, hindering 
the free functioning of the market and creating an 
unstable  business  environment.  The  authorities 
sign 
large 
manufacturing firms and their investment projects 
benefit  from  significant  government  support. 
Outside of these areas, in an endeavour to create 
“national  champions”,  government  decrees  are 
used to impose price caps on production costs (for 
example in the  construction sector), distorting the 
free functioning of the market.  

agreements 

strategic 

with 

retail 

restrictions 

from  being  examined  by 

In  retail,  frequent  changes 

Service  activities  face  several  barriers  to 
in 
competition. 
regulation  create  a  chronically  unstable  business 
environment.  Specific 
(e.g. 
introduction  of  price  caps  for  certain  food 
commodities  and  a  specific  retail  tax)    hold  back 
efficiency  gains  and  affect  competition.  The 
government  can  exempt  merger  and  acquisition 
the 
transactions 
competition  authority,  with  the  result  that  no 
examination  ever  takes  place.  The  provision  of 
several  services  is  entrusted  to  state-owned  or 
these 
private  firms  specifically  created  for 
purposes, which operate without competition. Slow 
and  costly insolvency  procedures may  also  hinder 
the  restructuring  of  failing  businesses.  A  number 
of  key  milestones  in  the  Hungarian  recovery  and 
resilience plan relate to tackling these weaknesses. 
Hungary  has  the  highest  number  of  regulated 
professions in the EU, with professions like tourist 
guides and patent/trademark agents having levels 
of  restrictiveness  above  the  EU  average.  The 
fragmented  system  regulating  civil  engineers 
hinders the free movement of these professionals,  
and  rules  spreading  responsibility  over  different 
categories  of  professionals  in  the  same  area  of 
activity impact on service provision.  

The  Single  Market  Scoreboard  indicates  that 
Hungary performs  relatively  well  at transposing 
EU law. The transposition deficit stood at 0.7% at 
the  end  of  2021  (EU  average  1.6%).  In  contrast, 
there  were  30  ongoing  infringement  procedures, 
above the EU average of 27 per Member State (96). 

Hungary’s  economic  development  relies on  a 
capacity  to  remove  obstacles  to  sustainable 
productivity  growth.  While  part  of 
the 
productivity  slowdown  reflects  increasing  labour 
shortages  (with  the  consequent  inclusion  of  low-
productivity  workers), 
structural  weaknesses 
remain significant. A comprehensive SME strategy, 
particularly  one  focused  on  digitalisation  and 
digital  skills,  could  benefit  the  country,  as  well  as 
business 
addressing  weaknesses 
the 
Innovation 
environment.  The  2022  European 
Scoreboard  shows  Hungary 
the 
innovation  laggards,  with  performance  relative  to 
the EU decreasing over time (see also Annex 11 on 
innovation). 

is  among 

in 

(94)  Statistics | Eurostat (europa.eu) Electricity production 

capacities by main fuel groups and operator 

The  procurement  market  remains  vulnerable 
to anticompetitive practices. The proportion of 

(95)  For a more complete analysis, see Annex 10 on Digital 

Transformation  

(96)  2022 Single Market Scoreboard  

57 

 
                                                 
 
                                                 
contracts awarded in procedures where there was 
just  one  bidder,  despite  recent  decreases,  is  still 
high at 33% (97). This lack of competition in public 
procurement  decreases  the  incentives  to  innovate 
for  those  companies  that  cannot  enter  the 
procurement market, as well as for the companies 
benefitting  from  the  situation.  In  February  2021, 
the  government  set  itself  an  ambitious  target  of 
reducing  the  percentage  of  public  procurement 
procedures with only a single bid to less than 15%.  

Graph A12.3: Business environment and 
productivity drivers 

obligation  to  conduct  public  procurement 
procedures is an important development. The 
updates  of  the  Electronic  Procurement  System  to 
allow  the  structured  extraction  of  all  contract 
award and subcontracting data and the decision to 
use the Single Market Scoreboard methodology for 
measuring  single  bids  are  essential  aspects  of 
increasing  transparency  and  the  quality  of  the 
available data on public procurement. The recently 
adopted performance measurement framework, if 
effectively  implemented  in  practice,  will  have 
positive effects on the public procurement market. 
The  achievement  of  these  milestones  is  forecast 
for  between  2022  and  2026.  It  will  help  to 
improve  the  quality  of  available  data,  and  the 
transparency and efficiency of public procurement 
in Hungary. 

Source: 1) % of GDP, 2021 Eurostat;  
2) composite indicator, 2021 European Investment Fund 
access to finance index;   
3) average payment delay in number of days, 2022 Intrum;  
4) % of firms in manufacturing facing constraints, 2022 
European Commission business consumer survey;   
5) proportion of contracts awarded with a single bidder, 2022 
Single Market Scoreboard. 

of 

reforms 

implementation 

The 
and 
investment  under  the  Hungarian  recovery  and 
resilience  plan  (RRP) (98)  represents  a  historic 
opportunity  to  tackle  many  of  these  challenges 
and to pave the way for a successful transition of 
the  Hungarian  economy  in  both  the  digital  and 
green sectors. Particularly important in this respect 
are measures to improve the procurement market, 
which, if implemented, could improve predictability 
and transparency in the business environment.  

The  amendment  of  the  Public  Procurement 
Act to include public interest trusts under the 

(97)  Single Market Scoreboard (europa.eu) – proportion of 

procurement procedures published in TED during 2022. 

(98)  Recovery and resilience plan for Hungary (europa.eu) 

58 

1) Businessinvestments2) EIF access tofinance index3) Payment gap- G2B3) Payment gap- B2B4) Materialshortage4) Labourshortage5) Single bidsEuropean UnionHungary 
     
                                                 
 
Table A12.1: Industry and the Single Market 

(*) Last available year 
Source: (1) AMECO, (2) Eurostat, (3) ECFIN BCS, (4) Eurostat, (5) COMEXT and Commission calculations, (6) Eurostat, (7) Eurostat, 
(8) OECD, (9) Single Market Scoreboard, (10) EIB survey, (11) Eurostat: (12) Intrum, (13) SAFE Survey, (14) EIF SME Access to 
Finance Index. 

59 

POLICY AREAINDICATOR NAME20182019202020212022EU27 average (*)Net private investment, level of private capital stock, net of depreciation, % GDP (1)6.68.66.77.78.73.7Net public investment, level of public capital stock, net of depreciation, % GDP (1)2.32.62.42.210.4Real labour productivity per person in industry (% yoy)(2)0.12.3-3.94.84.41.4Cost competitive-nessNominal unit labour cost in industry (% yoy)(2)4.32.9-0.51.6-0.32.9Material shortage (industry), firms facing constraints, % (3)1099232247Labour shortage using survey data (industry), firms facing constraints, % (3)615924393928Vacancy rate (business economy)(4)2.82.41.82.22.73.1Concentration in selected raw materials, Import concentration index based on a basket of critical raw materials (5)0.20.180.20.20.210.18Installed renewables electricity capacity, % of total electricity produced (6)7.812.116.119.7n.a.50.9Single Market integrationEU trade integration, % (7)60.759.657.558.466.145.8RestrictionsEEA Services Trade Restrictiveness Index (8)0.050.050.050.050.050.05Public procurement Single bids, % of total contractors (9)404039403329Investment obstaclesImpact of regulation on long-term investment, % of firms reporting business regulation as major obstacle (10)6.19.210.87.68.429.6Bankruptcies, Index (2015=100)(11)n.a.n.a.n.a.44.181.686.8Business registrations, Index (2015=100) (11)n.a.n.a.n.a.166.8165.4121.2Payment gap - corporates B2B, difference in days between offered and actual payment (12)5118121113Payment gap - public sector, difference in days between offered and actual payment (12)1082081415Share of SMEs experiencing late payments in past 6 months, % (13)n.a.50.943.934.640.643EIF Access to finance index - Loan, Composite: SME external financing over last 6 months, index values between 0 and 1 (14)0.250.310.280.13n.a.0.46EIF Access to finance index - Equity, Composite: VC/GDP, IPO/GDP, SMEs using equity, index values between 0 and 1 (14)0.110.120.130.06n.a.0.23BUSINESS ENVIRONMENT - SMEsBusiness demographyLate paymentsAccess to financeHEADLINE INDICATORSEconomic StructureRESILIENCEShortagesStrategic dependenciesSINGLE MARKET 
 
   
 
ANNEX 13: PUBLIC ADMINISTRATION 

This  Annex  outlines  the  performance  of 
Hungary’s  public  administration,  which  is 
essential for providing services and carrying 
out  reforms.  Overall,  Hungary  ranks  in  the 
bottom third of the 27 Member States (EU-27) on 
government 
has 
included reforms in its recovery and resilience plan 
(RRP),  aimed  at  improving  judicial  independence 
and  the  quality  of  legislation,  which  include 
stakeholder engagement and consultation.  

effectiveness (99).  Hungary 

Hungary  has  a  relatively  young  civil  service. 
The ratio of staff aged 49 or below to those aged 
50  or  above  is  higher  than  the  EU  average. 
However,  the  share  of  employees  in  the  public 
administration  with  higher  education  is  relatively 
low,  unlike  the  participation  of  civil  servants  in 
adult  learning  (Graph  A13.2).  Gender  parity  in 
senior  civil  service  positions  is  the  lowest  of  the 
EU-27 (Graph A13.1). The rules governing the civil 
service  are  rather  fragmented,  with  an  increasing 
number  of  sectors  operating  according  to  their 
own  separate  regulatory  frameworks  for  human 
resources. The recruitment rules are opaque.  

Graph A13.1: Public administration. Share of 
women and men in senior positions (2022 data) 

increased  monitoring  of 
rules  and  greater 
alignment of fiscal rules with EU regulations, there 
is  still  room  to  further  develop  monitoring  and 
forecasting of the fiscal situation.  

The  justice  system  performs  efficiently  but 
concerns about judicial independence persist. 
The  RRP  includes  a  comprehensive  set  of  key 
institutional  reforms  to  strengthen  rule  of  law, 
including  strengthening  the  independence  of  the 
judiciary (100). The average time it takes to resolve 
litigious  civil  and  commercial  cases  at  first 
instance  is  short  (145  days  in  2021),  as  is  the 
average  time  to  resolve  administrative  cases  at 
first instance (103 days in 2021). Digital tools are 
widely used in courts, including an electronic case 
management system, and technology for distance 
communication  and  to  provide  a  secure  remote 
working environment for judges and staff.  

quality 

of  Hungary’s 

initiated  during 

regulatory 
The 
governance is weakened by the frequent use 
of  emergency  procedures  for  law  adoption. 
Emergency  procedures  that  deviate  from  the 
legislative  process,  and  expedited 
standard 
procedures 
the  COVID-19 
pandemic  extended  since  the  beginning  of  the 
Russian  war  of  aggression  against  Ukraine, 
eliminate  the  possibility  of  effective  stakeholder 
legislation (101). 
consultation  before  voting  of 
Classified  decisions  of  the  government,  linked  to 
the  allocation  of  funds,  have  introduced  opaque 
practices  with  a  fiscal  impact.  Ex  ante  regulatory 
impact  assessments  and  ex  post 
legislative 
scrutiny  are  also 
in  practice  by  the 
limited 
extensive  use  of  state  of  emergency  procedures 
for  adopting  legislation,  following  the  relevant 
constitutional  changes  in  May  2022.  The  RRP 
includes  measures  to  improve  the  quality  of  law-
impact 
making, 
assessment,  to  support  the  effective  involvement 
of  stakeholders  and  social  partners,  and  to 
improve the transparency of public information.  

including  with 

respect 

to 

Source: European Institute for Gender Equality  

Hungary has a low ranking on selected fiscal 
framework  indicators.  Its  performance  on  the 
national  medium-term  budgetary  framework,  and 
the  strength  of  its  fiscal  rules’  indices,  are  well 
below  the  EU  average.  Hungary`s  independent 
fiscal  institution  has  a  narrower  scope  of  activity 
than  that  of  the  average  EU  country.  Despite 

(99)  Worldwide Governance Indicators, 2021. 

There is room for improving the digitalisation 
of public services (Table A13.1 and Annex 10). 

(100) For a more detailed analysis of the performance of the 
justice system in Hungary, see the 2023 EU Justice 
Scoreboard (forthcoming) and the country chapter for 
Hungary of the 2023 Rule of Law Report (forthcoming). 

(101) European Commission, Public administration and governance: 
Hungary, Publications Office of the EU, 2023 (forthcoming).  

60 

0102030405060708090100HUEU-27MenWomen 
 
     
                                                 
                                                 
 
Table A13.1: Public administration indicators 

(1) High values denote a good performance, except for indicator # 6. (2) 2022 value. If not available, the 2021 value is shown. 
(3) Measures the user centricity and transparency of digital public services as well as the existence of key enablers for the 
provision of those services. (4) Defined as the absolute value of the difference between the percentage of men and women in 
senior civil service positions. Flags: (b) break in time series; (d) definition differs; (u) low reliability. 
Source:  ICT use survey, Eurostat (# 1); E-government benchmark report (# 2); Open data maturity report (# 3); Labour Force 
Survey, Eurostat (# 4, 5, 7), European Institute for Gender Equality (# 6); Fiscal Governance Database (# 8, 9); OECD Indicators of 
Regulatory Policy and Governance (# 10). 

The share of e-government users is above the EU 
average,  unlike  the  e-government  benchmark’s 
overall index. 

Graph A13.2: Hungary. a) Share of 25-64 year olds with tertiary education attainment level by sector and 
occupation, b) Participation rate of 25-64 year olds in adult learning (%) by sector and occupation 

Source: European Commission, based on the Labour Force Survey. 2022 data 

61 

HU201720182019202020212022EU-27(2)159.466.663.870.181.5n/a64.82n/an/an/a63.366.268.172.93n/an/a0.30.30.60.70.8433.836.638.841.245.4 (b)46.652.0511.912.311.010.68.3 (b)20.116.9651.063.264.263.462.657.411.072.52.52.42.22.1 (b)2.11.580.60.60.60.60.6n/a0.790.70.80.80.80.8n/a1.5101.27n/an/an/a1.28n/a1.7Medium term budgetary framework indexIndicator (1)E-government and open government dataShare of individuals who used the internet within the last year to interact with public authorities (%)E-government benchmark overall score (3) Open data and portal maturity indexEducational attainment level, adult learning, gender parity and ageingShare of public administration employees with tertiary education (levels 5-8, %)Participation rate of public administration employees in adult learning (%)Gender parity in senior civil service positions (4)Ratio of 25-49 to 50-64 year olds in NACE sector OPublic financial management Strength of fiscal rules indexEvidence-based policy makingRegulatory governance0510152025HUEU-27HUEU-27HUEU-27HUEU-27Public admin.,defence andsocial securityEducationHealthcareTotal economyb) Adult learning High-skilled occupationsMedium-skilled occupationsUnskilled occupationsArmed forces01020304050607080HUEU-27HUEU-27HUEU-27HUEU-27Public admin.,defence andsocial securityEducationHealthcareTotal economya) Higher education attainmentHigh-skilled occupationsMedium-skilled occupationsUnskilled occupationsArmed forces 
 
 
 
   
 
  
FAIRNESS 
ANNEX 14: EMPLOYMENT, SKILLS AND SOCIAL POLICY CHALLENGES IN LIGHT OF 
THE EUROPEAN PILLAR OF SOCIAL RIGHTS  

The  European  Pillar  of  Social  Rights  is  the 
compass  for  upward  convergence  towards 
better  working  and  living  conditions  in  the 
EU. This Annex provides an overview of Hungary’s 
progress in implementing the Pillar’s 20 principles 
and EU headline and national targets for 2030 on 
employment, skills and poverty reduction. 

Table A14.1: Social Scoreboard for Hungary 

Update of 27 April 2023. Members States are classified on 
the Social Scoreboard according to a statistical methodology 
agreed with the EMCO and SPC Committees. It looks jointly at 
levels and changes of the indicators in comparison with the 
respective EU averages and classifies Member States in seven 
categories. For methodological details, please consult the 
Joint Employment Report 2023. Due to changes in the 
definition of the individuals' level of digital skills in 2021, 
exceptionally only levels are used in the assessment of this 
indicator; NEET: neither in employment nor in education and 
training; GDHI: gross disposable household income. 
Source: Eurostat 

for 

remain 

labour  market  performance 
The  overall 
improve,  but  considerable 
continues  to 
challenges 
long-term 
the 
unemployed,  Roma,  persons  with  disabilities 
and  people  with  low  skills.  The  employment 
rate  (20-64  age  group)  continued  to  improve 
despite  a  slowing  economy.  It  reached  80.2%  in 
2022 and is above the EU average of 74.7%. Over 

the  same  period,  the  unemployment  rate  (15-74 
age  group)  decreased  by  0.5 pps  to  3.6%  (below 
the EU average of 6.1%). The rate of young people 
not  in  education,  employment  or  training  (NEET, 
15-29 age group) remains relatively low at 10.8% 
in 2022 (EU: 11.7%). However, women, people with 
low  educational  attainment,  people  living  in  rural 
areas and Roma are two to three times more likely 
to  become  NEET.  In  terms  of  the  long-term 
unemployment rate, Hungary performs better than 
average (1.2% vs EU 2.4%). At the same time, one 
third  of  registered  unemployed  people  are  long-
term  unemployed  while 
the  duration  of 
unemployment  benefits  is  for  a  maximum  of  3 
months  under 
legislation.  The 
the  current 
employment gap for Roma remains substantial at 
28  pps  in  2021 (102).    The  disability  employment 
gap has also remained persistently high above 28 
pps  (EU:  23.1  pps)  since  2014.  The  employment 
gap  between  low-  and  high-skilled  people  has 
been  increasing  in  recent  years  (to  33.3  pps). 
Moreover,  regional  disparities  in  employment  and 
unemployment  rates  also  persist  (see  Annex  17). 
Half of the active labour market policy funding in 
2023  is  still  focused  on  public  work  schemes. 
There  is  therefore  still  room  for  improvement  in 
the  public  employment  service  and  social 
protection system to provide timely and adequate 
assistance and reach Hungary’s target to increase 
to  85%  by  2030. 
the  employment 
Furthermore,  social  dialogue  in  Hungary  remains 
among  the  weakest  in  the  EU  and  has  further 
of 
deteriorated 
constraints  on  teachers’  right  to  strike  in  2022 
curbs  workers’ 
the 
attractiveness of the teaching profession. 

rights  and  may  harm 

introduction 

recently. 

rate 

The 

There  is  still  scope  for  improving  gender 
equality  in  the  labour  market.  The  overall 
gender  employment  gap  is  better  than  the  EU 
average  (9.8 pps  vs  10.6  pps  in  the  EU  in  2022). 
Among Roma, however, the gap grew significantly 
from  15.2  pps  in  2019  to  23.5  pps  in  2021. 
Inequality  of  pay  is  higher  than  the  EU  average 
(the gender pay gap in 2021 was 17.3% vs 12.7% 
in the EU). Caring responsibilities still keep one out 
of  five  women  who  would  like  to  work  from 
entering 
labour  market.  Participation  of 
children aged less than 3 years in formal childcare 
was  13.8%  in  2021,  well  below  the  EU  average 

the 

(102) Labour Force Survey, Hungarian government 

62 

12.449.110.89.84.1580.23.61.2142.819.423.350.628.82.413.81.1Critical situationTo watchWeak but improvingGood but to monitorOn averagePolicy areaHeadline indicatorEqual opportunities and access to the labour marketEarly leavers from education and training(% of population aged 18-24, 2021)Youth NEET rate(% of population aged 15-29, 2022)Gender employment gap(percentage points, 2022)Income quintile ratio(S80/S20, 2021)Share of individuals who have basic or above basic overall digital skills (% of population aged 16-74, 2021)Dynamic labour markets and fair working conditionsSocial protection and inclusionAt risk of poverty or social exclusion rate for children                       (% of population aged 0-17, 2021)Disability employment gap(percentage points, 2021)Better than averageAt risk of poverty or social exclusion rate                                            (% of total population, 2021)Employment rate(% of population aged 20-64, 2022)Unemployment rate(% of active population aged 15-74, 2022)Long term unemployment(% of active population aged 15-74, 2022)GDHI per capita growth                                                              (2008=100, 2021)Best performersImpact of social transfers (other than pensions) on poverty reduction (% reduction of AROP, 2021)Children aged less than 3 years in formal childcare(% of population under 3-years-old, 2021)Self-reported unmet need for medical care(% of population 16+, 2021)Housing cost overburden(% of total population, 2021) 
 
 
 
   
 
                                                 
 
60%  of  adults  participating  in  training  every year 
by 2030. To improve the population’s digital skills, 
Hungary  plans  to  invest  at  least  EUR  400  million 
of  RRF  and  ESF+  funds  in  digital  education  in 
schools,  vocational  education  and  training  and 
higher  education  institutions,  as  well  as  digital 
skills  training  for  adults,  including  those  from 
vulnerable groups. 

There is room for social policies to tackle the 
growing  economic  and social  difficulties.  The 
severe  material  and  social  deprivation  rate  was 
still  one  of  the  highest  in the  EU  in  2021  (10.2% 
vs 6.3% in the EU) and was especially high among 
children  (15.2%  vs  7.5%  in  the  EU)  and  Roma 
(55.5%).  The  share  of  those  who  have  difficulties 
in  making  ends  meet  is  much  higher  among 
persons  with  disabilities  (17.4%  vs  9.5%  in  the 
EU).  Households  without  stable  employment  – 
including  temporary  contract  workers,  who  have 
limited access to social protection  – have faced a 
weakening social safety net over the past decade. 
The real value of the minimum income has halved 
since 2010, and its adequacy is one of the lowest 
in the EU (21% of the poverty threshold vs 59% in 
the  EU).  Food  prices  increases  were  among  the 
highest in the EU in 2022 (47.2% vs 17.9% in the 
EU)  and  particularly  affected  the  poorest  families 
who  spend  the  highest  share  of  their  income  on 
food.  Amendments  to  social  protection  legislation 
reduced  the  state’s  legal  responsibility  to  provide 
social care. According to the legislation, social care 
is  a  last  resort  when  people  are  not  able  to  take 
care  of 
the 
municipality  do  not  fulfil  their  care  duty.  To 
‘Catching-up 
inclusion, 
promote 
municipalities’  initiative  will  improve  access  to 
social services, healthcare, education, employment 
and housing in the 300 poorest municipalities and 
will  focus  on  children.  It  will  be  financed  by  EU 
funds  from  the  ESF+, the ERDF  and  the  RRF.  This 
will help Hungary meet its target of decreasing the 
material  and  social  deprivation  rate  of  families 
with children to 13%, thereby reducing the number 
of people at risk of poverty  or social exclusion by 
292 000 by 2030. 

themselves  and 

relatives  and 

social 

the 

(36.2%).  Faced  with  a  high  demand  (70 000 
places),  the  government  plans  to  create  new 
crèche  places,  helped  by  significant  Recovery  and 
Resilience  Facility 
(RRF),  cohesion  funds  and 
domestic  funds  contributions.  Gender  equality 
could  be  further  improved  with  measures  to 
promote  sharing  care  responsibilities  between 
parents  and  introduce  non-transferable  parental 
leave. 

Hungary  still  faces  challenges  in  terms  of  a 
high  early  school  leaving  rate,  especially  in 
rural  areas,  and  poor  performance  in  basic 
skills.  The  country’s  early  school  leaving  rate  is 
higher  than  the  EU  average  (12.4%  vs  9.6%  in 
2022)  and  has  been  stagnating  since  2011. 
Northern Hungary (23.6%) and rural areas (19.7%) 
are particularly affected, with some of the highest 
early  school  leaving  rates  in  the  EU  (see  Annex 
13).  Overall,  the  share  of  16-18-year-olds  in 
education  in  recent  years  has  been  falling  and  is 
below the EU average. About a quarter of 15-year-
in  basic  skills (103). 
olds  are 
Educational  attainment  and 
socio-economic 
background  affect  basic  literacy  and  numeracy 
skills  rates  of  adults more  heavily than  the OECD 
average (104).  The  share  of  people  with  at  least 
basic digital skills was 49% in 2021 compared to 
54%  in  the  EU.  Values  are  significantly  lower 
among  people  with  low  education,  unemployed 
people  and  those  aged  above  55.  This  creates 
challenges for employability, especially among the 
most vulnerable. ESF+ resources are earmarked to 
prevent and tackle early school leaving. 

low-performers 

Despite  the  challenges  related  to  basic  and 
digital  skills  and  need  for  upskilling,  the 
share  of  adults  participating 
in  adult 
learning is low. The share of people aged 25 to 
64 who had participated in adult training (over the 
past  4  weeks)  was  5.9%  in  2021,  compared  to 
10.8% in the EU, and is significantly lower among 
low-skilled  and  unemployed  people.  Unemployed 
people  also  lack  sufficient  support  to  access 
relevant  training,  and  upskilling  opportunities  for 
low-skilled  and  disadvantaged  people  are  scarce. 
There  is  room  for  improvement  of  the  enabling 
policy  framework  to  achieve  tangible  results, 
especially  for  the  low-skilled  and  disadvantaged 
groups. This would help reach Hungary’s target of 

(103) OECD, PISA 2018. 

(104) Literacy and numeracy skills. 2110109 - Hazai jelentés.indd 

(nive.hu). 

63 

 
                                                 
Table A14.2: Situation of Hungary on 2030 
employment, skills and poverty reduction targets 

(1) Adult Education Survey, adults in learning in the past 12 
months. (2) Number of people at risk of poverty or social 
exclusion (AROPE), reference year 2019. (3) Hungary 
expresses its national target as a reduction of the material 
and social deprivation rate of families with children to 13% 
and thereby a reduction of the number of people AROPE by 
292 000. Source: Eurostat, DG EMP 
Source:  

64 

IndicatorsLatest dataTrend            (2015-2022)National target by 2030EU target by 203080.2(2022)54.8(2016)-58(2021)Poverty reduction2,3  (thousands)-292-15 000Employment (%)8578Adult learning1 (%)6060 
 
   
 
ANNEX 15: EDUCATION AND TRAINING 

This  Annex  outlines  the  main  challenges  for 
Hungary’s  education  and  training  system  in  light 
of  the  EU-level  targets  and  other  contextual 
indicators  under  the  European  Education  Area 
strategic framework, based on the 2022 Education 
and Training Monitor. 

are 

shortages 

the  salaries  of  other 

Teacher 
increasingly 
challenging.  The  teacher  population  is  ageing;  in 
2020, 46% of teachers were aged 50 or older (105). 
Teacher salaries in Hungary are one of the lowest 
both  in  absolute  terms  and  in  purchasing  power 
parity  comparison  among  the  EU  countries  that 
are  OECD  members.  They  are  equivalent  to  only 
47-52%  of 
tertiary 
graduates,  depending  on educational  level  (EU-22 
average:  82-92%).  Applications  for  initial  teacher 
education  have  dropped  greatly  over  the  past  3 
years. Dropout rates are high and less than half of 
graduates  actually  enter  the  profession.  The 
government,  with  co-financing  from  the  European 
Social  Fund  Plus,  intends  to  raise  the  level  of 
teacher  salaries,  by  January  2025,  to  a minimum 
of  80%  of  the  average  level  of  tertiary  graduate 
workers.  Nevertheless,  the  teaching  profession 
remains  of  little  attraction  because  of  the  high 
workload and the low level of school autonomy. 

Graph A15.1: Number of initial teacher education 
(ITE) applications between 2016 and 2022 

the 

had no kindergarten (KSH, 2020). The government 
in 
employment 
amended 
kindergartens 
in  2020,  thereby  reducing  the 
required  number  of  qualified  teaching  staff. 
Nevertheless,  in  December  2022,  there  were  still 
over  2 450  teacher  vacancies  in  Hungary’s  4 575 
kindergartens (106). 

conditions 

in 

the 

least-developed  districts, 

Basic skills are below the EU average and the 
rate  of  early  leavers  from  education  and 
training  (ELET)  has  not  improved  over  the 
past  decade.  In  2022,  ELET  was  12.4%  (EU 
average:  9.6%;  EU-level  target:  9%).  The  rate  is 
higher 
in 
vocational  training  schools,  and  among  Roma 
(62.7%  v  9.9%  among  non-Roma 
in  2021) 
(MNTFS,  2022).  Participation  data  shows  that 
lowering the compulsory school age from 18 to 16 
in  2012/13  had  a  significant  negative  impact  on 
school  attendance  (KRTK-KTI,  2021).  Building  on 
former projects funded under the European Social 
Fund, Hungary plans to continue providing support 
to  schools  with  a  high  share  of  dropouts  and  low 
performance,  with  a  view  to  prevent  early  school 
leaving.  Education  outcomes  at  the  age  of  15,  as 
measured  by  the  2018  OECD  Programme  for 
International  Student  Assessment 
(PISA),  are 
significantly below EU averages and have declined 
since  2009.  The  low  levels  of  effectiveness  and 
fairness  in  the  school  system  are  likely  linked  to 
the  low  level  of  curricular  autonomy,  the  lack  of 
socio-economic  diversity  within  schools  and  the 
low  salaries  for  teachers  (European  Commission, 
2018).  The  national  recovery  and  resilience  plan 
includes measures to improve the quality of lower-
secondary  education  and  the  provision  of  special 
education,  and  to  support  teachers  in  acquiring 
new specialisations. 

Source: Felvi database 

Participation  in  early  childhood  education 
and  care  (ECEC)  corresponds  to  the  EU 
average  but 
teacher  shortages  affect 
quality. From age 3, 92.8% of children participate 
in ECEC (EU average: 93.0%; EU-level target: 96%). 
However,  the  regional  coverage  of  kindergartens 
remains unbalanced: in 2020, 31% of settlements 

The  number  of  tertiary  graduates  cannot 
meet the growing demand for a highly skilled 
workforce.  At  31.9%,  Hungary  has  one  of  the 
lowest rates of the population aged 25-34 holding 
a tertiary degree and this rate has only increased 
by  less  than  1  percentage  point  since  2015  (EU 
average:  42.0%;  EU-level  target:  45.0%).  This  is 
partly  linked  to  high  dropout  rates,  which  are 
highest in IT, technical and science programmes. In 
response,  Hungary  plans  to  implement  measures 
on preventing dropout in several study fields from 
the  Economic  Development  and 
Innovation 
Operational  Programme+.  More  than  one  third  of 
bachelor’s  studies  are  finished  without  a  degree 

(105) [educ_uoe_perp01]. 

(106) https://kozigallas.gov.hu 

65 

05101520252016201720182019202020212022in thousandsAll ITEPre-primary educationPrimary education 
 
  
                                                 
                                                 
 
Table A15.1: EU-level targets and other contextual indicators under the European Education Area 
strategic framework 

Source: (1.3,4.5,7.8,9.10,11) = Eurostat; 2 = OECD (PISA); 6 = European Commission (Joint Research Centre). Notes: Data is not 
yet available for the remaining EU-level targets under the European Education Area strategic framework, covering 
underachievement in digital skills and participation of adults in learning. The equity indicator shows the gap in the share of 
underachievement in reading, mathematics and science (combined) among 15-year-olds between the lowest and highest quarters 
of socio-economic status. 

(OH, 2020). The employment rate of recent tertiary 
graduates 
(91.1%)  exceeds  the  EU  average 
(84.9%),  indicating  a  high  demand.  The  share  of 
socio-economically  disadvantaged  pupils  passing 
the  secondary  school  leaving  exam  and  applying 
for  tertiary  education  is  only  3%  (Varga,  2021). 
The  proportion  of  students  with  disabilities 
remains  below  1%  and  university  students  with 
special needs face serious barriers to their studies 
(Petri & Markos, 2021).  By  2022, all but six state 
universities  were  restructured  to  come  under  the 
control  of  trust  funds  set  up  by  the  government. 
The boards have all decision-making powers in the 
universities’  key  areas  without  being  accountable 
for their own operation and decisions, either to the 
government  or  to  the  academic  body  of  the 
university.  In  its  statement  of  February  2023, the 
European University Association observed that the 
configuration of boards undermines the autonomy 
of  Hungarian  universities  and 
recommended 
concrete  changes  (EUA,  2023).  The  European 
Commission  raised  concerns  about  academic 
freedom with regard to Hungary’s compliance with 
the  EU  Charter  of  Fundamental  Rights.  Overall 
participation 
learning  remains  fairly 
in  adult 
limited (see Annex 14). 

66 

96%90.7%91.9%92.8%202093.0%2020Reading< 15%27.5% 20.0%25.3%201822.5%2018Mathematics< 15%28.0% 22.3%25.6%201822.9%2018Science< 15%26.0% 21.1%24.1%201822.3%2018< 9 %11.6%b11.0%12.4% 9.6%Men12.0%b12.5%13.0%11.1%Women11.2%b9.4%11.7%8.0%Cities6.7%b9.6%5.3%8.6%Rural areas15.9%b12.2%19.7%10.0%Native11.6%b10.0%12.3%8.3%EU-born:b, u20.7%:u20.3%Non EU-born:b, u23.4%:u22.1%6Equity indicator (percentage points)::28.7201819.320187Exposure of VET graduates to work based learningTotal ≥ 60% (2025) : :32.3%60.1%45%32.1%36.5%31.9%42.0%Men26.1%31.2%26.7%36.5%Women38.4%41.8%37.4%47.6%Cities47.3%46.2%54.3%52.2%Rural areas17.7%26.9%15.6%30.2%Native32.1%37.7%31.4%43.0%EU-born32.4%32.7%40.7%39.5%Non EU-born:u27.0%49.1%35.7%37.4% 38.3%46.2%202039.2%2020Tertiary educational attainment (age 25-34)8Total8By gender9By degree of urbanisation10By country of birth11Share of school teachers (ISCED 1-3) who are 50 years or over1Participation in early childhood education (age 3+)2Low achieving 15-year-olds in:Early leavers from education and training (age 18-24)3Total3By gender4By degree of urbanisation5By country of birth20152022IndicatorTargetHungaryEU27HungaryEU27 
 
   
 
ANNEX 16: HEALTH AND HEALTH SYSTEMS 

A  healthy  population  and  an  effective, 
accessible  and  resilient  health  system  are 
prerequisites  for  a sustainable  economy and 
society.  This  Annex  provides  a  snapshot  of 
in 
population  health  and  the  health  system 
Hungary.  

increased  by  almost 

In  2021,  life  expectancy  at  birth  remained 
among  the  lowest  in  the  EU,  continuing  a 
decline since the peak in 2019. Between 2019 
and  2020,  the  drop  in  life  expectancy  was  in  line 
with  the  overall  EU  trend.  In  2021,  however,  life 
expectancy  at  birth  in  Hungary  fell  by  more  than 
1 year,  compared  to  an  EU  average  decline  of 
approximately  3.6  months  (Graph  A16.1).  This 
reflects  the  much  higher  COVID-19  mortality  in 
threefold 
2021,  which 
compared  to  2020 (107).  In  2020,  the  leading 
causes  of  death  were  diseases  of  the  circulatory 
system  (“cardiovascular  diseases”)  followed  by 
cancer  and  COVID-19.  Cancer  mortality  is  among 
the  highest  in  the  EU,  with  colorectal,  lung  and 
breast  cancer  accounting  for  almost  half  of  all 
cancer  deaths  in  2020.  Mortality  rates  due  to 
preventable and treatable causes are significantly 
higher  than  the  EU  average,  reflecting  the  high 
prevalence of health risk factors in the Hungarian 
population  and  issues  with  the  quality  of  health 
services.  

Graph A16.1: Life expectancy at birth, years 

Source: Eurostat 

Although health expenditure has increased, it 
remains  lower  than  in  most  other  Member 
States. Between 2013 and 2019, Hungary’s level 
of health spending per capita grew by an average 
annual rate of 2.5% in real terms, which is slightly 
below the 3% rate observed on average across the 
EU.  As  a  result  of  the  COVID-19  pandemic, 
between  2019  and  2020,  health  spending  per 
capita increased by 11.4% – roughly double the EU 

(107) Based on data provided directly by Member States to ECDC 
under the European Surveillance System (data current as of 
13 April 2023). 

67 

is  comparable  to  the  EU  average 

average  rate  over  the  same  period.  This  increase 
was  mostly  financed  through  public  sources. 
However,  when  measured  as  a  share  of  GDP, 
health  spending  in  Hungary  remains  low  at  7.3%, 
compared to 10.9% on average across the EU. The 
only  area  where  Hungary’s  health  spending  per 
capita 
is 
spending  on  medical  goods  (i.e.  primarily  retail 
pharmaceuticals) (EUR 470 vs EUR 596 per capita 
in the EU overall). However, medical goods absorb 
a  share  of  Hungary’s  total  health  budget  that  is 
about  10  percentage  points  (pps)  higher  than  the 
EU average (28.1% vs 18.2%). Public spending on 
health  in  Hungary  is  projected  to  increase  by  0.9 
pps  of  GDP  by  2070,  in  line  with  the  expected 
trend  across  the  EU  (see  Annex  21  and  Graph 
A16.2).  

Graph A16.2: Projected increase in public 
expenditure on healthcare over 2019-2070 

AWG reference scenario 
Source: European Commission / EPC (2021) 

In 2020, spending on preventive care rose in 
step  with  the  trend  observed  across  the  EU. 
Between  2019  and  2020,  spending  on  preventive 
care in Hungary rose by 26 % – an increase in line 
with  the  general  trend  observed  in  the  EU.  The 
relative  share  of  health  expenditure  dedicated  to 
prevention  also  rose,  from  3.1%  to  3.7%  –  a 
proportion  slightly  above  the  EU  average.  Across 
the EU, significant increases in prevention-focused 
health  spending  in  2020 were  primarily  driven  by 
extraordinary  expenditure  on  disease  detection, 
surveillance, control and response programmes as 
part of the public health response to COVID-19. 

The  government  is  taking  measures  to  ease 
the  persistent  shortage  of  workers  in  the 
healthcare sector. The health system in Hungary 
suffers  from  a  chronic  scarcity  of  medical 
professionals.  With  3.1  (3.3  in  2021)  practising 
physicians  and  only  6.6  nurses  per  1 000 
inhabitants  in  2020,  Hungary  has  significantly 
fewer doctors and nurses than the EU average (3.9 
inhabitants,  respectively). 
and  8.3  per  1 000 

76.276.076.276.575.774.380.980.981.081.380.480.1201620172018201920202021HungaryEU6.64.80.90.902468EUHungary% of GDP20192070increase 
 
      
                                                 
      
 
Table A16.1: Key health indicators 

Note:  The EU average is weighted for all indicators, except for (*) and (**), for which the EU simple average is used. The simple 
average for (*) uses data for 2020 or most recent year if former not available. Doctors' density data refer to practising doctors in 
all countries except EL, PT (licensed to practice) and SK (professionally active). Nurses' density data refer to practising nurses in all 
countries except FR, PT, SK (professionally active) and EL (nurses working in hospitals only). 
Source: Eurostat; except: ** ECDC 

future: the average age of practising GPs is around 
60 ,  and  a  significant  proportion  of  them  are 
anticipated to retire in the next few years. Hungary 
is planning to alleviate the impact of GP shortages 
through  an  array  of  reforms  aimed  at  promoting 
group  practices,  and  through 
in 
primary  care  financed  by  the  Recovery  and 
Resilience Facility.  

investments 

to 

plan 

to  modernise  hospital 

Hungary  allocated  22%  of  its  recovery  and 
resilience 
healthcare 
(RRP) 
investments  and  reforms.  Hungary  is  among 
the EU countries that allocated the largest relative 
share  of  their  RRP  to  investments  and  reforms  in 
the  healthcare  sector.  Hungary  plans  to  make  an 
ambitious range of investments of more than HUF 
510  billion  (equivalent  to  approximately  EUR  1.3 
billion) 
infrastructure, 
strengthen  primary  care,  improve  efficiency  of 
services  and  expand  the  use  of  digital  health 
information  systems  in  the  Hungarian  healthcare 
system between 2023 and the end of 2026. In the 
area  of  reforms,  the  Hungarian  government  has 
started  taking  measures  to  eradicate  the  practice 
of 
improve  doctors’ 
financial  and  working  conditions.  These  changes 
are  expected  to  alleviate  shortages  of  clinical 
personnel  in  Hungary’s  public  healthcare  system 
and  to  reduce  inequalities  in  access  to  care 
associated with corruption.  

informal  payments  and 

Health  workers  are  spread  unevenly  across  the 
country,  and  shortages  are  concentrated  in  the 
more  economically  disadvantaged  regions.  Low 
wages  compared 
to  neighbouring  countries 
(particularly  for  nurses)  combined  with  poor 
working  conditions  explain  the  shortages,  despite 
the  large  increase  in  the  number  of  medical  and 
nursing  graduates  trained  in  Hungary  in  the  past 
decade.  The  latter  hints  at  the  existence  of 
persistent  staff 
reduce 
attrition of health graduates and health workers, in 
recent  years,  Hungary  has  been  implementing  a 
sizeable, multi-year programme of  gradual salary 
increases  for  clinical  staff,  and  has  set  up  an 
incentive scheme to improve the attractiveness of 
medical training programmes. 

issues.  To 

retention 

Concerns  exist  about  the  accessibility  of 
primary care services in the near future due 
to the  dwindling  number  and the  age  profile 
of  general  practitioners  (GPs).  Against  the 
the  above-mentioned  general 
backdrop  of 
shortage  of  healthcare  staff,  GPs  are 
in 
particularly  short  supply.  Over  the  past  5 years, 
the number of GPs decreased by about 6% (108) as 
the  number  of  new  GPs  failed  to  compensate  for 
the significant attrition due to retirement in recent 
years..  The  low  number  of  GPs  impinges  on  the 
overall  efficiency  of  the  health  system,  as 
overworked  GPs  are  unable  to  ‘gatekeep’  patient 
relatively 
referrals 
for  GPs, 
unappealing 
particularly in rural areas, is a key determinant of 
these  persistent  and  worsening 
shortages. 
Moreover,  the  current  age  composition  of  GPs 
aggravates concerns about their supply in the near 

care.  The 
remuneration  package 

to  specialist 

(108) Hungarian Central Statistical Office (2023). Retrieved from: 
https://www.ksh.hu/stadat_files/ege/hu/ege0007.html. 

68 

20172018201920202021EU average (latest year) Treatable mortality per 100 000 population (mortality avoidable through optimal quality healthcare)179.0175.9173.2179.6NA91.7 (2020)Cancer mortality per 100 000 population341.0335.6327.7320.9NA242.2 (2020)Current expenditure on health, % GDP 6.76.66.37.3NA10.9 (2020)Public share of health expenditure, % of current health expenditure68.969.568.771.4NA81.2 (2020)Spending on prevention, % of current health expenditure 3.03.13.23.7NA3.4 (2020)Acute care beds per 100 000 population427423421423NA387.4 (2019)Doctors per 1 000 population *3.33.43.53.13.33.9 (2020)Nurses per 1 000 population *6.56.66.66.66.68.3 (2020)Consumption of antibacterials for systemic use in the community, daily defined dose per 1 000 inhabitants per day (total consumption in CY and CZ) **13.413.713.310.010.814.5 (2021) 
                                                 
 
 
   
 
ANNEX 17: ECONOMIC AND SOCIAL PERFORMANCE AT REGIONAL LEVEL 

This  Annex  showcases  the  economic  and 
social regional dynamics in Hungary, providing 
an  update  on  the  economic,  social  and  territorial 
cohesion  in  and  among  the  Hungarian  regions 
compared  with  the  rest  of  the  EU  and  the  main 
regional economic recovery challenges. 

therefore  some 

Regional disparities in Hungary have steadily 
decreased since 2010 but remain significant. 
Real GDP per capita (PPS) growth in 2011 - 2020 
was lower in some of the more developed regions 
of the country (i.e. Budapest, Nyugat-Dunántúl and 
Pest), than in the four least developed ones (Graph 
A17.1).  There  was 
internal 
convergence within Hungary during this period, but 
at a rather slow pace, which explains why Hungary 
has converged only slowly to the EU average. GDP 
per  capita  is  only  around  half  the  EU  average  in 
four  of  Hungary’s  eight  NUTS  2  regions  (Észak-
Magyarország,  Észak-Alföld,  Dél-Alföld  and  Dél-
Dunántúl).  In  the  capital  region,  Budapest,  it  was 
156%,  but  only  49%  in  Észak-Alföld.  Internal 
disparities between counties are also significant. In 
2021,  GDP  per  capita  exceeded  90%  of  the 
national  average  in  3  counties  in  Közép-  and 
Nyugat-Dunántúl  but  remained  under  75%  of  the 
national  average  in  no  fewer  than  11  counties 
across the country.  

Graph A17.1: GDP per capita (2010) and GDP 
growth (2011-2020) in Hungary 

Source: EUROSTAT, DG REGIO Elaboration 

Disparities  in  GDP  per  capita  are  mainly 
driven  by  the  large  labour  productivity  gaps 
between  the  relatively  more  developed  and 
the  four  least  developed  regions  of  the 
country.  Productivity  is  highest  in  Budapest  and 
Pest county (71% of the EU average) but is much 
lower  in  the  four  least  developed  regions  of  the 
country where it is only at around 60% of the EU 
average.               

There  are  marked  differences  in  the  ability 
of  regions  ability  to  offer  an  attractive  and 

in  Nyugat-Dunántúl  83.9%  and 
There 

sustainable  environment  for  firms  and 
residents,  as  it  is  reflected  in  the  values  of  the 
Regional Competitiveness Index: it is below or just 
above  83.4%  of  the  EU  average  in  the  four  least 
developed  regions,  while  Közép-Dunántúl  it  is 
in 
82.3%, 
Budapest 
significant 
differences  in  SMEs’  value  added  at  factor  cost, 
which is above or close to the national average in 
Budapest, Közép- and Nyugat-Dunántól, as well as 
in  Észak-Magyarország,  but  is  between  60%  and 
70%  in  the  other  three  least  developed  regions  - 
due  to  the  lack  of  endowment  in  key  assets  such 
as transport infrastructure and human capital.  

105.5%. 

are 

There  are  significant  regional  gaps  in  ICT 
uptake.  The  gap  is  high  between  the  relatively 
more  developed  and  four least  developed  regions 
and  between  cities  and  rural  areas.  In  2021,  the 
ratio of internet users using internet for interaction 
in 
with  public  authorities  ranged  from  89% 
Budapest  to  64%  in  Észak-Alföld.  It  was  83%  in 
cities, but only 60% in rural areas. This is linked to 
the  ratio  of  individuals  with  basic  or  above  basic 
level  of  digital  skills,  which  was  59%  in  cities, 
while only 38% in rural areas. As for ICT uptake in 
enterprises, 
territorial  disparities  are  more 
pronounced  with  respect  to  the  use  of  more 
advanced  technologies  (2021).  For  example,  the 
use of cloud-based services was above or close to 
30%  in  Budapest  (EU  average  34%),  Közép-
Dunántúl  and  Pest  county,  but  under  20%  in  the 
other regions.    

The  four 
least  developed  regions  have 
experienced  depopulation.  The  average  annual 
decrease  per  1000  residents  between  2011  and 
2020  was  almost  9  in  Észak-Magyarország  and 
around 7 in Dél-Dunántúl and Dél-Alföld and 5 in 
Észak-Alföld,  while  the  annual  increase  was more 
than  8  in  Pest  county.  The  negative  population 
trend has reversed in Közép-Dunántúl and Nyugat-
Dunántúl since 2017. 

in 

disparities 

Regional 
educational 
attainment  are  also  significant.  The  rate  of 
early school leavers was in 2021 as high as 22.3% 
in Észak-Magyarország and 16.9% in Észak-Alföld, 
but  just  5.4%  in  Budapest  and  6.8%  in  Nyugat-
Dunántúl. 

There  are  significant  disparities  between 
regions  in  terms  of  young  people  who  are 
neither  in  employment  nor  in  education  and 
training  (NEET).    Közép-Magyarország  (6%), 

69 

0.51.01.52.02.53.03.54.020406080100120140160Annual real GDP per head growth2011-2020 (average % change on the preceding year)GDP (PPS) per head in 2010 (EU = 100)Capital regionOther NUTS2 regionsNational averageEU27 
 
  
 
 
Table A17.1: Selected indicators at regional level in Hungary 

Source: EUROSTAT 

Közép- Dunántúl  and  Nyugat-Dunántúl  (8.1%  and 
5.8%)  are  below  the  national  average,  but  the 
ratio  is  strikingly  higher  in  Észak-Magyarország 
(18.4%)  and  Észak-Alföld  (17.1%),  as  well  as  in 
rural areas (17.2%).   

The share of persons with less than primary, 
lower  secondary  education 
primary  and 
levels  within  the  population  aged  25-64  is 
significantly higher in some of the four least 
developed regions (Észak-Magyarország: 21.8%, 
Észak-Alföld:  20.8  %,  Dél-Dunántúl:  18.2%)  than 
the national average, which is in turn less than the 
EU  average  (13.7%  vs.  20.7%).  In  addition,  the 
share  of  low-educated  people  among  younger 
cohorts  indicates  an  increasing  trend  in  Észak-
Magyarország  26.0%  in  2021  (20.2%  in  2017). 
Tertiary  educational  attainment 
(EU  average 
33.4%, national average 29.3%) was under or just 
around  25%  in  all  regions  except  Budapest  and 
Pest (55.5% and 33.4% respectively).  

in  education  and  training 
Participation 
among the population aged 25-64 is higher in 
some of the four least developed regions than 
in  some  relatively  more  developed  ones: 
Nyugat-Dunántúl  had  a  rate  of  3.6%,  compared 
with  Észak-Magyarország 
(6.2%),  Észak-Alföld 
(6.7%) and Dél-Alföld (6.4%). 

Labour  market  conditions  are  generally 
better  in  the  central  and  western  regions.  In 
2021,  the  lowest  unemployment  rate  was  in 
Közép-Dunántúl  (2.1%).  It  was  2.9%  in  Budapest 

but  much  higher  in  the  four  least  developed 
regions  (ranging  from  4.8%  in  Dél-Dunántúl  to 
7.1%  in  Észak-Alföld).  A  gap  of  10  percentage 
points  remains  between  the  employment  rate  of 
Budapest  (82.9%)  and  of  certain  least  developed 
regions  such  as Dél-Dunántúl  (72.8%)  and  Észak-
Magyarország (72.9%).  

There are significant interregional disparities 
when it comes to the share of the population 
that is at risk of poverty and social exclusion 
(2021).  This  was  9.7%  in  Közép-Dunántúl,  but 
over  20%  in  the  four  least  developed  regions 
(reaching  28.7%  in  Észak-Magyarország).  There 
are  marked  disparities  in  the  level  of  severe 
material  and  social  deprivation  (2020),  which 
affected  less  than  10%  of  the  population  in 
Közép-  and  Nyugat-Dunántúl,  but  12.4%  in  Dél-
in  Észak-Magyarország  and 
Dunántúl,  20.3% 
15.4% 
in  Észak-Alföld.  Poverty  and  social 
exclusion  is  concentrated  in  the  least  developed 
districts  and  municipalities  below  the  regional 
level, as well as in rural areas.  

The  impact  of  the  COVID-19  pandemic  in 
terms of GDP per capita was generally more 
severe  in  the  most  developed  regions  of  the 
country, such as Közép-Dunántúl (-5.0%), Nyugat-
Dunántúl  (-4.7%)  and  Budapest  (-3.2%)  where 
some  sectors  such  as  tourism  were  particularly 
badly  hit  by  the  pandemic.  It  was  milder  in  the 
four  least  developed  regions,  where  the  impact 
ranged  from  -2.0%  in  Dél-Alföld  to  -1.2%  in 
Észak-Alföld. 

70 

NUTS CodeGDP per headProductivity (GVA (PPS) per person employed)Real productivity growthReal GDP per head growthPopulation growthUnemployment rateEarly leavers from education and training Regional Competitiveness IndexSevere material and social deprivationPPS, 2021GVA (PPS) per person employed, 2020Average % change on the preceding year, 2011-2020Average % change on the preceding year, 2011-2020Average annual change per 1000 residents, 2011-2020% of active population, 2021% of population from 18 to 24 years, 2021Index - values range between 0 and 100, 2022% of population, 2020European Union100.0100.00.21.02.07.09.7100.06.8Hungary74.067.00.62.5-2.34.012.083.410.7Budapest156.071.00.22.10.22.95.4105.57.4Pest61.071.0-0.11.48.33.09.1105.58.7Közép-Dunántúl70.065.00.82.8-2.22.111.282.38.3Nyugat-Dunántúl68.069.00.71.91.12.26.883.95.2Dél-Dunántúl51.061.01.12.8-7.44.813.269.912.4Észak-Magyarország52.063.01.33.5-8.76.222.366.020.3Észak-Alföld49.061.00.72.7-5.07.116.967.915.4Dél-Alföld54.062.01.13.3-6.64.510.473.38.3 
 
  
 
MACROECONOMIC STABILITY 
ANNEX 18: KEY FINANCIAL SECTOR DEVELOPMENTS 

several  banks  anticipate  higher  volumes  of  loan-
loss  provisioning  in  2022  and  2023,  primarily  in 
their  SME  portfolios.  A  clear  decline  in  housing-
market activity may pose a manageable risk to the 
banking sector. The current economic environment 
– especially the energy crisis – is putting pressure 
on  the  debt-servicing  capacity  of  corporates  and 
households. 

The  war  in  Ukraine  and  sanctions  against 
Russia  are  expected  to  affect  trends  in 
corporate and household lending. In the twelve 
months  to  Q3-2022,  lending  to  non-financial 
corporations outpaced lending to households in the 
same twelve-month period. In Q3-2022, lending to 
non-financial corporations had increased by 15.1% 
year-on-year,  partly  due  to  the  support  of 
subsidised  credit  schemes.  Lending  to  households 
dropped  by  8.0%  year-on-year  in  Q3-2022  as 
demand  decreased.  Corporate  and  household 
lending,  while  still  strong  in  early  2022,  are 
expected  to  fall  due  to  the  economic  uncertainty, 
as well as to the higher interest rate and inflation 
paths.  This  trend  may  also  be  driven  by  banks 
tightening their credit standards in response to the 
changing economic environment. 

Graph A18.1: Evolution of credit activity 

Source: ECB. 

Household debt continued to rise moderately. 
Household debt rose from 18.5% of GDP in 2019 

Hungary  has  a  predominantly  bank-based 
financial  sector.  Total  banking-sector  assets 
accounted  for  113.3%  of  GDP  in  Q3-2022.  The 
domestic  ownership  of  local  lenders  accounts  for 
roughly  60%  of  total  banking-sector  assets.  The 
five  largest  banks  in  the  system  hold  51.7%  of 
total assets. Financing on capital markets remains 
low,  as  the  market-funding  ratio  dropped  to  40% 
in  2021  (EU  average:  50.8%),  and  stock  market 
capitalisation  is  17.7%  of  GDP  (EU  average: 
85.5%). In the capital markets, the 2020 launch of 
the green-bond market in Hungary is an important 
milestone  (the  green-bond  market  now  accounts 
for  4%  of  the  Hungarian  bond  market 
in 
cumulative  outstanding  value  since  2020),  and 
this  may  lead  to  the  market  penetration  of  ESG-
based investment products. 

and 

resilient. 

remains 
The  Hungarian  banking  sector 
profitable 
Banking-sector 
profitability remained high in Q3-2022, with return 
on  equity  of  10.5%.  Banking-sector  profitability 
may  come  under  pressure  if  higher  lending  rates 
and  interest  income  do  not  offset  the  additional 
costs  from  windfall  taxes  and  caps  on  interest 
rates  for  certain  types  of  loans  (e.g.  mortgages 
and  SME  loans).  The  banking  solvency  ratio  was 
18.0% in Q3-2022 (EU average: 18.6%), signalling 
the  robustness  of  the  banking  sector.  Hungarian 
banks  remain  well  capitalised,  with  a  common 
equity  tier  1  ratio  of  16.1%  in  Q3-2022  (EU 
average:  15.3%).  Banks  have  also  benefited  from 
abundant  central  bank  liquidity,  which  stood  at 
roughly 8.7% of total liabilities at the end of 2022. 
The  MNB,  Hungary’s  central  bank,  has  decided  to 
increase  the  countercyclical  capital  buffer  rate  to 
0.5% from 1 July 2023 for the first time since its 
introduction 6 years ago. 

loan 

(NPL) 

The  non-performing 
ratio 
remained  rather  stable  but  risks  to  the 
quality  of  portfolios  remain.  The  NPL  ratio 
slightly increased to 3.3% in Q3-2022 from 3.2% 
in  2021  (EU  average  for  Q3-2022:  1.8%).  Asset 
quality  slightly  deteriorated  following  the  phasing 
out of the pandemic-related moratoria on loans at 
the  end  of  2021.  According  to  the  MNB (109), 

(109) https://www.mnb.hu/letoltes/financial-stability-report-

november-2022.pdf. 

71 

-25-20-15-10-50510152025Total privateNFCHH% 
 
 
 
 
                                                 
 
  
 
Table A18.1: Financial soundness indicators 

(1) Last data: Q3 2022. 
(2) Data is annualized. 
Source: ECB, Eurostat, S&P Global Capital IQ Pro 
Source:  

to 21% of GDP in 2021 (110). According to the MNB, 
the rise in the cost of living (through the increase 
in utility costs and food prices) may result in debt-
servicing  difficulties  for  an  additional  4-7%  of 
households with credit. This is in addition to risks  

linked  to  the  repricing  of  loans,  which  for  the 
moment are mitigated by an interest-rate cap for 
many debtors (111). 

The  real-estate  market  is  expected  to  slow 
down. After the extraordinary rise of 24.8% in Q2-
2022, the annualised increase in house prices has 
slowed  downin  Q3-2022.  According  to  the  MNB, 
the supply of new homes can be expected to fall in 
the coming months due to a decrease in demand. 
In Q3-2022, the number of transactions decreased 
by  34%  year-on-year,  while  the  volume  of 
mortgage loans declined by more than a third. 

In  December  2021,  the  European  Systemic 
Risk  Board  (ESRB) (112)  issued  a  warning  to 
Hungary  on  medium-term  vulnerabilities  in 
the  residential  real-estate  market  as  a 
potential  risk  to  the  country’s  financial 
stability.  The  ESRB  considered 
the  main 
vulnerabilities  to  be:  (i)  signs  of  house-price 
overvaluation; (ii) elevated house-price growth; (iii) 
high  rates  of  growth  in  mortgage  credit;  and  (iv) 
rapid growth in household indebtedness. 

The  insurance  sector  is  highly  concentrated. 
The top  five market participants account for 60% 
of  all  premium  revenue.  The  total  assets  of  all 
insurers  are  equivalent  to  4.9%  of  GDP  in  Q2-
2022  (compared  to  113.3%  of  GDP  for  the 
banking  system),  which  is  relatively  low  (EU 
average:  59.5%)  According  to  the  MNB,  the 
sector’s  profitability  is  good  (ROE  24%).  In  Q2-
2022,  insurers’  solvency  ratio  was  175.8%  (EU 
average: 268.5%). The unexpectedly high inflation 
in  Hungary, 
to 
like  elsewhere, 
negatively affect the non-life insurance sector.   

is  expected 

(110)

https://ec.europa.eu/eurostat/databrowser/view/tipspd2

2/default/table?lang=en. 

(111) https://www.mnb.hu/letoltes/financial-stability-report-

november-2022.pdf. 

(112)

https://www.esrb.europa.eu/news/pr/date/2022/html/es

rb.pr220211~9393d5e991.en.html. 

72 

201720182019202020212022EUMedianTotal assets of the banking sector (% of GDP)95.492.690.9107.4110.1113.3276.8207.9Share (total assets) of the five largest banks (%)49.650.052.750.151.7--68.7Share (total assets) of domestic credit institutions (%)153.752.857.157.858.660.2-60.2NFC credit growth (year-on-year % change)10.213.614.18.910.715.1-9.1HH credit growth (year-on-year % change)2.67.316.614.315.18.0-5.4Financial soundness indicators:1        - non-performing loans (% of total loans)8.45.44.23.63.23.31.81.8- capital adequacy ratio (%)16.218.518.018.319.718.018.619.8- return on equity (%)214.514.714.37.612.710.56.16.6Cost-to-income ratio (%)164.463.964.761.058.458.060.651.8Loan-to-deposit ratio (%)171.872.776.074.475.576.888.678.0Central bank liquidity as % of liabilities4.02.93.79.610.48.8-2.9Private sector debt (% of GDP)69.968.767.376.880.5--120.7Long-term interest rate spread versus Bund (basis points)264.5266.3271.8273.5343.4642.8-93.3Market funding ratio (%)35.233.132.535.740.0-50.840.0Green bonds issued to all bonds (%)---1.62.14.23.92.31-34-1011-1718-2425-27Colours indicate performance ranking among 27 EU Member States. 
 
                                                 
 
 
 
   
 
Graph A18.2: Housing prices 

(1) 2015=100 
Source: Eurostat. 

73 

050100150200250300 
  
ANNEX 19: TAXATION  

This  Annex  provides  an 
indicator-based 
overview of Hungary’s tax system.  It includes 
information on the tax structure (the types of tax 
that  Hungary  derives  most  of  its  revenue  from), 
the  tax  burden  on  workers,  and  the  progressivity 
and redistributive effect of the tax system. It also 
provides 
tax  collection  and 
compliance  and  on  the  risks  of  aggressive  tax 
planning activity. 

information  on 

Hungary’s  tax  revenues  are  below  the  EU 
aggregate as a proportion of its GDP, with a 
relatively  heavy  and  increasing  reliance  on 
consumption  taxes  and  a  relatively  low  and 
decreasing  reliance  on  labour  taxes.  Table 
A19.1 shows that Hungary’s revenues from labour 
taxes  as  a  share  of  GDP  were  below  the  EU 
aggregate  (14.6%  in  2021)  while  the  revenues 
from  consumption  taxes  as  a  share  of  GDP  was 
considerably  above  the  EU  aggregate  (13.8%  in 
2021).  Revenue  from  capital  taxation  decreased 
from  7.1%  of  GDP  in  2010  to  5.5%  in  2021.  In 
turn,  revenue  from  consumption  taxes  increased 
from 12.4% of GDP in 2010 to 13.8% in 2021 as 
the VAT rate was increased to 27% in 2012 and a 
series of sectoral consumption-related taxes were 
introduced.  Revenue  from  environmental  taxation 
is close to the EU aggregate (2.0% of GDP in 2021 
as  compared  with  2.2%  in  the  EU),  but  recurrent 
property  taxation  remains  relatively  low  (0.4%  of 
GDP in  2021  compared  with  the  EU  aggregate  of 

Table A19.1: Taxation indicators 

1.1%).  Hungary's  Recovery  and  Resilience  Plan 
(RRP)  contains  measures  to  simplify  the  taxation 
system  and  to  strengthen  it  against  the  risk  of 
aggressive  tax  planning  (as  explained  below). 
There are nevertheless currently no signs that the 
9%  corporate  tax  rate  (the  lowest  in  the  EU)  will 
be  changed. 
to 
incorporate  the  local  business  tax  into  the  newly 
agreed EU-wide 15% minimum tax for the largest 
corporations (the ‘Pillar 2’ Directive.) Simplification 
measures  are  planned  to  reduce  the  number  of 
taxes  by  2024.  Sector-specific  extra  profit  taxes 
were  introduced  or  amended  seven  times  in  the 
second half of 2022. 

(Hungary  may  be  allowed 

Hungary’s  labour  tax  burden  is  significantly 
higher than the EU average for those earning 
low wages. Graph A19.1 shows that in 2022 the 
total  labour  tax  burden  was  much  higher  in 
Hungary than the EU average for single people at 
50% of the income level of the average wage but 
close  to  the  EU  average  for  high-income  earners. 
Second  earners  at  a  wage  level  of  67%  of  the 
average  wage,  whose  spouses  earn  the  average 
wage,  are  also  subject  to  a  tax  wedge  that  is 
higher than the EU average.  

(1) Forward-looking effective tax rate (OECD). 
(2) A higher value indicates a stronger redistributive impact of taxation. 
(*) EU-27 simple average  
For more data on tax revenues as well as the methodology applied, see European Commission, Directorate-General for Taxation 
and Customs Union, Taxation trends in the European Union: data for the EU Member States, Iceland, Norway and United Kingdom: 
2021 edition, Publications Office of the European Union, 2021, https://data.europa.eu/doi/10.2778/843047 and the Data on 
Taxation webpage, data https://ec.europa.eu/taxation_customs/taxation-1/economic-analysis-taxation/data-taxation_en. 
For more details on the VAT gap, see European Commission, Directorate-General for Taxation and Customs Union, VAT gap in the 
EU: report 2022, Publications Office of the European Union, 2022, https://data.europa.eu/doi/0.2778/109823.  
Source: European Commission, OECD. 

74 

2010201920202021202220102019202020212022Total taxes (including compulsory actual social contributions) (% of GDP)36.836.336.033.937.939.940.040.6Labour taxes (as % of GDP)17.316.616.214.620.020.721.320.9Consumption taxes (as % of GDP)12.413.914.013.810.811.110.711.2Capital taxes (as % of GDP)7.15.85.85.57.18.18.08.5Total property taxes (as % of GDP)1.11.01.10.91.92.22.22.2Recurrent taxes on immovable property (as % of GDP)0.30.40.40.41.11.21.21.1Environmental taxes as % of GDP2.62.32.22.02.42.42.22.2Tax wedge at 50% of average wage (Single person) (*)41.044.643.643.241.233.932.331.932.131.7Tax wedge at 100% of average wage (Single person) (*)46.644.643.643.241.241.040.139.939.739.7Corporate income tax - effective average tax rates (1) (*)10.210.210.219.519.419.1Difference in Gini coefficient before and after taxes and cash social transfers (pensions excluded from social transfers) (2) (*)12.66.57.64.58.67.78.17.8Outstanding tax arrears: total year-end tax debt (including debt considered not collectable) / total revenue (in %) (*)12.312.031.640.7VAT Gap (% of VAT total tax liability, VTTL)9.85.111.09.1HungaryEU-27Tax structureProgressivity & fairnessTax administration & compliance 
 
  
 
 
 
      
 
 
 
 
 
 
 
Graph A19.1: Tax wedge for single and second 
earners, % of total labour costs, 2022 

the 

theoretical 

The  VAT  gap  (the  gap  between  revenues  actually 
liability) 
tax 
collected  and 
decreased  by  4.7 pps 
in  2020  –  the  most 
significant  decrease in  the  EU  -  to  5.1%,  which is 
below  the  EU-wide  gap  of  9.1%.  The  increase  in 
compliance  accompanied  the  introduction  of  new 
reporting obligations. (113) 

Large  flows  of  foreign  direct  investments 
through  special  purpose  entities  indicate 
companies  may  be  using  Hungary  for 
aggressive tax planning (see Graph A19.2). The 
risk of aggressive tax planning has been identified 
as  an  issue  to  tackle  and  the  Hungarian  RRP 
includes reforms to address it, including increasing 
data  reporting  obligations  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 
zero-tax 
to 
jurisdictions. 

low-  or 

Graph A19.2: Stocks of assets and liabilities held 
through Special Purpose Entities (SPEs) as a % of 
the respective total asset and liability stocks of 
Foreign Direct Investment (FDI) in 2021 

Source: European Commission 

Second earner tax wedge assumes first earner at 100% of 
the average wage and no children. 
Source: European Commission 

taxes  and  on 

Hungary performs comparatively well on tax 
compliance  and  tax  administration.  Its  RRP 
includes measures on the digital transformation of 
tax  compliance  procedures  to  make  tax  reporting 
of  companies  easier,  simpler  and  faster.  The  RRP 
measures to simplify the tax system (e.g. reducing 
the  number  of 
the  digital 
transformation of tax compliance procedures) can 
also  improve the  work  of tax  administrations  and 
facilitate  tax  compliance  by  companies.  The  new 
customer  portal  of  2022  with  enhanced  services 
for  taxpayers  is  already  a  step  towards  reducing 
administrative  burden.  Tax  arrears  have  declined 
slightly  by  0.3 pps  to  12%  of  total  net  revenue. 
This  is  significantly  below  the  EU-27  average  of 
40.7%, although that average is distorted by very 
large values in a few Member States.  

(113) Hungary introduced real-time electronic reporting of 

domestic B2B sales invoice data in 2018. In July 2020, the 
coverage of the system was extended to B2B transactions 
below the previous limit of HUF 100 000. 

75 

41.241.241.241.241.220253035404550100150Tax wedge, % of total labour costsEarnings as % of the average wageSingle earner - HUSingle earner - EU averageSecond earner -  HUSecond earner -  EU average85%30%91%30%15%70%9%70%0%20%40%60%80%100%Hungary (total = €416Bn)EU27 (total = €21,688Bn)Hungary (total = €67Bn)EU27 (total = €19,097Bn)AssetsLiabilitiesSpecial Purpose Entities (SPEs)Non-SPEs 
 
      
  
 
 
 
                                                 
 
ANNEX 20: TABLE WITH ECONOMIC AND FINANCIAL INDICATORS 

Table A20.1: Key economic and financial indicators 

(1) Domestic banking groups and stand-alone banks, EU and non-EU foreign-controlled subsidiaries and EU and non-EU foreign-
controlled branches. 
(2) Net international investment position (NIIP) excluding direct investment and portfolio equity shares.  
Source: Eurostat and ECB as of 2 May 2023, where available; European Commission for forecast figures (Spring forecast 2023). 

76 

2004-072008-122013-1920202021202220232024Real GDP (y-o-y)3.4-0.83.8-4.57.24.60.52.8Potential growth (y-o-y)3.20.42.63.53.73.42.52.5Private consumption (y-o-y)1.9-2.23.7-1.24.66.4-0.72.8Public consumption (y-o-y)0.10.53.0-0.51.70.80.00.9Gross fixed capital formation (y-o-y)4.2-4.48.9-7.16.51.2-2.91.5Exports of goods and services (y-o-y)16.62.15.9-6.18.811.83.54.5Imports of goods and services (y-o-y) 13.80.16.8-3.97.711.12.03.5Contribution to GDP growth:Domestic demand (y-o-y)2.0-2.04.4-2.64.43.6-1.22.0Inventories (y-o-y)0.0-0.4-0.30.01.80.30.40.0Net exports (y-o-y)1.31.6-0.3-2.01.00.71.30.8Contribution to potential GDP growth:Total Labour (hours) (y-o-y)-0.6-0.21.00.50.50.50.00.0Capital accumulation (y-o-y)1.40.61.01.41.51.41.11.1Total factor productivity (y-o-y)2.40.10.61.61.71.51.41.4Output gap2.8-3.01.0-4.1-0.80.3-1.6-1.2Unemployment rate6.99.95.74.14.13.64.24.0GDP deflator (y-o-y)4.23.33.56.46.415.313.03.5Harmonised index of consumer prices (HICP, y-o-y)5.54.91.63.45.215.316.44.0HICP excluding energy and unprocessed food (y-o-y)4.54.12.23.74.514.216.45.6Nominal compensation per employee (y-o-y)7.92.53.63.08.815.014.68.3Labour productivity (real, hours worked, y-o-y)4.80.41.40.34.12.11.82.7Unit labour costs (ULC, whole economy, y-o-y)4.02.62.36.72.611.914.05.8Real unit labour costs (y-o-y)-0.2-0.6-1.10.3-3.6-2.90.92.2Real effective exchange rate (ULC, y-o-y)2.8-2.3-0.9-5.30.2-1.311.12.9Real effective exchange rate (HICP, y-o-y)3.4-0.4-0.9-4.20.4-3.9..Net savings rate of households (net saving as percentage of net disposable income)6.45.38.310.913.1...Private credit flow, consolidated (% of GDP)13.00.80.38.112.6...Private sector debt, consolidated (% of GDP)82.0110.579.176.880.4...of which household debt, consolidated (% of GDP)24.936.521.420.821.0...of which non-financial corporate debt, consolidated (% of GDP)57.174.057.656.059.4...Gross non-performing debt (% of total debt instruments and total loans and advances) (1).9.810.6.2.4...Corporations, net lending (+) or net borrowing (-) (% of GDP)-3.41.51.23.0-0.7-3.00.0-0.8Corporations, gross operating surplus (% of GDP)22.523.124.723.825.126.026.325.3Households, net lending (+) or net borrowing (-) (% of GDP)1.92.94.95.46.53.03.24.9Deflated house price index (y-o-y).-6.77.61.510.04.1..Residential investment (% of GDP)4.43.12.54.13.94.6..Current account balance (% of GDP), balance of payments-7.7-1.11.8-1.1-3.9-8.2-3.5-2.7Trade balance (% of GDP), balance of payments-1.24.56.21.90.3-4.1..Terms of trade of goods and services (y-o-y)-0.7-0.50.22.0-3.1-5.43.40.0Capital account balance (% of GDP)0.51.92.42.02.52.0..Net international investment position (% of GDP)-92.1-102.9-63.3-52.1-52.4-49.3..NENDI - NIIP excluding non-defaultable instruments (% of GDP) (2)-30.9-48.3-15.7-2.4-1.3-5.3..IIP liabilities excluding non-defaultable instruments (% of GDP) (2)75.2111.671.864.866.771.5..Export performance vs. advanced countries (% change over 5 years)45.510.3-3.28.03.2...Export market share, goods and services (y-o-y)4.9-5.21.52.6-5.07.70.90.7Net FDI flows (% of GDP)-2.4-1.7-1.7-1.9-2.0-2.2..General government balance (% of GDP)-7.2-4.1-2.2-7.5-7.1-6.2-4.0-4.4Structural budget balance (% of GDP)..-2.7-5.8-6.7-6.4-3.2-3.8General government gross debt (% of GDP)62.377.773.079.376.673.370.771.1forecast 
 
 
 
     
 
 
 
ANNEX 21: DEBT SUSTAINABILITY ANALYSIS 

This  Annex  assesses  fiscal  sustainability 
risks for Hungary over the short, medium and 
long term. It follows the same multi-dimensional 
approach  as  the  European  Commission’s  2022 
Debt Sustainability Monitor, updated based on the 
Commission’s 2023 spring forecast. 

1  -  Short-term  risks  to  fiscal  sustainability 
low  overall.  The  Commission’s  early-
are 
detection  indicator  (S0)  does  not  signal  major 
short-term  fiscal  risks  (Table  A21.2). (114)  Gross 
financing needs are expected to remain significant 
at around 14% of GDP in the short term (i.e. over 
2023-2024),  although  declining  compared  with 
the  recent  peak  in  2020  (Table  A21.1).  Financial 
markets’ perceptions of sovereign risk are stable. 

2 - Medium-term risks to fiscal sustainability 
are high overall. 

The  DSA  for  Hungary  shows  that,  under  the 
baseline,  the  government  debt  ratio 
is 
projected to remain above 60% of GDP over 
the medium term (at 72.5% of GDP in 2033)  
(Graph  1). (115), (116)  The  assumed  structural 
primary  balance  (a  surplus  of  0.5%  of  GDP) 
contributes  to  these  developments.  It  appears 
relatively  ambitious  compared  with  past  fiscal 
performance,  indicating  that  the  country  has 
limited  room  for  corrective  action.  At  the  same 
time,  the  baseline  projections  up  to  2033  are 

(114) The S0 is a composite indicator of short-term risk of fiscal 
stress. It is based on a wide range of macro-financial and 
fiscal variables that have proven to perform well in the past 
in detecting situations of upcoming fiscal stress.  

(115) The assumptions underlying the Commission’s ‘no-fiscal 
policy change’ baseline notably comprise: (i) a structural 
primary surplus, before ageing costs, of 0.5% of GDP as of 
2024; (ii) inflation converging linearly towards the 10-year 
forward inflation-linked swap rate 10 years ahead (which 
refers to the 10-year inflation expectations 10 years from 
now); (iii) the nominal short- and long-term interest rates on 
new and rolled over debt converging linearly from current 
values to market-based forward nominal rates by T+10 (as 
for all Member States); (iv) real GDP growth rates from the 
Commission 2023 spring forecast until 2024, followed by 
EPC/OGWG ‘T+10 methodology projections between T+3 and 
T+10, i.e. for 2025-2033 (on average 2.3%); (v) ageing costs 
in line with the 2021 Ageing Report (European Commission, 
Institutional Paper 148, May 2021). For information on the 
methodology, see the 2022 Debt Sustainability Monitor 
(European Commission, Institutional Paper 199, April 2023). 

overall  affected  by  an  unfavourable  snowball 
effect,  driven  by  the  tightening  of  financing 
conditions,  though  the  impact  of  Next  Generation 
EU is expected to support real GDP growth at 2.3% 
on  average  over  2025-2033.  Government  gross 
financing needs are expected to remain significant 
over  the  projection  period,  reaching  close  to  15% 
of  GDP  in  2033,  slightly  above  the  level  forecast 
for 2024 (Table A21.1). 

The  baseline  projections  are  stress  tested 
against  four  alternative  scenarios  to  assess 
the  impact  of  changes  in  key  assumptions 
(Graph  1).  For  Hungary,  reverting  to  historical 
fiscal  trajectories  under  the  ‘historical  structural 
primary  balance  (SPB)’  scenario  would  lead  to  a 
higher government debt ratio. If the SPB gradually 
converged to a balanced budget (its historical 15-
year  average),  the  projected  debt-to-GDP  ratio 
would  be  around  4  pps.  higher  compared  to  the 
baseline  in  2033.  A  permanent  worsening  of  the 
macro-financial  conditions,  as  reflected  under  the 
‘adverse interest-growth rate differential’ scenario 
(i.e., 1 pp. higher than the baseline) would result in 
a  persistently  higher  government  debt-to-GDP 
ratio,  by  around  7  pps.  of  GDP  by  2033,  as 
compared  with 
temporary 
worsening  of  financial  conditions,  as  reflected  in 
the  ‘financial  stress  ‘scenario  (i.e.  temporarily 
increase of interest rates by 1 pp.), would lead to a 
broadly  similar  public  debt-to-GDP  ratio  by  2033 
compared  with  the  baseline.  The  ‘lower  structural 
primary  balance  (SPB)’  scenario  (i.e.,  SPB  level 
permanently  reduced  by  half  of  the  cumulative 
forecast  error),  would  lead  to  a  substantially 
higher  government  debt-to-GDP  ratio  by  2033 
(around  +24  pps.  of  GDP)  compared  with  the 
baseline,  with  debt  increasing  to  more  than  90% 
of GDP.  

the  baseline.  A 

Additionally,  stochastic  debt  projections 
indicate  medium  risk  (Graph  2). (117)  These 
stochastic  simulations  point  to  a  46%  probability 
of  the  debt  ratio  in  2027  being  greater  than  in 
2022,  entailing  medium  risk  given  the  initial 
medium  debt  level.  In  addition,  such  shocks  point 
to high uncertainty (i.e., the difference between the 
10th  and  90th  debt  distribution  percentiles) 

(116) Table 1 shows the baseline debt projections and its 

(117) These projections show the impact on debt of 2000 different 

breakdown into the primary balance, the snowball effect (the 
combined impact of interest payments and nominal GDP 
growth on the debt dynamics) and the stock-flow 
adjustment.  

shocks affecting the government’s primary balance, 
economic growth, interest rates and exchange rates. The 
cone covers 80% of all simulated debt paths, therefore 
excluding tail events 

77 

 
 
                                                 
                                                 
 
 
materialisation  of  COVID-19  crisis  related  state 
guarantees.  On  the  other-hand,  risk-mitigating 
factors include the lengthening of debt maturity in 
recent  years  and  relatively  stable  financing 
sources.  In  addition,  the  measures  under  the 
NGEU/RRF,  if  fully  implemented,  could  have  a 
further  positive  impact  on  GDP  growth  in  the 
coming years, and therefore help to mitigate debt 
sustainability risks. 

surrounding 
projections. 

the  government  debt  baseline 

3  -  Long-term  risks  to  fiscal  sustainability 
are medium overall. (118)  

The  S2  sustainability  gap  indicator  (at  4.5 
pps.  of  GDP)  points  to  medium  risk, 
suggesting  that  Hungary  would  need  to 
significantly  improve  its  structural  primary 
balance to ensure debt stabilisation over the 
long term. This result is underpinned by projected 
ageing  costs,  in  particular  due  to  an  expected 
increase  of  pension  spending  (+3.2  pps.  of  GDP) 
over  the  long-term,  and  –  to  a  lower  extent  to 
health  care  and  long-term  care  spending  (Table 
A21.1). In this respect, reform plans in the RRP are 
expected  to  contribute  to  the  fiscal  sustainability 
of the Hungarian pension system.  

Combined  with  debt  vulnerabilities,  as 
highlighted by the S1 indicator, overall long-
term  risks  are  assessed  as  medium.  Indeed, 
the  S1  sustainability  gap  indicator  signals  that  a 
significant consolidation effort  of 2.8 pps. of GDP 
would be needed to reduce debt to 60% of GDP by 
2070. This result is mainly driven by the projected 
increase  in  ageing  costs,  mostly  due  to  pension 
expenditure  (1.6  pps.  of  GDP)  and,  to  a  lower 
extent,  an  unfavourable  initial  budgetary  position 
(contribution by 0.3 pp. of GDP) (Table A21.1). 

Finally,  several  additional  risk  factors  need 
to  be  considered  in  the  assessment.  On  the 
one hand, risk-increasing factors are related to the 
rates,  Hungary’s 
recent 
negative net international investment position, the 
rising share of short-term and foreign debt, and to 
liability  risks  stemming  from  the 
contingent 
the  possible 
private 

including  via 

increase 

interest 

sector, 

in 

(118)The S2 fiscal sustainability gap indicator measures the 

permanent fiscal effort (SPB adjustment) in 2024 that would 
be required to stabilise public debt over the long term. It is 
complemented by the S1 fiscal sustainability gap indicator, 
which measures the permanent fiscal effort required in 2024 
to bring the debt-to-GDP ratio to 60% in the long term (by 
2070). For both the S1 and S2 indicators, the risk 
assessment depends on the amount of fiscal consolidation 
needed: ‘high risk’ if the required effort exceeds 6 pps. of 
GDP, ‘medium risk’ if it lies between 2 pps. and 6 pps. of 
GDP, and ‘low risk’ if the effort is negative or below 2 pps. of 
GDP. The overall long-term risk classification brings together 
the risk categories derived from S1 and S2. S1 may notch up 
the risk category derived from S2 when it signals a higher 
risk than S2. See the 2022 Debt Sustainability Monitor for 
further details. 

78 

 
                                                 
Table A21.1: Debt sustainability analysis - Hungary 

Source: Commission services. 

Table A21.2: Heat map of fiscal sustainability risks - Hungary 

Source: Commission services. 

79 

Table 1. Baseline debt projections20202021202220232024202520262027202820292030203120322033Gross debt ratio (% of GDP)79.376.673.370.771.171.070.970.670.670.770.971.371.872.5Changes in the ratio13.9-2.7-3.3-2.60.4-0.1-0.1-0.30.00.10.20.40.50.7of whichPrimary deficit5.24.93.50.10.1-0.2-0.5-0.7-0.8-0.8-0.8-0.7-0.6-0.5Snowball effect1.3-7.5-10.2-5.00.00.10.30.50.80.91.01.11.11.2Stock-flow adjustments7.40.03.42.20.40.00.00.00.00.00.00.00.00.0Gross financing needs (% of GDP)26.917.115.715.113.613.213.213.113.313.513.714.014.314.6S1S2Overall index  (pps. of GDP)2.84.5of which Initial budgetary position0.30.1Debt requirement0.2Ageing costs2.34.4of which    Pensions1.63.2     Health care0.50.6     Long-term care0.30.5Others0.00.1Table 2. Breakdown of the S1 and S2 sustainability gap indicators203040506070809010011020202021202220232024202520262027202820292030203120322033Graph 1. Deterministic debt projections Historical SPB scenarioLower SPB scenarioFinancial stress scenarioAdverse 'r-g' scenarioBaseline% of GDPp10p20p40p60p80p90203040506070809010011020202021202220232024202520262027% of GDPGraph 2. Stochastic debt projections 2023-2027MedianBaselineBaselineHistorical SPBLower SPBAdverse 'r-g'Financial stressOverallMEDIUMHIGHHIGHHIGHMEDIUMMEDIUMDebt level (2033), % GDP72.576.496.779.273.2Debt peak year20222033203320332022Fiscal consolidation space44%50%69%44%44%Probability of debt ratio exceeding in 2027 its 2022 level46%Difference between 90th and 10th percentiles (pps. GDP)48.4(1)Debtlevelin2033.Green:below60%ofGDP.Yellow:between60%and90%.Red:above90%.(2)Thedebtpeakyearindicateswhetherdebtisprojectedtoincreaseoveralloverthenextdecade.Green:debtpeaksearly.Yellow:peaktowardsthemiddleoftheprojectionperiod.Red:latepeak.(3)Fiscalconsolidtationspacemeasurestheshareofpastfiscalpositionsinthecountrythatweremorestringentthantheoneassumedinthebaseline.Green:highvalue,i.e.theassumedfiscalpositionisplausiblebyhistoricalstandardsandleavesroomforcorrectivemeasuresifneeded.Yellow:intermediate.Red:low.(4)Probabilityofdebtratioexceedingin2027its2022level.Green:lowprobability.Yellow:intermediate.Red:high(alsoreflectingtheinitialdebtlevel).(5)thedifference between the 90th and 10th percentiles measures uncertainty, based on the debt distribution under 2000 different shocks. Green, yellow and red cells indicate increasing uncertainty.Short termMedium term - Debt sustainability analysis (DSA)Long termOverall                               (S0)Overall Deterministic scenariosStochastic projectionsS2S1Overall(S1 + S2)LOWHIGHMEDIUMMEDIUMMEDIUM 
 
 
 
 
   
 
 
   
 
ANNEX 22: MACROECONOMIC IMBALANCE PROCEDURE ASSESSMENT MATRIX  

is  whether 
inflation,  which  has  not  visibly 
moderated  yet,  will  remain  elevated  for  an 
extended period, exerting further pressure on costs 
and  competitiveness,  and  keeping  government 
financing 
Unaddressed 
vulnerabilities  diminish  Hungary’s  resilience  to 
possible further shocks. 

elevated. 

costs 

is 

to 

framework, 

inflation  and 

instrumental 

Policy 
inconsistencies  have  exacerbated 
vulnerabilities  whereas  a  consistent  policy 
mix,  underpinned  by  a  strong  institutional 
policy 
to 
strengthen stability and anchor expectations. 
Monetary  and  fiscal  policy  tightened,  but  the 
composition  of  the  fiscal  response  remained 
conducive 
the  build-up  of 
imbalances, by creating distortions that prevented 
the  adjustment  of  the  economy  to  a  changing 
world economic structure, rising interest rates and 
higher  energy  prices.  Policies  impeded  efforts  to 
reduce  energy  import  dependence  and  weakened 
the  monetary  transmission  mechanism.  These 
included, 
inter  alia,  untargeted  measures  to 
protect households’ purchasing power, financed by 
indirect  taxes  burdening  companies  and  the 
financial  sector,  price  and  interest  rate  caps,  and 
untargeted  and  fiscally  costly  housing  subsidy 
schemes.  Policies  contributed  to  house  price 
growth  through  untargeted  subsidies,  frequently 
changing  regulations  and  cost  pressures  due  to 
high public investment. All those policies have also 
had  a  material  impact  on  external  indebtedness 
and fiscal  sustainability. Export promotion policies 
remain  focused  on  attracting  cost-sensitive  and 
resource-intensive  assembly  activities,  in  which 
Hungary  is  losing  its  comparative  advantage  due 
to skills shortages and higher energy prices.  

Based  on  this  assessment,  the  Commission 
considered  in  its  communication  European 
Semester – 2023 Spring Package (COM(2023) 
600 
experiences 
that  Hungary 
final) 
imbalances. 

The  Macroeconomic 
Imbalance  Procedure 
matrix presents the main elements of the in-
depth  review  undertaken  for  Hungary (119).  
Hungary was selected for an in-depth review in the 
in-depth 
2023  Alert  Mechanism  Report.  This 
review  on  the  prevention  and  correction  of 
macroeconomic  imbalances  presents  the  main 
findings  on  the  gravity  and  evolution  of  the 
challenges  identified,  as  well  as  policy  responses 
and potential policy needs. Findings cover all areas 
of vulnerability assessed in the in-depth review.  

Hungary  is  facing  vulnerabilities  relating  to 
its external and government financing needs, 
compounded  by  the  impact  of  high  inflation. 
The  current  account  deficit  widened  to  8.2%  of 
GDP  in  2022,  mostly  reflecting  Hungary’s  large 
reliance on energy imports. Inflation rose to 15.3% 
in  2022  and  in  Q1  2023  it  exceeded  25%.  Wage 
and  ULC  growth  had  also  been  very  strong  in 
recent years, although labour tax cuts and nominal 
currency  depreciation  mitigated  its  impact  on 
export competitiveness. House prices have doubled 
over the last five years. Although the government 
debt-to-GDP ratio decreased in 2022 to 73.3%, it 
was  still  eight  percentage  points  higher  than  in 
2019. Large government deficits account for much 
the  external  borrowing  needs.  Sovereign 
of 
borrowing  costs  and  the  interest  burden  have 
increased  since  2021.  At 
time, 
government gross financing needs remain high. 

the  same 

Going  forward,  while  some  of  the  identified 
vulnerabilities  could  ease,  substantial  risks 
and  uncertainties  remain.  Lower  energy  prices 
and  the  retrenchment  of  domestic  demand  are 
projected  to  narrow  the  current  account  deficit  in 
2023-2024,  which  nonetheless  is  expected  to 
remain substantial. Although inflation is set to rise 
further  in  2023  as  a  whole,  following  the  phase-
out  of  price  caps  on  energy  and  food,  the 
stabilisation  of 
currency  and  weaker 
consumption  are  expected  to  reduce  inflation 
substantially  in  2024.  The  housing  market  has 
begun to cool in late 2022 and the pace of house 
price  growth  eased  recently.  The  decreasing 
government  deficit  and  high  nominal  GDP  growth 
are  set  to  support  the  reduction  of  government 
debt in 2023, due to high inflation. A key concern 

the 

(119)  European Commission (2023) In-Depth Review for Hungary, 
Commission staff working document (COM(2023) 639 final), 
in accordance with Article 5 of Regulation (EU) No 
1176/2011 on the prevention and correction of 
macroeconomic imbalances.  

80 

 
 
                                                 
 
 
 
 
Table A22.1: Assessment of macroeconomic imbalances matrix 

Source: European Commission 

81 

Gravity of the challengeEvolution and prospectsPolicy responseUnsustainable trends, vulnerabilities and associated risksExternal positionHungary maintains a negative net international investment position (NIIP) of 46% of GDP in 2022, but the position excluding non-defaultable instruments (NENDI) was nearly balanced. The current account deficit widened from 0.8% of GDP in 2019 to 8.2% in 2022. From a sectoral perspective, this was mainly due to a higher government deficit.The deterioration of the current account balance was driven by the strong domestic demand over a number of years and increasing energy import prices in 2022. Moderating energy commodity prices and the adjustment of domestic demand are projected to narrow the current account deficit below 4% in 2023 and 3% in 2024. In the baseline scenario the NIIP is expected to be stable in the medium to long term.The government deficit has accounted for much of the large external borrowing needs of the country, and only partly driven by the policy responses to the pandemic and the energy crises.Policy needs remain to address the external sector vulnerabilities, by further reducing the budget deficit, and by reducing energy import demand that was incentivised by weakly targeted price caps and regulated prices.House pricesNominal house prices doubled over the last five years and valuation metrics indicate substantial overvaluation in 2022. Mortgage growth picked up since 2017 but household debt remained among the lowest at 19% of GDP in 2022. The supply of dwellings grew less than demand since 2013.Nominal house prices fell by 2% quarter-on-quarter in Q4 2022, while the value of new mortgages halved compared to Q4 2021. The declining real income of households and high interest rates are set to ease overvaluation. High inflation and low household indebtedness are expected to prevent nominal house prices from falling substantially. Lending and construction are both expected to slow down.Some policy needs remain in context of the sharp increase in house prices. Weakly targeted government grant, loan and tax schemes that have boosted house price growth in recent years largely remain in place. Construction costs rose amid labour and material shortages that were exacerbated by high public investment. Increasing costs and frequently changing regulations hindered investment in dwellings.Government debtThe government debt-to-GDP ratio stood at 73.3% in 2022, 8 percentage points above the 2019 level. Since 2021 the debt ratio has been again on a decreasing path due to high nominal GDP growth and smaller deficits. The gross financing need of the government remained substantial at 15.7% of GDP in 2022. The shares of foreign currency and variable rate instruments within Hungary's public debt increased in 2022. Government debt is projected to decrease further to 70.7% of GDP in 2023 while the deficit is projected to narrow from 6.2% in 2022 to 4.0% in 2023. A no-policy change forecast points to a rising deficit and debt ratios in 2024. Fiscal consolidation is complicated by a higher interest burden, demographic tailwinds and contingent liabilities including projected central bank losses. Gross financing needs are set to decrease somewhat in 2023. Rising yields increase the interest burden of government debt from 2.3% of GDP in 2021 to 4.3% in 2024.Policy needs to ensure sustainable fiscal consolidation beyond 2023, when the sector-specific taxes that were introduced in 2022 are due to be phased out. Hungary's RRP envisages regular spending reviews and a pension reform which can enhance fiscal sustainability.Prices, costs and compe-titivenessUnit labour cost growth is high, at over 22% cumulatively over 2020-2022, and some 12% in 2022 alone. It contributed to the rise of inflation to 15.3% in 2022 along with commodity price increases, currency depreciation and indirect tax hikes. The real exchange rate depreciated in 2022 as high nominal wage and price increases were offset by nominal currency depreciation. Hungary's export market share at current prices rose by 1.2% in the five years up to 2022, a marked slowdown compared to earlier years. Hungary remains specialised in resource-intensive and cost-sensitive assembly activities of global value chains.Inflation is projected to rise further in 2023 to 16.4%, but it is then expected to ease to 4% in 2024 due to the fading impact of past cost shocks and weaker consumption. High wage growth has recently been driven by the tight labour market and minimum wage hikes. Trade performance is expected to improve with the continued recovery of international tourism and new foreign direct investments in manufacturing.Policy needs remain to achieve price stability and mitigate competitiveness pressures. Monetary and fiscal policies are tightening to address inflationary pressure. However, price and interest rate caps and subsidised loans provide untargeted support to aggregate demand which can hinder anti-inflationary efforts. In recent years the authorities encouraged high wage growth, among others through very large minimum wage hikes, and partly offset their impact on competitiveness by labour tax cuts and currency depreciation. Policies promote foreign direct investment by facilitating cost competitiveness through low taxes, state aid and flexible regulations, but they could not reduce the gap vis-à-vis the EU in factors of non-price competitiveness such as innovation, skills or the business environment.