COMMISSION STAFF WORKING DOCUMENT 2024 Country Report – Hungary Accompanying the document Recommendation for a COUNCIL RECOMMENDATION on the economic, social, employment, structural and budgetary policies of Hungary
Date: 2024-06-19
Institutions: European Commission, Secretariat-General
Subjects: Hungary, budget policy, economic policy, economic recovery, economic reform, employment policy, energy diversification, fiscal policy, social policy, stability pact

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 19.6.2024  SWD(2024) 617 final  COMMISSION STAFF WORKING DOCUMENT 2024 Country Report – Hungary Accompanying the document Recommendation for a COUNCIL RECOMMENDATION on the economic, social, employment, structural and budgetary policies of Hungary         {COM(2024) 617} - {SWD(2024) 600}  
 
 
 
 
 
 
 
 
 
 
 
ECONOMIC AND EMPLOYMENT SNAPSHOT 

The economy is set to recover 
after the recession in 2023 

After a  recession  in  2023, the Hungarian 
economy is set to grow again (1). Following 
buoyant  growth  in  2022,  real  GDP  decreased 
by  0.9%  in  2023.  It  is  projected  to  increase 
again by 2.4% in 2024 and by 3.5% in 2025. 
Despite  the  fall  in  GDP,  employment  held 
steady  and  the  employment  rate  remained 
above  the  EU  average  in  2023,  which  can 
support domestic demand in the future.   

while  tight  monetary  policy  helped  reduce 
inflation rates from an annual average of 17% 
– the highest in the EU in 2023 – to below 4% 
by  early  2024.  Core  inflation  decreased  less 
and  was  6.5%  in  March  2024.  Nominal  wage 
growth has remained high, driven by the tight 
labour  market  and  significant  minimum  wage 
increases.  The  current  account  improved  from 
a  deficit  of  8.3%  of  GDP  in  2022  to  a  0.3% 
surplus  in  2023  due  to  falling  energy  import 
prices and lower import demand. The projected 
pick-up  in  economic  activity  is  set  to  keep 
inflation  above  the  central  bank’s  target  of 
3%, with a band of ±1%, and lead to modest 
current account deficits in 2024-2025. 

to 

continues 

experience 
Hungary 
vulnerabilities  related  to  external  and 
government  financing  needs.  An  in-depth 
review  was  undertaken  as  part  of 
the 
macroeconomic  imbalance  procedure  earlier 
this year (2). It found that while the improving 
external  environment  mitigated  some  short-
term  risks,  policy  progress  has  been  limited, 
with  Hungary  still  vulnerable  to  both  external 
and domestic shocks. 

The  high  budget  deficit  remains  a 
challenge. Tax revenues have been eroded by 
labour  and  corporate  tax cuts  between  2017-
2022,  while  spending  has  remained  elevated 
since  the  pandemic.  Hungary  has  faced  some 
of  the  highest  debt  servicing  costs  in  the  EU, 
and  interest  expenditure  rose  from  2.2%  of 
GDP in 2019 to 4.7% in 2023 (3). The interest 
rate paid on public debt was the highest in the 

(2)  SWD(2024) 103 final. 

(3)  Interest expenditure is set to amount to 6.7% of public 
debt in 2024, draining more than 11% of government 
revenue, up from some 5% in 2021. Inflation-linked 
retail government bonds, which amounted to some 9% 
of GDP at the end of 2023, are a major driver of high 
interest expenditure in 2023 and 2024, as their coupon 
payments depend on the inflation rate of the preceding 
year.   

In  recent  years,  expansionary  economic 
policies  have  contributed  to  the  build-up 
of  vulnerabilities.  Until  2022,  household 
consumption  was  supported  by  tax  cuts, 
pension  increases  and  price  and  interest  rate 
caps  that  aimed  to  preserve  households’ 
purchasing  power.  However,  these  measures 
prevented  consumers  from  adjusting  to  rising 
energy  prices  and  borrowing  costs,  and  led  to 
the build-up of both large current account and 
inflationary 
budget  deficits,  as  well  as 
pressures. 
schemes 
contributed  to  house  price  overvaluation  but 
had  little  structural  effect  on  productivity 
growth,  while  adding  to  the  long-term  fiscal 
burden.  In  addition,  frequent  credit  market 
interventions have provided limited support to 
economic  growth  while  hindering  the  smooth 
transmission of monetary policy. 

Subsidised 

lending 

An  improving  external  environment  and 
some  policy  adjustments  helped  reduce 
inflation  and  the  current  account  deficit. 
The  lifting  of  price  caps  led  to  a  spike  in 
inflation  from  the  second  half  of  2022.  This 
forced  consumers  to  cut  back  on  spending, 

(1)  The cut-off date for the data used to prepare the 27 

Country Reports was 15 May 2024. 

2 

 
 
 
 
(see  Annex  19).  Consequently,  while  GDP  per 
capita was 76.4% of the EU average in 2023, 
actual individual consumption, which measures 
the material welfare of households, was 68%, 
the second lowest in the EU. Hungary’s relative 
position  has  deteriorated  in  the  last  decades 
(see Graph 1.2). 

Graph 1.2: Development of actual individual 
consumption per capita in Hungary and in 
Central and Eastern Europe (average of EU-
27=100%), 2004-2023 

EU, and the gap to its peers increased recently 
(Graph  1.1).  The  policy  response  to  the  fiscal 
pressures  stemming  from  high  energy  prices, 
inflation  and  the  ensuing  recession  mostly 
consisted  of  public  investment  cuts  together 
with  temporary  windfall  profit  and  sectoral 
taxes  that  were  levied  mainly  on  the  energy, 
financial  and  retail  sectors.  The  2023  budget 
the 
deficit,  at  6.7%  of  GDP,  exceeded 
government’s  original  target  by  some  3 
percentage  points.  In  the  absence  of  further 
measures,  the  deficit  is  projected  to  remain 
elevated at 5.4% of GDP in 2024 and 4.5% in 
2025, which is expected to stall debt reduction 
after a 0.5 percentage point decrease in public 
debt  in  2023  to  73.5%  of  GDP.  According  to 
the  Commission’s  debt  sustainability  analysis 
based  on  the  2024  Spring  forecast,  Hungary 
faces  medium  risks  in  the  medium  term  and 
long term (see Annex 21). 

Graph 1.1: Average interest rate paid on public 
debt in Hungary and selected Central and 
Eastern European countries (%) 

(1) Central and Eastern Europe = Bulgaria, Estonia, 
Croatia, Latvia, Lithuania, Poland, Romania, Slovakia 
(2) Purchasing power parities 
Source: Eurostat 

Structural challenges are holding 
back productivity growth  

Structural  challenges  remain  for  GDP 
growth  in  the  longer  term.  To  foster  long-
term economic growth, Hungary would need to 
its  economic  policy  on  ensuring 
refocus 
boosting 
stability 
macroeconomic 
competitiveness  by  attracting  high  value-
added 
investment  and  providing  a  more 
predictable  business  environment  as  well  as 
high-skilled workers.  

and 

The  economy  specialises 
in  activities 
where low production costs are the main 
source  of  competitiveness.  The  Hungarian 
economy  is  well  integrated  into  global  value 
chains. However, companies mostly participate 

(1) Unweighted average of non-euro area countries, i.e. 
Czechia, Poland and Romania 
Source: Ameco database 

The benefits from growth are distributed 
unevenly.  Over  the  past  few  years,  the 
compensation of employees has grown slower 
than  domestic  income,  while  social  transfers 
as  a  percentage  of  GDP  have  also  been  low 
compared  to  the  EU  average  (see  Annex  14). 
The  real  value  of  several  social  and  family 
benefits has been eroded by high inflation. The 
tax  and  benefit  system’s  ability  to  reduce 
inequalities is low compared to the EU average 

3 

01234567820162017201820192020202120222023HungaryCzechia, Poland and Romania40%50%60%70%80%90%100%20042005200620072008200920102011201220132014201520162017201820192020202120222023HungaryCEE 
       
  
in  assembly  activities,  which  are  labour-  and 
energy-intensive but only account for a limited 
share  of  the  final  product’s  value.  Policies 
have  aimed  to  reduce  production  costs  for 
manufacturing  companies  by  lowering  labour 
and  corporate  income  taxes,  offering  tax 
allowances and investment subsidies, adopting 
lax  employment  protection  legislation,  and 
loosely  enforcing  environmental  regulations. 
Such  policies  might  attract  investment  in 
manufacturing,  but 
this  approach  has 
reinforced  Hungary’s  specialisation  in  cost-
business 
sensitive  and 
activities.  While  investment  in  machinery  and 
equipment as a share of GDP was among the 
highest  in  the  EU  in  2023,  investment  in 
intellectual  property  remains  well  below  the 
EU  average.  The 
foreign  direct 
investment  (FDI)  stock  has  gradually  declined 
over  the  last  decade  and  its  structure  has 
the  deteriorating 
changed.  This 
business  environment  (see  more  details  in 
Section  3  on  Further  priorities  ahead), 
government’s  efforts  to  increase  domestic 
ownership  in  utilities  and  services,  and  the 
promotion  of 
in  assembly 
investment 
activities.  

energy-intensive 

reflects 

inward 

Graph 1.3: FDI stock in Hungary by investor, as 
% of GDP 

(1) Asia = South Korea, China, India and Japan 
Source: Magyar Nemzeti Bank 

There 
is  still  considerable  scope  to 
improve the energy efficiency and energy 
security aspects of Hungary’s climate and 
energy policy. Gas remains a significant part 
of  both  the  energy  and  electricity mix (30.6% 

by 

improving 

and 25% respectively in 2022) (4). Reliance on 
foreign  electricity  supply  was  25.4%  in  2023 
and  is  set  to  decline  to  20%  by  2030. 
Hungary’s  draft  updated  national  energy  and 
climate  plan  from  2023  outlined  ambitious 
plans to further strengthen the internal energy 
market 
energy 
interconnectedness.  However,  more  ambitious 
targets  are  needed  for  energy  efficiency, 
energy  security  and  renewable  energy.  The 
plan  does  not  specify  the  investments  that 
would  help  achieve  the  goals.  It  also  lacks 
reduce 
concrete  measures  on  how 
dependence on Russian oil and gas, which was 
75% in 2023, apart from highlighting the need 
to strengthen domestic natural gas extraction. 
The  reliance  on  imported  fossil  fuels,  coupled 
with  slow  progress  in  energy  efficiency  and 
low  renewables  penetration,  affect  Hungary’s 
economic competitiveness.  

to 

(PISA), 

especially 
The 

Skilled  workers,  digitalisation  and  an 
innovation-friendly business  environment 
are  needed  for  long-term  growth.  The 
education system could do better in equipping 
people  with  skills  and  promoting  social 
mobility.  Some  10 000  pupils  from  each 
cohort  never  enter  the  labour  market  or  only 
become  low-skilled  workers.  This  is  linked  to 
low  levels  of  basic  skills,  as  measured  in  the 
OECD’s  Programme  for  International  Student 
among 
Assessment 
disadvantaged 
tertiary 
students. 
attainment rate is among the lowest in the EU. 
People  with  a  disability,  Roma  and  the  low-
educated  face  challenges  to  participate  in 
training  and  find  work.  At  the  same  time,  the 
vacancy rate remains high in sectors requiring 
skills, such as health and social services, public 
ICT  services. 
administration,  financial  and 
Hungary  recently  streamlined  the  process  of 
employing  workers  from  non-EU  countries  to 
address  the  shortage  of  workers:  the  number 
of  foreign  workers  in  Hungary  surged  to 
around  100 000,  around  2.1%  of 
the 
employed  population,  in  2023,  mostly  due  to 
the inflow of non-EU nationals (see Annex 14). 
While  the  use  of  digital  technologies  by 
the 
increased 
Hungarian  firms 

in  2023, 

(4)  https://ec.europa.eu/eurostat/web/interactive-
publications/energy-2024#energy-sources  

4 

0%10%20%30%40%50%60%70%80%90%20142015201620172018201920202021US and GermanyAsiaOther 
       
 
remains  a 
digitalisation  of  businesses 
challenge 
(see  Annex  10).  The  business 
environment  remains  a  barrier  to  innovation 
due  to  unpredictable  regulatory  changes,  low 
government  effectiveness,  a  high  perception 
of  corruption  and  weak  competition  in  certain 
The  administrative  burden  on 
sectors. 
businesses,  measured 
the  Global 
by 
Competitiveness  Index,  is  slightly  higher  than 
the EU average. Progress in these areas could 
help the Hungarian economy transform from a 
low-cost country into one based on innovation. 
This  could  sustain  economic  growth  as 
domestic  wage  and price  levels  catch  up  with 
the rest of the EU. 

Regional  disparities  remain  significant  in 
Hungary,  and  the  process  of  internal 
convergence  remains  slow.  GDP  per  capita 
is still around 50% of the EU average in 4 out 
of  the  8  NUTS 2  regions.  These  regions  and 
rural areas in general experience depopulation 
and  lag  behind  other  regions  in  terms  of 

labour  productivity,  poverty  reduction,  skills 
and  air  quality.  Internal  disparities  are  driven 
by  limited  transport  infrastructure  and  low 
R&D expenditure in the less developed regions, 
significant  disparities  in  terms  of  educational 
outcomes  and  a  spatial  mismatch  between 
labour  supply  and  demand.  These  factors  are 
reinforced  by 
integrated 
programmes to address complex challenges at 
the 
functional  areas,  capacity 
constraints  of  municipalities  in  the  districts 
lagging  behind  and  low  involvement  of  local 
stakeholders.  

level  of 

lack  of 

the 

in 

of 

Pillar 

Social 

three-quarters  of 

Hungary  performs  at  or  above  the 
average 
the 
Rights 
European 
indicators,  but  further  policy  action  is 
needed. 
performance 
continues to be generally favourable. However, 
remains 
the  disability  employment  gap 
low-educated 
substantial,  and  Roma  and 
lower 
adults 

Labour  market 

significantly 

have 

also 

Box 1: 

Hungary’s competitiveness in brief 

Hungary’s competitiveness is supported by high investment and high employment rates 
as well as strong integration into EU trade.  

However, competitiveness challenges remain: 

•  The  business  environment  is  characterised  by  frequent  regulatory  changes 
and  discretionary  state  intervention.  This  results  in  low  competition  in  certain 
sectors,  affecting  the  single  market  and  companies  from  other  EU  countries. 
Social  dialogue  is  weak,  which  does  not  support  an  effective  and  stable 
regulatory  framework.  Moreover,  the  country  has  the  highest  number  of 
incorrectly transposed single market directives, which hinders the effective 
functioning of product markets. 

•  Weaknesses 

in  economic  and  fiscal  governance  and  more  broadly 
vulnerabilities related to external and government financing needs tend 
to  result  in  high  financing  costs  for  the  economy,  creating  a  competitive 
disadvantage and increasing the sustainability challenges for public finances.   
•  Shortage  of  skilled  workers,  resulting  from  below-average  performance  in 
skills  and  education,  including  large  gaps  in  basic  skills  by  socio-economic 
status, high early school leaving and low tertiary attainment rates, which hinder 
productivity. Research and innovation spending is low and does not translate 
into actual innovation. 

•  The  electricity  prices  for  firms  are  among  the  highest  in  the  EU.  This 
weakens  their  competitiveness,  in  part  because  the  share  of  energy  from 
renewable sources is one of the lowest (15.2% compared to the EU average of 
23% in 2022).  

5 

 
 
of 

indicators, 

employment  rates.  The  significant  increase  in 
adults’ digital skills suggests a positive outlook 
on adult learning and the digital transition, and 
this is to be maintained. The low participation 
of  children  under  3  in  childcare,  a  high  early 
school  leaving  rate,  together  with  the  recent 
worsening 
the 
poverty 
diminishing  impact  of  social  transfers  on 
poverty  reduction  and  the  high  housing  cost 
overburden rate, point to multiple social issues 
and  the 
intergenerational  transmission  of 
poverty.  The  limited  functioning  of  social 
the  broad 
dialogue  continues 
involvement  of  social  partners  in  decision-
making.  While  Hungary  is  actively  addressing 
some  of  these  challenges,  further  efforts  are 
needed  to  increase  the  adequacy  of  social 
protection  and  alleviate  poverty  for  the  most 
disadvantaged, as well as ensure equal access 
to  quality  social,  education,  employment  and 
housing services for all. 

to  hinder 

Box 2: 

UN Sustainable Development Goals (SDGs) 

Hungary  is  moving  away  from  the  SDG  target  on  industry,  innovation  and 
infrastructure (SDG 9), having fallen behind on Research and innovation policy indicators such 
as  patent  applications  and  R&D  expenditure.  Among  other  competitiveness  and  productivity-
related  SDGs,  the  country  is  converging  towards  the  EU  average  on  some  indicators  of  quality 
education, while still lagging behind on tertiary education attainment and adult learning (SDG 4). 
Hungary  is  outperforming  other  Member  States  on  most  employment  indicators  related  to  the 
goal of decent work and economic growth (SDG 8) but challenges remain in related areas such 
as gender equality (see Annex 1).  

Out  of  the  17  indicators,  10  SDGs  remain  below  the  EU  average.  Besides  those 
highlighted  above,  these  relate  to  environmental  sustainability  (SDGs  2,  7,  9,  12,  13),  fairness 
(SDGs 3, 4, 5, 7) and macroeconomic stability (SDGs 16 and 17). 

6 

 
 
 
IMPLEMENTATION OF KEY REFORMS AND 
INVESTMENTS USING EU INSTRUMENTS 

to 

key 

boost 

Funding from the Recovery and Resilience 
Facility (RRF) and cohesion policy funding 
is 
Hungary’s 
competitiveness and promote sustainable 
growth. In addition to EUR 10.4 billion of RRF 
funding  described  in  Annex  3,  cohesion  policy 
funding  for  Hungary  amounts  to  EUR  21.7 
billion for the 2021-2027 period. Support from 
these  two  instruments  combined  represents 
around  16.38%  of  the  country’s  GDP  (2023), 
compared to the EU average of 5.38% of GDP 
(see  Annex  4),  provided  Hungary  fully  and 
effectively implements the remedial measures 
to  protect  the  financial  interests  of  the  EU 
under the general regime of conditionality, the 
enabling conditions and the RRF.  

Under  its  recovery  and  resilience  Plan 
(RRP),  Hungary  has  launched  important 
policy  measures  that  are  expected  to 
improve the country’s competitiveness (5). 
In particular, the RRP envisages major reforms 
in  the  energy  sector  and  reforms  to  improve 
the  sustainability  of  public  spending.  Further 
RRP  measures  are  ongoing  in  the  fields  of 
education  and  skills,  health,  aggressive  tax 
planning, 
social 
cohesion.  

efficiency  and 

energy 

of 
resilience 

implementation 
and 

Hungary’s 
The 
is 
plan 
recovery 
significantly  delayed  due  to  substantial 
challenges.  Hungary  has  not  submitted  any 
payment requests so far. Structural challenges 
linked  to  the  outstanding  implementation  of 
the  necessary  measures 
the 
protection  of  the  EU’s  financial  interests  call 
for specific actions to ensure that reforms and 
investments  can  be  completed  on  time. 

to  ensure 

(5)  The steps taken as part of RRP implementation listed in 
this section are to be interpreted as preliminary steps 
by Hungary to fulfil the commitments of the RRP. They 
do not constitute a final assessment of the satisfactory 
fulfilment of such measures by the Commission. 

7 

in 

highly 
Investments, 
concentrated  towards  the  end  of  the  RRP 
implementation and merit special attention.  

particular, 

are 

and 

and 

quality 

economic 

Cohesion  policy  funding  helps  tackle 
Hungary’s  growth  and  competitiveness 
challenges  and  reduce  the  country’s 
territorial, 
social 
disparities.  During  the  2014-2020  cohesion 
policy programming period, support focused on 
network infrastructure in transport and energy, 
sustainable 
employment, 
education and training, the competitiveness of 
small and medium-sized businesses, including 
research 
environmental 
innovation, 
protection,  resource  efficiency  and  the  low-
carbon  economy  and  social  inclusion.  For  the 
2021-2027 programming period, support aims 
to  boost  competitiveness, 
innovation  and 
digital  transformation,  the  green  transition, 
education  and  skills,  labour  market  measures 
and  territorial  and  social  cohesion,  while 
improving living and working conditions. 

and 

Enabling the green and energy 
transition 

cohesion  policy,  which 

Hungary’s  RRP  has  a  strong  green 
dimension.  Following  the  adoption  of  the 
revised  RRP  in  December  2023,  including  a 
new  REPowerEU  chapter,  66.9%  of  the  RRP’s 
allocation 
is  dedicated  to  climate-related 
objectives.  This  is  complemented  by  funding 
under 
supports 
Hungary’s  climate  targets,  in  particular  on 
wastewater  treatment,  disaster  risk  reduction, 
railways  network,  clean 
upgrading  TEN-T 
suburban 
in 
residential  housing,  the  uptake  of  renewables 
in the economy, digitalisation of the electricity 
grid  and  energy  management  of  buildings, 
circular waste management and upskilling.  

transport,  energy  efficiency 

 
 
 
steps 

Through  its  RRP  and  REPowerEU  chapter, 
Hungary  has  undertaken 
to 
authorise  the  connection  of  12  GW  of 
electricity  from  renewables.  The  plan 
includes  measures  to  strengthen  the  grid, 
which  have  so  far  led  to  1  GW  of  grid 
development 
of 
renewables.  They  will  be  complemented  by 
investments  and  reforms  to  build  a  flexible 
electricity  market  with  a  high  share  of 
renewables and use the grid in a more flexible 
way on the supply and demand side (Box 3).  

integration 

the 

for 

Hungary  has  started  to  reduce  barriers 
that  were  hindering  the  development  of 
wind  power  and  other  renewables.  It 
adopted legislation  to  reduce  the  requirement 
for the installation of wind turbines to keep a 
minimum  distance  from  residential  premises 
to 700 meters. Rules for the grid connection of 
small photovoltaic plants were simplified,  and 
feed-in 
for  households’  solar 
panels  were  lifted  in  a  large  part  of  the 
country.  The  framework  for  the  development 
of  renewable  hydrogen  was  also  reviewed  to 
incentivise  the  uptake  of  green  hydrogen  in 
the industrial sector. 

limitations 

Following the introduction of new energy 
efficiency  standards,  building  renovation 
schemes  backed  by  EU  funds  will  be 
required  to  achieve  at  least  a  30% 
reduction  in  energy  consumption.  Funding 
under the RRP for energy efficiency measures 
for  households,  companies  and  the  public 
sector  amounts  to  EUR  1.7  billion.  There  are 
strong complementarities with the 2021-2027 
cohesion  policy  programmes,  which  provide 
additional funding of EUR 1.2 billion for energy 
efficiency.  Measures  that  target  residential 
homes  are  also  expected  to  reduce  air 
pollution (6).  While  support  from  EU  funds  for 
is  significant, 
energy  efficiency  measures 
there is potential for further energy efficiency 
improvements  in  residential  buildings,  also  in 
light  of  the  fact  that  the  regulated  price  for 
households  continues  to weaken  incentives  to 
become 
reduce 
consumption.  

energy-efficient 

and 

(6)  The relatively inefficient energy production sector 
remains another major source of air pollution. 

8 

this 

end, 

instruments  to 

Hungary  is  kickstarting  the  roll-out  of 
financial 
improve  the 
access  of  households  and  companies  to 
finance  in  the  energy  efficiency,  electric 
mobility  and  geothermal  energy  sectors. 
To 
the  Hungarian  national 
development  bank  (MFB)  has  been  mandated 
with  the  implementation  of  five  financial 
instruments  under  the  RRP  for  a  total  of 
almost EUR 1.5 billion. In addition, the MFB will 
mobilise  at  least  EUR  550  million  in  these 
sectors  under  the  2021-2027  cohesion  policy 
programming period. 

towards  a  single 

To  boost  sustainable  transport,  Hungary 
tariff 
is  moving 
ticketing  and  passenger 
information 
system.  As  of  May  2023,  passengers  can 
travel  with  one  ticket  across  the  country  on 
routes operated by different services. Cohesion 
policy  supports  the  shift  to  rail  transport  and 
green  public  transport,  including  urban  and 
suburban  transport,  to  the  tune  of  EUR  3 
billion. 

Under  the  RRP,  Hungary  is  developing  a 
national  strategy  and  action  plan  for 
green  skills.  The  RRP  also  includes  targeted 
investments  to  help  train,  upskill  and  reskill 
the workforce so they can acquire green skills, 
and  increase  public  awareness  on  energy, 
climate  mitigation  and  adaptation,  and 
environmental  issues.  These  complement  the 
and 
resources 
Just 
employment  measures 
Transition Fund. 

reskilling 
the 

available 

from 

for 

Supporting fiscal sustainability 
with more efficient and fairer 
fiscal and tax policies  

The RRP includes measures to make fiscal 
policies more efficient and fairer. Hungary 
has started preparations to reform the pension 
system with the aim to promote medium- and 
long-term  fiscal  sustainability  and  fairness.  It 
has 
institutional 
framework  for  conducting  annual  spending 
reviews.  Two  reviews  conducted  in  2023  (on 
health and family/housing) and two planned in 

established 

also 

the 

 
 
Box 3: 

Combined action for more impactful EU funds 
To  boost  economic  growth  and  maximise  the  impact  of  EU  funding,  Hungary’s  RRP  includes 
reforms that support investments under other EU instruments, creating important synergies and 
complementarities  between  the  various  funds.  For  example,  several  reforms  in  Hungary’s  RRP 
help build a flexible electricity market with a high share of renewables. These reforms – which 
include introducing dynamic pricing in the retail electricity market, improving regulatory reserve 
markets, strengthening the role of energy communities and aggregators, improving the uptake of 
electricity storage and the range of consumers using smart meters – aim to reduce the burden 
on  the  grid.  The  reforms  are  flanked  by  investments  both  in  the  RRP  and  under  the  cohesion 
policy to modernise the electricity grid.  

strengthened  the  role  and  powers  of  the 
National  Judicial  Council  (led  by  judges)  to 
limit  arbitrary  decisions  in  the  administration 
of courts and reformed the functioning of the 
Supreme  Court  to  shield  it  from  political 
influence.  It  ended  the  Constitutional  Court’s 
role  in  reviewing  final  decisions  by  judges  at 
the request of public authorities and removed 
obstacles  to  preliminary  references  to  the 
Court of Justice of the European Union.  

The  RRP  includes  reforms  to  improve 
competition  in  public  procurement.  To 
reduce  the  high  share  of calls  for  tender  that 
result in a single bid to 15% by 2026, Hungary 
reported  that  it  set  up  a  comprehensive 
performance  measurement 
to 
continuously  monitor  the  level  of  single  bids 
and assess the underlying reasons. It has also 
reported  on  an  action  plan  to  make  public 
procurement procedures more transparent and 
small-  and  medium-sized 
help  micro-, 
companies participate in tenders. 

framework 

Cohesion  policy  provides  support  to 
businesses.  Investments  amounting  to  EUR 
4.4  billion  have  been  allocated  for  the 
technological  development  of  small  and 
medium-sized companies, integration of digital 
technologies (including cloud, AI and big data) 
and 
funds 
services. 
amounting  to  EUR  1.5  billion  have  been 
infrastructure  and 
allocated 
equipment, 
knowledge-
transfer  and  research  projects  of  businesses, 
including equity instruments.  

research 
technology 

advisory 

Further 

and 

to 

2024 (on public investment and education) are 
expected to cover at least 20% of government 
expenditure. 

Hungary 
is  taking  action  to  tackle 
aggressive  tax  planning,  improve  the 
transparency of its tax system and make 
it  more  user-friendly  by  digitising  tax 
services.  As  of  1  January  2024,  there  are 
new  rules  in  place  aiming  to  prevent  royalty 
and  interest  payments  from  flowing  untaxed 
to  zero-  or  low-tax  jurisdictions.  Transfer 
pricing  regulations  have  been  bolstered  by 
in 
requiring 
transactions  between  associated  entities  to 
report specific information. Hungary also put in 
place  an  e-platform  to  fulfil  VAT  reporting 
obligations. 

companies 

involved 

large 

Removing regulatory barriers and 
improving the business 
environment 

the 

The  RRP  includes  several  measures  to 
strengthen 
anti-corruption 
framework.  This  includes  the  establishment 
of  an  Integrity  Authority  and  Anti-Corruption 
Task Force, and the adoption of a new national 
anti-corruption 
the 
strategy, 
possibility  of  a  judicial  review  of  decisions  by 
the  prosecution  service  or  the  investigating 
authority 
report  or 
to  dismiss  a  crime 
terminate  criminal  proceedings.  Moreover,  the 
plan  includes  reforms  to  improve  the  quality 
and  transparency  of  decision-making  and 
ensure  a  more  systematic  involvement  of 
stakeholders.  

including 

Hungary 
judicial 
independence.  Hungary  has  significantly 

strengthened 

its 

9 

 
 
the  end  of  2025, 
further  4 000  by 
supplemented  by  an  additional  1 000  crèche 
places financed by cohesion funds.  

ensure 

To improve the quality of health services, 
Hungary  is  taking  steps  to  set  out  more 
for  patient-carer 
transparent  ways 
relationships 
better 
and 
management.  New  legislation  introduced  a 
new employment contract with higher salaries 
for  doctors  as  well  as  sanctions  for  gratuity 
payments 
the  healthcare  sector.  The 
government  decree  on  the  establishment  of 
the  National  Directorate-General  for  Hospitals 
aims 
the 
healthcare management system by creating a 
leaner  organisational  structure.  Cohesion 
policy will  support the further digitalisation of 
healthcare  and  the  infrastructure  of  local 
outpatient care and social services.  

the  efficiency  of 

improve 

to 

in 

in 

The  RRP  and  cohesion  policy  funds  will 
help  address  poverty 
the  most 
In  connection  with  the 
deprived  areas. 
‘Catching-up 
initiative, 
comprehensive  social,  healthcare,  education, 
employment  and  housing  services  based  on 
local needs are to be implemented. 

municipalities’ 

Improving access to quality 
education and healthcare, and 
social inclusion 

Through  the  RRP  and  cohesion  policy, 
Hungary  started  implementing  a  reform 
to  make  the  teaching  profession  more 
attractive.  At  the  end  of  2023  and  at  the 
beginning of 2024, the Hungarian government 
adopted decrees to start a long-term increase 
in schoolteachers’ salaries. The aim is to reach 
at  least  80%  of  the  average  graduate  salary 
by  2025  and  maintain  this  minimum  80% 
salary  level  at  least  until  2030.  Around  EUR 
1.8 billion of cohesion policy funds have been 
allocated to this end. 

is 

implementing 

to  pupils  and 

several 
Hungary 
measures  to  ensure  equal  access  to 
digital  education  tools  and  improve  the 
digital  skills  of  students  and teachers.  In 
the RRP, a first batch of digital notebooks were 
distributed 
for 
education  purposes  and  to  schools  to  help 
them  set  up  IT  classrooms.  A  strategy  was 
adopted  to  prioritise  disadvantaged  students 
when  allocating  digital  notebooks.  Projects 
under  the  cohesion  policy  plan  to  interlink 
online 
educational 
learning and develop the basic digital skills of 
at least 300 000 adults by 2029.  

databases, 

teachers 

improve 

Hungary  is  taking  steps  to  modernise  its 
vocational education system. 16 vocational 
education  and  training  centres  will  benefit 
from  energy  efficiency  renovations,  modern 
workshops  and  classrooms,  and  new  digital 
equipment, tools and digital learning materials. 
Investments  supported  by  the  cohesion  policy 
plan  to  modernise  professional  development 
programmes  for  trainers,  provide  mentoring 
and scholarships to disadvantaged pupils, and 
establish sectoral knowledge centres providing 
quality, dual training on a sectoral basis. 

Hungary  is  increasing  the  availability  of 
early childhood education and care places 
for  children  under  3  years  of  age.  The 
construction and extension of crèche places is 
underway under the RRP, with 500 new places 
to  be  completed  by  the  end  of  2024  and  a 

10 

 
 
FURTHER PRIORITIES AHEAD 

Hungary 
faces  additional  challenges 
related  to  economic  policy  governance,  fiscal 
policy, debt sustainability, the housing market, 
the  business  environment,  skills  level  and  the 
integration  of  disadvantaged  groups  into  the 
labour  market,  social  assistance,  social 
dialogue  and  reliance  on  Russian  fossil  fuels. 
Tackling  these  challenges  will  help  increase 
Hungary’s 
long-term  competitiveness  and 
ensure  its  resilience.  It  will  also  help  make 
further  progress  in  achieving  the  Sustainable 
Development Goals (SDGs). 

is 

important  that  the  challenges 
It 
identified are addressed both at national 
and  regional 
regional 
disparities and improve the administrative and 
absorption  capacity  in  a  balanced  way  across 
the country. 

reduce 

level 

to 

Weak economic policy governance 
leads to imbalances and high 
deficits 

and 

lays 

stability, 

Hungary  would  benefit  from  a  more 
coherent  economic  policy  strategy  that 
delivers  fiscal  consolidation  and  macro-
financial 
the 
foundations  for  sustainable  economic 
growth (7).  In  recent  years,  economic  policies 
have  been  geared  towards  stimulating  short-
term  economic  growth  with  the  risk  of 
overheating  the  economy.  This  can  worsen 
external  sustainability  and  keep  inflation  and 
interest  rates  relatively  high.  Large  minimum 
wage  hikes  have  helped  support  consumption 
but  would  require  future  productivity  gains  to 
avoid fuelling inflation. The cost of household 
energy  subsidies  has  been  shifted 
to 
companies  in  the  form  of  higher  taxes  and 

(7)  See SWD(2024) 103 final.  

11 

higher energy prices, weakening their price and 
cost competitiveness.  

and 

important  policy 

Credit market interventions have become 
an 
instrument,  with 
rising 
benefits 
questionable 
budgetary costs. Since the end of 2021, the 
government  has  introduced  several  interest 
rate  caps  to  limit  the  rise  in  borrowing  costs 
for  the  private  sector  and  the  government.  In 
response  to  rising  market 
interest  rates, 
subsidised  lending  schemes  have  also  been 
expanded.  However,  such  schemes  have  not 
increased the productivity of loan recipients (8), 
while  creating  a  long-term  fiscal  burden. 
Borrowing  by  a  public  development  bank  to 
finance  these  schemes  has  added  to  public 
debt  by  1.7%  of  GDP  in  2023.  In  2023,  the 
government  spent  0.6%  of  GDP  on  interest 
subsidies,  while  the  subsidies  provided  by  the 
lending 
central  bank 
schemes  added  to  its  losses.  Due  to  recent 
changes  in  the  central  bank  law,  the  losses 
made  by  the  MNB  no  longer  need  to  be 
budget 
the 
reimbursed 
immediately, only over the long term.  

(MNB)  on 

its  own 

national 

by 

The national fiscal framework has not led 
fiscal  stance. 
to  a  more  prudent 
Weaknesses  in  Hungary’s  fiscal  framework 
and  budget  planning  have 
increased  the 
expansionary bias of fiscal policy and added to 
current  macroeconomic  challenges (9).  The 
the  annual  budget 
early  preparation  of 
between  2016  and  2023 
the 
reduced 
reliability  of  macroeconomic  and  budgetary 
forecasts.  The 
the 
government  in  budget  implementation  allows 

large  discretion  of 

(8)  Telegdy, Á. and G. Tóth (2024), A támogatott hitelezés 
hatásvizsgálata Magyarországon, Közgazdasági 
Szemle 71:113-130 (in Hungarian). 

(9)  See thematic chapter in the 2023 in-depth review; 
SWD(2023) 639 final. Fiscal policy is often called 
expansionary or ‘loose’ if it increases demand in the 
economy via higher spending and tax cuts. 

 
 
 
 
for  looser  policy  in  good  times.  It  has  also 
reduced  budget  transparency  and  overall 
policy  predictability.  Frequent  and  significant 
revisions  of  fiscal  targets  have  undermined 
the role of the budget as an anchor for market 
participants  and  called 
into  question  the 
credibility  of  the  medium-term  fiscal  plans. 
Moreover,  Hungary’s  debt 
remains 
procyclical, as it allows for more spending and 
tax  reductions  when  there  is  higher  growth 
and inflation.  

rule 

sound  medium-term 

A realistic and stable medium-term fiscal 
framework  would  help  address  fiscal 
challenges.  Hungary  would  benefit  from 
embedding 
fiscal 
planning  based  on  multiannual  spending 
ceilings,  as  set  out  in  the  revised  EU  fiscal 
rules,  in  the  domestic  budgetary  framework. 
Giving  the  Hungarian  Fiscal  Council  a  more 
increased  operational 
prominent  role  and 
capacities  could  help  improve  fiscal  discipline 
and  transparency,  especially  in  the  current 
context of heightened consolidation needs. The 
Fiscal  Council  could  contribute  to  the  national 
policy  debate,  for  instance  by  assessing  the 
government’s  budgetary  and  multiannual 
forecasts  or  performing 
macroeconomic 
regular 
long-term 
and 
costing 
policy 
sustainability analyses.  

The  Commission’s  analysis  points  to 
elevated  debt  sustainability  risks  driven 
by  persistently  high  deficits  (see  Annex 
21).  According  to  the  2024  Ageing  Report 
projections, the long-term sustainability of the 
pension  system  has  deteriorated,  with  total 
public  pension  expenditure  expected 
to 
account 
in  2070, 
for  12%  of  GDP 
0.6 percentage  points  (pps)  higher  than  in 
previous projections.   

Despite  recent  reforms,  housing  support 
measures may continue to drive up house 
prices.  House  price  increases  cooled  and 
house  price  overvaluation  eased  in  2023  due 
to higher interest rates and a fall in household 
income  and  confidence.  However,  data  for 
early  2024  point  to  a  renewed  increase  in 
mortgage  lending.  Recent  reforms  in  housing 
subsidies have reduced the number of eligible 
households,  but  the  amount  of  support  per 
beneficiary  has  increased  substantially.  These 

the  same 

subsidies  could  continue  to  drive  up  house 
prices  if  supply  is  not  responsive  to  increased 
demand.  At 
time,  meaningful 
measures to increase the housing supply have 
been  left  wanting.  The  underdeveloped  rental 
market also reduces housing affordability and 
hinders  social  mobility.  Housing  support 
schemes  have  also  become  more  geared 
towards  higher-income  households  with  the 
increasing reliance on subsidised loans. 

The quality of the business 
environment is key for companies 

in  an 

national 

to  perform 

environment 

ranks  among 

The  business  environment  continued  to 
deteriorate.  Hungary 
the 
bottom  third  of  EU  countries  in  the  IMD 
Competitiveness  Ranking (10). 
It  performed 
particularly  badly  in  the  ‘Business  efficiency’ 
category, which measures the extent to which 
the 
encourages 
innovative 
businesses 
manner. Service trade restrictions are high, as 
measured  by  the  OECD  in  2024.  The  Global 
Competitiveness  Index  shows  that  only  a  few 
firms dominate the market. Regulatory quality 
has  declined  over 
last  decade,  as 
measured  by 
the  Worldwide  Governance 
Indicator. According to a survey by the German 
Chamber  of  Commerce,  the  attractiveness  of 
Hungary  as  an  investment  destination  has 
decreased (11). 
there  was  no 
Hungarian firm among the 50 fastest growing 
tech companies in Central and Eastern Europe, 
while  in  2009  there  were  more  Hungarian 
firms  on  the  list  than  firms  from  other 
countries (12). The US terminated its tax treaty 
with  Hungary  as  of  January  2024.  The 
absence  of  such  a  tax  treaty  increases  the 
administrative  costs  and  taxes  of  Hungarian 
firms  and  natural  persons  on  their  incomes 

In  2023, 

the 

(10)  World Competitiveness Ranking – IMD business school 

for management and leadership courses 

(11)  In 2023, 79% of companies stated they would reinvest 

in Hungary, down from 88% in 2022. 

(12)  nyitrai-tamas-a-versenykepessegi-reformok-
elmaradasaval-a-hazai-technologiai-cegek-
teljesitmenye-is-gyengulo-tendenciat-mutat.pdf 
(mnb.hu) 

12 

 
 
investment, 

from  the  US.  This  change  may  affect  the 
presence  of  foreign  direct 
in 
particular  by  special  purpose  entities (13).  In 
2024,  the  number  of  taxes  increased  further 
from  59  to  61,  also  because  most  of  the 
temporary  sectoral  taxes  set  up  since  the 
pandemic have not been phased  out by 2024 
as expected.  

State  interventions  have  an  impact  on 
competition  and  the  functioning  of  the 
single  market  in  Hungary.  In  recent  years, 
the  sector-specific  taxes  levied  on  certain 
sectors  and  firms  have  increased.  These  tend 
to  be  in  sectors  where  foreign  ownership  is 
high  (e.g.  retail,  cement,  construction  and 
ceramic materials), creating a disproportionate 
the  firms  concerned (14)  and 
burden  on 
affecting  how  the  single  market  works.  Firms 
complain  about  unequal 
treatment  and 
conduct 
arbitrariness  when 
administrative  inspections (15)  or  decide  on 
permits (16).  The  government 
increasingly 
declares  certain  investment  projects  to  be  of 

authorities 

(13)  The foreign direct investment by special purpose 

entities (SPEs) amounted to around 140% of the GDP in 
2022. These SPEs are formally registered in Hungary 
but have no or very limited physical presence, 
employment and production activity in the country. 

(14)  In the cement industry, the 90% mining fee on profit, 
the recently introduced 40% tax on freely distributed 
emission quotas and 15% tax on quota transfers, even 
within company, has made domestic production 
uneconomical, thereby supporting imports. The 
unexpected and retrospective nature of this tax do not 
provide an incentive to more efficient or 
environmentally friendly operations. The tax rate in the 
highest bracket (turnover above HUF 100 billion) of the 
progressive retail tax on net revenue was increased 
further from 4.1% to 4.5% in 2024. The tax rate 
remained unchanged for lower brackets (0% up to HUF 
0.5 billion, 0.15% up to HUF 30 billion, 1% up to HUF 
100 billion).  

(15)  Large foreign retail firms received disproportionately 

more fines and inspections than Hungarian-owned retail 
firms, for example in the context of mandatory 
discounts that concern only larger retail chains. By 
contrast, the environmental fines and pollution 
monitoring standards are low. Firms can contract 
authorities to carry out targeted inspections on 
competitor firms.  

(16)  The construction of retail establishments above 400 m2 
is prohibited in Hungary, but the authorities can grant 
exemptions. The criteria for these exemptions are not 
transparent and there is no scope for effective judicial 
review. 

for 

lighten 

importance 
to  speed  up  and 

the  national 
‘strategic 
economy’ 
the 
administrative  process.  Private  investors  can 
also  ask  for  exemptions,  but  the  criteria  used 
by  the  government  are  not  transparent  and 
cannot  be  challenged  in  court.  In  2023,  for 
instance,  the  government  obtained  a  right  of 
first refusal on solar power plants in Hungary. 
This  can  hinder  the  green  transition  and 
decrease the value of these businesses, as it is 
less  likely  that  potential  buyers  will  invest 
money in a transaction if the state has  a buy 
option.  At  the  same  time,  the  government 
continues 
to  exempt 
transactions  from  merger  control.  The  criteria 
for these exemptions are not transparent, and 
no  formal  procedure  exists  to  contest  them. 
There  have  been  more 
than  40  such 
interventions since 2014. The government also 
continues  to  make  extensive  use  of 
its 
mandate  to  issue  emergency  decrees  under 
the  ‘state  of  danger’  regime.  Many  of  these 
decrees  do  not  seem  to  relate  to  the  invoked 
emergency  situation,  which  weakens  legal 
certainty  and  interferes  with  normal  business 
activity.  

its  power 

to  use 

national 

champions. 

The  changing  market  and  ownership 
structure  create  less  competition  and 
fewer  incentives  to  invest  and  innovate. 
The  general  perception  of  businesses  is  that 
various  state  interventions  are  used  to  force 
foreign  owners  to  sell  their  firms,  facilitating 
the  creation  of  public  or  government-
connected 
These 
interventions may also restrict companies with 
ownership from other EU countries from doing 
business  under  equal  opportunities.  The 
transactions  are  often  concluded  through 
private  equity  funds  and  their  beneficial 
owners  do  not  seem  to  be  easily  identifiable 
with certainty. This adds to the unpredictability 
of  the  business  environment  and  creates  a 
supervisory 
challenge 
authorities.  Several  services (17)  are  entrusted 
to  state-owned  or  private  firms  specifically 
created  for  these  purposes,  which  operate 
without competition.  

the  market 

for 

(17)  Textbook publishing, fertility clinics, waste 

management, mobile payments, the cash-in-transit 
market, tobacco wholesale and retail and gambling. 

13 

 
 
 
The  deteriorating  enforcement  of  single 
market 
rules  acts  as  a  drag  on 
investment.  According  to  the  Single  Market 
Scoreboard,  there  are  significant  delays  in 
transposing  directives  related  to  the  single 
market  and  complying  with  rulings  of  the 
European  Court  of  Justice,  and  a  significant 
transposed 
proportion  of  directives  are 
‘protecting 
incorrectly.  The  recent  law  on 
national 
legal 
questions (18).  Better  compliance  with  single 
market 
support  market 
integration,  generate  more  investment  and 
ultimately 
to  greater  productivity, 
competitiveness and welfare gains. 

sovereignty’  also 

rules  would 

raises 

lead 

Graph 3.1: Cost of one patent in EUR million, in 
purchasing power standards, 2022 

Source: Eurostat 

R&D 

spending 

Low 
hampers 
on 
competitiveness.  Overall  R&D  spending 
decreased  to  1.4%  of  GDP  in  2022  (EU 
average 2.2%), from more than 1.6% in 2021. 
Hungary is a ‘moderate innovator’, and the gap 
between  its  performance  and  the  EU  average 
is  widening.  Businesses  and  academia  are 
more 
if  the 
business environment is stable. While the R&D 
activity of businesses is supported by the state 
through a generous tax allowance, a large part 
of  it  is  performed  by  a  few  large  companies. 

invest  in  research 

likely  to 

(18)  February infringement package: key decisions 

(europa.eu) 

Moreover, R&D spending is not translated into 
actual 
innovation.  The  number  of  patent 
applications compared to the money spent on 
them  is  one  of  the  lowest  in  the  EU  (Graph 
3.1).  This  points  to  the  low  effectiveness  of 
this  tax  allowance  and  R&D  spending  (see 
Annex 11). 

Shortage of skilled workers acts 
as an obstacle to growth 

in 

the 

rural 

areas 

The  shortage  of  skilled  workers  hinders 
the  competitiveness  potential  of  the 
economy.  Basic  skills  as  per  the  latest  PISA 
test results are around the EU average, but the 
performance  gap  by  socio-economic  status  is 
larger  than  in  other  EU  countries.  More  than 
half  of  15-year-old  Hungarians  from  the 
bottom  quarter  of 
socio-economic 
distribution  underachieve  in  mathematics,  a 
share that increased by 6.7 pps between 2018 
and  2022.  The  early  school  leaving  rate  is 
above  the  EU  average,  and  it  is  significantly 
higher 
among 
disadvantaged groups, especially among Roma 
and  persons  with  a  disability.  The  share  of 
tertiary graduates is also one of the lowest in 
the EU, which poses challenges in meeting the 
growing demand for a highly skilled workforce. 
Due  to  the  selectiveness  of  the  education 
system,  disadvantaged  students  have  little 
chance to go to university. Concerns related to 
academic  freedom,  obstacles  to  international 
scientific  cooperations  and  low  salaries  in 
universities  decrease  the  attractiveness  of 
skills  and 
higher  education. 
the 
education 
Hungarian  economy  to  a  high  value-added 
growth model.   

Improving 
levels  would  help  shift 

and 

implementing  active 

Disadvantaged  groups  have  difficulties 
entering the labour market. Between 2014 
and 2022, significant amounts were allocated 
to 
labour  market 
measures  from  EU  cohesion  funds.  While  the 
employment rate of the low-skilled and Roma 
increased  significantly  over  this  period,  it 
remains  much  lower  than  the  average  (60% 
and  46%  respectively  in  2022).  The  disability 
employment gap is well above the EU average. 
Similarly,  while  the  overall  rate  of  young 

14 

0204060LUMTNLFISEDKIEDEFREUATCYITBEESEESILTPTLVGRBGPLSKCZHUHRRO 
  
 
it 

people neither in employment nor in education 
or  training  (10.8%)  remains  below  the  EU 
average, 
is  significantly  higher  among 
persons  with  disabilities,  Roma  and  women  in 
rural  areas.  There  is  a  substantial  territorial 
difference in the employment rate (see Annex 
14).  Targeted  measures  to  integrate  these 
groups  could  improve  their  socio-economic 
labour  and  skills 
conditions  and  ease 
shortages.  For  a  more  productive  and  more 
mobile  workforce,  effective  and  widely 
available  adult  education  would  be  key. 
Extending  the  duration  of  the  unemployment 
benefit  from  its  current  short  period  of  3 
months  could  also  provide  more  opportunities 
for people to find better matching jobs or find 
time  for  upskilling-  and  reskilling.  This  would 
improve productivity and competitiveness.   

Foreign  workers  help  ease 
labour 
shortages.  There  has  been  a  significant 
increase  in  the  number  of  foreign  workers  in 
recent years, but this may not match fully the 
needs.  The  legislation  on  the  employment  of 
foreign workers sets out limits on their number 
and the sectors in which they can be hired.  

Graph 3.2: Number of foreign workers in 
Hungary (thousands) 

Source: KSH 

Limited social dialogue puts employees in 
a  disadvantaged  position 
in  wage 
bargaining, especially in the public sector. 
In  times  of  creeping  labour  shortages,  even 
the 
during 
unemployment  rate  remained  below  the  EU 
average  (4.1%  vs  5.9%  in  2023).  While  real 

recession 

2023, 

the 

in 

wages  have  fallen  due  to  high  inflation, 
effective labour representation could have led 
to  a  less  significant  loss  for  wage  earners. 
Despite  some  improvement,  social  dialogue 
remains weak and fragmented in the absence 
of  a  legal  framework  for  a  tripartite  forum 
made up of the government, trade unions and 
employers’ 
collective 
bargaining coverage as measured by the OECD 
is  low.  Measures  such  as  the  change  in  the 
membership  fees  payable  to  trade  unions  for 
public  sector  workers,  limiting  the  right  of 
teachers  to  strike  or  the  abolishment  of 
collective bargaining in the health sector have 
put employees in a weak position, including in 
wage negotiations.  

associations. 

The 

The  positive  trend  of  decreasing  poverty 
has  stalled.  In  the  past  decade,  poverty 
indicators have improved markedly in line with 
robust economic growth. However, the relative 
situation of certain groups such as low-income 
households,  children,  Roma  and  people  living 
in remote settlements has worsened. In 2023, 
national  poverty  indicators  increased  again 
amid  the  economic  recession.  The  share  of 
people  at  risk  of  poverty  and  social  exclusion 
was  especially  high  among  disadvantaged 
groups such as the low-educated (45.3%) and 
Roma  (61.7%;  against  18.6%  of  non-Roma  in 
2023). 
increased  significantly  among 
children to 24.4% in 2023, driven by a strong 
increase  in  their  severe  material  and  social 
deprivation rate. 

It 

(‘fht’), 

transfers 

impact  of  social 

Some  social  benefits  fail  to  adequately 
support  their  target  groups.  The  poverty-
reducing 
is 
comparable  to  other  EU  Member  States. 
However,  some  social  benefits,  such  as 
family  benefit 
minimum 
income 
tax  benefit 
(‘családi  pótlék’)  and  family 
(‘családi  adókedvezmény’),  have 
remained 
rapid 
nominally  unchanged  despite 
nominal  wage  growth  in  recent  years.  The 
effective  tax  reduction  impact  of  the  family 
tax  benefit  has  decreased,  in  particular  for 
low-income  families  with  more  children  (see 
Graph  3.3).  In  a  high-inflation  environment, 
this  has  resulted  in  a  rising  proportion  of 
people at risk of poverty in families compared 
to those living in single households. The family 
tax  benefit  helps  well-earning  families  with 
several children more than it does for example 

the 

15 

010203040506070809010020192020202120222023EU and EFTAThird countries 
      
income 

households  with  one  child  and  with  a  lower 
income (19). The tax system has a low ability to 
correct 
inequalities.  The  personal 
income tax is flat, the total tax burden on low 
earners  is  relatively  high (20),  and  the  high 
reliance  on  VAT  disproportionately  burdens 
low-income  groups.  The  scarcity  of  public 
formal  care  services  and  assistance  implies 
that  families  play  a  role  in  financing  and 
providing long-term care.  

Graph 3.3: Increase in effective tax burden of 
employees due to the non-indexation of 
family tax benefit, 2019-2023 (percentage 
point) 

(1) Personal income tax and social security contribution 
Source: KSH 

These  findings  are  consistent  with  the 
second-stage  analysis  in  line  with  the 
features  of  the  Social  Convergence 
Framework. The analysis points to challenges 
mainly related to vulnerable groups’ education, 
skills  and  labour  market  participation  as  well 
as  to  the  adequacy  of  social  protection  but 
does  not  point  to  major  social  convergence 
challenges  for  Hungary  overall,  in  light  of  the 

(19)  Bornukova, K., Hernandez Martin, A. and Picos, F., 

Investing in Children: The Impact of EU Tax and Benefit 
Systems on Child Poverty and Inequality, European 
Commission, 2024, JRC137125. 

(20)  According to the Commission’s Tax and Benefits 

database, the tax wedge – at 50% of the average 
wage (single earners) – is one of the highest in the EU. 

positive  developments  recorded,  especially  in 
the areas of employment and skills (21). 

The green transition remains a 
significant challenge  

its 

of 

supply 

respectively.  This 
two 

The  appropriate 
clean, 
affordable  and  secure  energy  is  crucial 
for the competitiveness of the Hungarian 
economy.  Hungary  has  added  a  substantial 
REPowerEU  chapter 
recovery  and 
to 
resilience  plan,  but  significant  challenges 
remain.  It  continues  to  rely  heavily  on  Russia 
for fossil fuels and on nuclear energy, and its 
efforts to shift away from Russian dependence 
are  slow.  The  share  of  Russian  crude  oil  and 
gas in imports amounted to 64% and 75% in 
is 
2021  and  2023 
particularly  concerning  as 
thirds  of 
Hungary’s  energy  consumption  is  covered  by 
oil  and  gas,  and  Hungary  has  one  of  the 
highest  figures  in  the  EU  for  fossil  fuel 
subsidies  as  a  share  of  GDP  on  account  of 
subsidised  energy  prices  for  households.  The 
electricity  and  gas  price  for  non-household 
consumers  is  one  of  the  highest  in  the  EU, 
hindering  the  competitiveness  of  Hungarian 
firms. The four-year postponement to 2029 of 
the  phase-out  of  the  Mátra  lignite-fuelled 
power  plant,  which  accounts  for  50%  of  the 
power  sector’s  greenhouse  gas  emissions, 
slows the green transition. The deployment of 
renewable energy and its speedy connection to 
the  grid,  particularly  wind,  will  be  key  as 
decarbonisation  measures  and  an  expansion 
of 
(in 
electricity-based  manufacturing 
particular  batteries)  are  expected  to  drive  up 
the demand for electricity.  

Hungary also continues to face a number 
of  challenges  related  to  the  sustainable 
use  of  water.  There  are 
significant 
environmental  and  climate  risks,  including 
erosion,  flood  and  drought.  Measures  that 
into 
expand 

irrigation  without 

taking 

(21)  European Commission, SWD(2024)132. The analysis 
relies on all the available quantitative and qualitative 
evidence and analysing the policy response undertaken 
and planned. 

16 

0%2%4%6%8%10%12%2 earners ataverage wage2 earners at75% ofaverage wage2 earners at50% ofaverage wage1 child2 children3 children 
          
 
 
Box 4 

The mid-term review of cohesion policy funds for Hungary  

The  mid-term  review  of  cohesion  policy  funds  is  an  opportunity  to  assess 
cohesion policy programmes and  tackle emerging needs and challenges in EU 
Member  States  and  their  regions.  Member  States  review  each  programme,  taking 
into  account  among  other  things  the  challenges  identified  in  the  European  Semester, 
including in the 2024 country-specific recommendations. This review forms the basis for 
a  proposal  by  the  Member  State  for  the  definitive  allocation  of  15%  of  EU  funding 
included in each programme. 

Hungary has made progress in the implementation of cohesion policy programmes and 
the  European  Pillar  of  Social  Rights,  but  challenges  remain  as  outlined  in  this  report, 
including  Annexes  14  and  17.  In  particular,  significant  social  and  regional  disparities 
persist  between  the  least  and  most  developed  districts  and  between  urban  and  non-
urban  areas.  Against  this  background,  it  remains  important  to  continue  implementing 
planned  priorities,  with  particular  attention  to:  (i)  the  digital  and  green  transition, 
including  the  development  of  basic  digital  skills,  the  digital  transformation  of 
businesses,  take-up  of  smart  city  solutions,  net-zero  technologies  and  water 
management;  (ii)  integrated  territorial  development  in  functional  areas  and  the  least 
developed districts, and strengthening the administrative capacity at national and sub-
national levels; (iii) social inclusion and poverty reduction, focusing on children and the 
most deprived districts; (iv) comprehensive strengthening of basic skills, and improving 
access  to  quality  mainstream  education  and  lifelong  learning,  complemented  by 
structural  reforms  of  the  education  system;  (v)  targeted  measures  addressing  labour 
market challenges for disadvantaged groups such as Roma and building the capacity of 
social  partners;  (vi)  the  implementation  of  Territorial  Just  Transition  Plans.  In addition, 
resolving  pending  issues  on  enabling  conditions  and  the  conditionality  procedure  is 
necessary for Hungary to make full use of cohesion policy funds.  

intergenerational  poverty 

The following needs merit specific consideration in preparation for the mid-term review: 
integrated 
addressing  energy  poverty  and 
interventions, with a focus on the least developed districts and municipalities and their 
schools,  and  strengthened  governance  and  differentiation  of  the  smart  specialisation 
strategy.  Hungary  could  also  benefit  from  the  opportunities  under  the  Strategic 
Technologies for Europe Platform (22) initiative to boost investments in deep and digital 
technologies (e.g. Internet of Things, big data, artificial intelligence), clean technologies 
(e.g.  renewable  energy,  geothermal  energy)  and  biotechnologies  (pharmaceuticals, 
medical products), while also investing in skills and qualifications required to meet the 
demand for labour in these sectors. 

through 

consideration  sustainability  aspects  harm 
water  quantity,  quality,  and  biodiversity.  The 
increased  use  of  water  for  industry  (for 
example,  growing  battery  production) 
is 
expected  to  be  a  further  stressor  for  water 
quality  and  create  challenges  in  terms  of 
availability.  Distortive  sectoral  taxes  on  water 
pipelines  and  the  low  price  of  drinking  water 
have  prevented  water  utility  companies  from 
investing  in  infrastructure  maintenance.  The 
State  Audit  Office  estimates  that  about  25% 

of  all  drinking  water  was  lost  to  leakage  in 
2021.  Both  the 
legal  and  administrative 
environment  make  the  implementation  of  a 
comprehensive  water  strategy  difficult.  The 
responsibilities  related  to  water  management 
are  scattered  across  various  ministries  and 
authorities (see Annexes 6 and 9).  

(22)  Regulation (EU) 2024/795 

17 

 
 
 
KEY FINDINGS 

resilience  plan 

With its wide policy scope and substantial 
financial  envelope,  Hungary’s  recovery 
and 
includes 
measures 
to  address  a  series  of 
structural  challenges,  in  synergy  with 
other  EU  funds,  including  cohesion  policy 
funds by:  

(RRP) 

•  Strengthening  the  green  transition, 
building  a  flexible  electricity  sector  with  a 
high  share  of  renewable  energy, improving 
energy  efficiency 
in  residential  homes, 
public buildings and companies, electrifying 
transport,  encouraging  the  production  of 
renewables, 
the 
decarbonisation  of 
industry,  rolling  out 
financial instruments for energy, improving 
waste  management  and  supporting  the 
acquisition of green skills; 

incentivising 

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

training, 

skills 

•  Removing 

regulatory  barriers  and 
improving the business environment by 
increasing  competition  and  transparency in 
public  procurement,  strengthening  judicial 
independence, 
anti-
corruption  framework,  and  ensuring  better 
quality of the decision-making process;  

reinforcing 

the 

conducting 

•  Improving fiscal sustainability and the 
tax  system  by  reforming  the  pension 
spending 
system, 
reviews to identify  options for savings and 
efficiency  gains,  and  simplifying  the  tax 
system,  while  strengthening  it  against  the 
risk of aggressive tax planning; 

regular 

18 

•  Supporting access to quality education 
and healthcare, the labour market and 
social  services  by  making  the  teaching 
profession  more  attractive  and  promoting 
greater  participation  of  disadvantaged 
groups  in  quality  education,  modernising 
hospital  and  primary  care,  providing 
tailored support for those living in the most 
disadvantaged  settlements,  and  increasing 
the number of crèche places. 

of 

implementation 

The 
Hungary’s 
recovery  and  resilience  plan  is  facing 
significant 
substantial 
challenges  which  require  decisive  actions  to 
ensure a successful implementation of all the 
measures in the plan by August 2026. 

delays 

and 

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

and 

fiscal 

•  Pursuing  effective  policy  coordination 
improving  economic  policy  to 
and 
ensure 
external 
sustainability,  including  by  strengthening 
the  medium-term  budgetary  framework 
the 
and  annual  budgeting,  avoiding 
expansionary  bias  of  fiscal  policy  and 
distortive  interventions  on  the  credit  and 
product  markets,  and  targeting  support 
measures  in  the  housing  sector  towards 
low-income households; 

all 

the 

companies, 

•  Improving  the  quality  of  the  business 
environment  by  ensuring  a  predictable 
regulatory  framework,  a  level  playing  field 
for 
consistent 
application  of  single  market  rules  and  a 
in  certain 
higher 
sectors, 
including  by  avoiding  arbitrary 
administrative interventions and the use of 
distortive  sectoral  taxes  and  legislation, 
applying 
scrutiny 
competition 
systematically  to  business  transactions  as 

level  of  competition 

 
 
well  as  reducing  the  use  of  emergency 
measures to what is strictly necessary;  

•  Accelerating 

the  green 

transition 
further  by  decreasing  dependence  on 
Russian fossil fuels, investing in sustainable 
water management and by taking concrete 
steps to phase out fossil fuel subsidies. 

•  Improving  skills  levels,  labour  market 
participation and social mobility, with a 
focus  on  disadvantaged  groups,  including 
Roma  and  people  with  a  disability,  by 
raising  education  performance,  decreasing 
the rate of early leavers and upskilling the 
workforce; 

•  To support upward social convergence, 
providing  adequate  unemployment 
social 
benefits 
assistance  as  well  as  a fairer  tax  system 
and  equal  access  to  essential  services, 
including decent housing for all; 

effective 

and 

•  Ensuring  effective  social  dialogue  by 
strengthening its framework and improving 
the 
in 
involvement  of  social  partners 
decision-making. 

19 

 
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 – implementation 

A4.  Other EU instruments for recovery and growth 

A5.  Resilience 

Environmental sustainability 

A6.  European Green Deal 

A7.  Energy transition and competitiveness 

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 

LIST OF TABLES 

A2.1. 
A3.1. 

Summary table on 2019-2023 CSRs 
Key facts of the Hungarian RRP 

23 

25 

25 

27 

31 

33 

36 

38 

38 

43 

49 

52 

52 

54 

57 

60 

65 

67 

67 

70 

72 

74 

79 

79 

81 

83 

84 

28 
31 

 
 
 
Support from EU instruments in Hungary 
Resilience indices across dimensions for Hungary and the EU-27 
Indicators tracking progress on the European Green Deal from a macroeconomic perspective 
Key Energy Indicators 
Key indicators for a fair transition in Hungary 
Circularity indicators 

A3.2.  Measures in Hungary's RRP 
A4.1. 
A5.1. 
A6.1. 
A7.1. 
A8.1. 
A9.1. 
A10.1.  Key Digital Decade targets monitored by the Digital Economy and Society Index 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 (to be updated once new data are available) 
A20.1.  Key economic and financial indicators 
A21.1.  Debt sustainability analysis - Hungary 
A21.2.  Heat map of fiscal sustainability risks - Hungary 

LIST OF GRAPHS 

Progress towards the SDGs in Hungary 
Hungary’s progress on the 2019-2023 CSRs (2024 European Semester) 
Total grants disbursed under the RRF 
Total loans disbursed under the RRF 
Distribution of cohesion policy funding across policy objectives in Hungary 
Distribution of RRF funding by pillar in Hungary 
Greenhouse gas emissions from the effort sharing sectors in Mt CO2eq, 2005-2022 
Changes in livestock density and organic farming 
Environmental investment gap, annual average 
Hungary’s energy retail prices for households and industry & service 
Trends in electricity prices for non-household consumers (EU and foreign partners) 
Hungary's installed renewable capacity (left) and electricity generation mix (right) 
Fair transition challenges in Hungary 
Job vacancy rate in transforming sectors and mining and quarrying 
ETS emissions by sector since 2013 
Treatment of municipal waste 

A1.1. 
A2.1. 
A3.1. 
A3.2. 
A4.1. 
A4.2. 
A6.1. 
A6.2. 
A6.3. 
A7.1. 
A7.2. 
A7.3. 
A8.1. 
A8.2. 
A9.1. 
A9.2. 
A11.1.  R&D intensity in 2022 
A12.1.  Total factor productivity 
A12.2.  Labour productivity by sector (GDP per person employed, 2015=100 
A13.1.  Share of women and men in management positions 
A13.2.  Scope index of independent fiscal institutions 
A15.1.  Underachievement rates in mathematics by socio-economic background, PISA 2022 
A16.1.  Life expectancy at birth, years 
A16.2.  Projected increase in public expenditure on healthcare over 2024-2070 
A17.1.  GDP per capita (2012) and GDP per capita growth (2013-2022) 
A19.1.  Tax wedge for single and second earners, % of total labour costs, 2023 
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 2022 

LIST OF MAPS 

A17.1.  Regional Competitiveness Index, 2022, Hungary 

24 

32 
35 
36 
42 
48 
50 
53 
55 
59 
64 
66 
67 
69 
71 
73 
75 
80 
81 
83 
86 
86 

25 
27 
32 
32 
34 
34 
38 
40 
41 
43 
43 
45 
49 
50 
52 
53 
57 
60 
60 
65 
65 
70 
72 
72 
74 
82 

82 

76 

 
 
 
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  performs  well  (SDG 11)  or  is 
improving  (SDGs 2,  7  and  13)  on  some  SDGs 
related  to  environmental  sustainability,  it  is 
moving away from others and needs to catch 
up  with  the  EU  average  (SDGs 9  and  12).  On 
SDG 12 (Responsible consumption and production), 

Graph A1.1: Progress towards the SDGs in Hungary 

services 

Hungary  is  moving  away  from  the  EU  average. 
There  is  room  for  improvement  on  the  circular 
economy,  where  the  circular  material  use  rate  is 
low and stagnating (HU: 7.9%, EU: 11.5%; see also 
Annex 9). Other contributing factors are the small 
environmental  goods  and 
sector, 
passenger  car  emissions  (decreasing  more  slowly 
than the EU average)  and low energy productivity 
that is rising more slowly than the EU average. On 
a  positive  note,  Hungary’s  net  greenhouse  gas 
emissions (SDG 13; 5.6 tonnes per capita) continue 
to  be  below  the  EU  average  (7.3 tonnes  per 
capita). At the same time, Hungary almost halved 
its contribution to the international commitment to 
climate-related  expenditure  between  2017  and 
2022, while there was a moderate increase in the 
EU average. The recovery and resilience plan (RRP) 
includes measures to facilitate the development of 
renewable  energy  and  improve  the  sustainability 
of  transport,  water  management  and  the  circular 
economy. 

On  fairness,  Hungary  performs  well  on 

For detailed datasets on the various SDGs, see the annual Eurostat report ‘Sustainable development in the European Union’; for 
details on extensive country-specific data on the short-term progress of Member States: Key findings – Sustainable development 
indicators - Eurostat (europa.eu). A high status does not mean that a country is close to reaching a specific SDG, but signals that it 
is doing better than the EU on average. The progress score is an absolute measure based on the indicator trends over the past 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 25 April 2024. Data refer mainly to the period 2017-2022 or 2018-2023. Data on SDGs may 
vary across the report and its annexes due to different cut-off dates. 

25 

 
 
 
 
 
 
 
development 
boosting 
digitalisation  in  education,  public  administration, 
and the health, transport and energy sectors. 

cooperation 

and 

Hungary continues to improve but still needs 
to catch up with the EU average on all SDGs 
related  to  macroeconomic  stability  (SDGs 8, 
16,  17).  To  catch  up  with  the  rest  of  the  EU  on 
SDG 16  (Peace,  justice  and  strong  institutions), 
Hungary  has  room  for  considerable  improvement 
on  general  government  total  expenditure  on  law 
courts,  as  well  as  on  the  worsening  perceived 
independence of the justice system and Corruption 
Perceptions Index. On SDG 17 (Partnerships for the 
goals),  Hungary  continues  to  be  below  the  EU 
average for global partnership indicators. The RRP 
improve  public  finances, 
includes  reforms  to 
measures  in  areas  related  to  the  rule  of  law  and 
the  anti-corruption  framework,  and  reforms  to 
strengthen judicial independence. 

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

(poverty  and 

SDGs 1and  10 
reduced 
inequalities).  However,  it  is  moving  away 
from the targets for SDG 5 (Gender equality) 
and  needs  to  catch  up  with  the  EU  average 
on  several  SDGs (SDGs  3,  4,  5,  7  and  8). 
Hungary  outperformed 
the  EU  average  on 
multidimensional  poverty  indicators  (SDG 1):  it 
recorded  significant  progress  on  indicators  linked 
to  people  at  risk  of  poverty  or  social  exclusion 
(which fell from 25.9% of the population in 2017 
to  18.4%  in  2022)  and  the  severe  material  and 
social  deprivation  rate  (which  fell  from  16.1%  of 
the  population  in  2017  to  9.1%  in  2022).  On 
SDG 3  (Good  health  and  well-being),  Hungary 
needs  to  catch  up,  primarily  by  reducing  the 
obesity  rate  and  avoidable  mortality.  Hungary  is 
making progress on quality education (SDG 4) but 
still  needs  to  catch  up  with  the  EU  average  on 
tertiary  education  attainment  and  adult  learning. 
While  the  unadjusted  gender  pay  gap  (SDG 5) 
decreased, on average, to 12.7% of men’s average 
gross  hourly  earnings  in  the  EU  as  a  whole,  it 
widened  by  1.6  percentage  points  to  17.5%  in 
Hungary in the 5 years preceding 2022. Moreover, 
Hungary  continues  to  lag  far  behind  the  EU 
average  on 
in 
leadership positions (senior management positions 
and  seats  in  the  national  parliament).  The  RRP 
supports  social  development  in  disadvantaged 
settlements  and  aims  to  improve  higher  and 
vocational  education  and  modernise  the  health 
sector. 

indicators  related  to  women 

Hungary  is  improving  on  SDGs 4  (Quality 
education) and 8 (Decent work and economic 
growth)  in  relation  to  competitiveness  and 
productivity.  By  contrast,  it  is  moving  away 
from  the  targets  for  the  SDG  on  industry, 
innovation  and  infrastructure  (SDG 9).  The 
country  is  achieving  mixed  results  on  industry, 
innovation  and  infrastructure  (SDG 9),  performing 
well  on  sustainable 
infrastructure  but  being 
outperformed  on  R&I  indicators,  in  particular  on 
patent  applications  to the  European  Patent  Office 
(11  per  million  inhabitants  in  2023;  EU  average: 
153)  and  expenditure  on  R&D  (1.39%  of  GDP  in 
2022; EU average: 2.24%). Its investment share of 
GDP  (SDG 8;  27.9%  in  2022)  continues  to  be 
above the EU average (22.7%). With the exception 
of  the  gender  gap,  Hungary  outperforms  the  EU 
average on all employment indicators (SDG 8) but 
on  decent  work  indicators,  it  could  do  better  on 
fatal accidents at work (2.01 out of every 100 000 
workers  in  2021).  The  RRP  includes  measures 
supporting  the  development  of  research  and 

26 

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

Graph A2.1: Hungary’s progress on the 2019-2023 
CSRs (2024 European Semester) 

Source: European Commission. 

(SDGs) 

The Commission has assessed the 2019-2023 
country-specific  recommendations  (CSRs) (23) 
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 (24)  and  the  commitments  in  its 
recovery and resilience plan (RRP) (25). At this stage 
of RRP implementation, 22% of the CSRs focusing 
issues  from  2019-2023  have 
on  structural 
recorded  at  least  ‘some  progress’,  while  78% 
recorded  ‘limited  progress’  or  ‘no  progress’  (see 
Graph  A2.1).  As  the  RRP  is  implemented  further, 
considerable  progress  in  addressing  structural 
CSRs is expected in the coming years. 

(23)  2023 CSRs: EUR-Lex - 32023H0901(17) - EN - EUR-Lex 

(europa.eu) 

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) 

(24)  Including policy action reported in Recovery and Resilience 
Facility (RRF) reporting (published twice a year, reporting on 
progress in implementing milestones and targets on the 
basis of the payment requests assessment). 

(25)  Member States were asked to effectively address in their 
RRPs all or a significant subset of the relevant country-
specific recommendations issued by the Council. 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, which have not yet been 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. 

27 

No progress13%Limited progress65%Some progress18%Substantial progress4% 
 
 
 
 
 
 
   
 
 
 
Table A2.1:  Summary table on 2019-2023 CSRs 

(Continued on the next page) 

28 

HungaryAssessment in May 2024*RRP coverage of CSRs until 2026**Relevant SDGs2019 CSR 1Ensure 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.Some 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, 16 
 
 
 
  
 
Table (continued) 

(Continued on the next page) 

29 

2020 CSR 4 No 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 1Not relevant anymoreIn2022,maintainasupportivefiscalstance,includingtheimpulseprovidedbytheRecoveryandResilience Facility, and preserve nationally financed investment.Not relevant anymoreNot applicableSDG 8, 16Wheneconomicconditionsallow,pursueafiscalpolicyaimedatachievingprudentmedium-termfiscalpositions and ensuring fiscal sustainability in the medium term.Not relevant anymoreNot applicableSDG 8, 16At the same time, enhance investment to boost growth potential. Payparticularattentiontothecompositionofpublicfinances,onboththerevenueandexpendituresidesofthenationalbudget,andtothequalityofbudgetarymeasuresinordertoensureasustainableandinclusiverecovery.Prioritisesustainableandgrowth-enhancinginvestment,inparticularinvestmentsupporting the green and digital transition.Not relevant anymoreNot applicableSDG 8, 16Giveprioritytofiscalstructuralreformsthatwillhelpprovidefinancingforpublicpolicyprioritiesandcontributetothelong-termsustainabilityofpublicfinances,including,whererelevant,bystrengtheningthe coverage, adequacy and sustainability of health and social protection systems for all.Not relevant anymoresNot applicableSDG 8, 162022 CSR 1Some ProgressIn2023,ensurethatthegrowthofnationallyfinancedprimarycurrentexpenditureisinlinewithanoverallneutralpolicystance,takingintoaccountcontinuedtemporaryandtargetedsupporttohouseholdsandfirmsmostvulnerabletoenergypricehikesandtopeoplefleeingUkraine.Standreadyto adjust current spending to the evolving situation. Some ProgressNot applicableSDG 8, 16Expandpublicinvestmentforthegreenanddigitaltransitions,andforenergysecuritytakingintoaccounttheREPowerEUinitiative,includingbymakinguseoftheRecoveryandResilienceFacilityandother Union funds.Substantial 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, Some 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 9Progress on the cohesion policy programming documents is monitored under the EU cohesion policy. 
 
 
  
 
Table (continued) 

Note: 
* See footnote (25). 
** RRP measures included in this table contribute to the implementation of CSRs. Nevertheless, additional measures outside the 
RRP may be 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. 

30 

2022 CSR 6Limited progressReduce overall reliance on fossil fuels Limited ProgressRelevant RRP measures planned as of 2022 and 2023.SDG 7, 9, 13by accelerating the deployment of renewables, in particular by streamlining the permitting procedures Some ProgressRelevant RRP measures planned as of 2023.SDG 7, 8, 9, 13and the upgrading of the electricity infrastructure.Limited progressRelevant RRP measures planned as of 2022.SDG 7, 9, 13Diversifyimportsoffossilfuelsby,interalia,strengtheninginterconnectionwiththeparticipationofother countries.Limited ProgressSDG 7, 9, 13Reducethedependencyonfossilfuelsinbuildingsandtransportbysteppingupeffortsonenergy-efficiency measures for all, especially in residential housesSome ProgressRelevant RRP measures planned as of 2023 and 2024.SDG 7, 9, 13and on sustainable transport, in particular through electrification.Some ProgressRelevant RRP measures planned as of 2023, 2024 and 2026.SDG 7, 9, 132023 CSR 1Limited progressWinddowntheemergencyenergysupportmeasuresinforce,usingtherelatedsavingstoreducethegovernmentdeficit,assoonaspossiblein2023and2024.Shouldrenewedenergypriceincreasesnecessitateneworcontinuedsupportmeasures,ensurethatsuchsupportmeasuresaretargetedatprotectingvulnerablehouseholdsandfirms,arefiscallyaffordableandpreserveincentivesforenergysavings.Limited progressSDG 8, 16Ensureprudentfiscalpolicy,inparticularbylimitingthenominalincreaseinnationallyfinancednetprimary expenditure in 2024 to not more than 4,4 %.Limited progressSDG 8, 16PreservenationallyfinancedpublicinvestmentandensuretheeffectiveabsorptionofgrantsundertheFacility and of other Union funds, in particular to foster the green and digital transitions.No ProgressSDG 8, 16Fortheperiodbeyond2024,continuetopursueamedium-termfiscalstrategyofgradualandsustainableconsolidation,combinedwithinvestmentsandreformsconducivetohighersustainablegrowth, in order to achieve a prudent medium-term fiscal position.Limited progressSDG 8, 16Pursue effective coordination and clear demarcation of macroeconomic policies in order to ensure fiscal and external sustainability.No ProgressSDG 8, 16Phaseoutpriceandinterest-ratecapsinordertoreducedistortiveeffectsandtofacilitatethesmoothtransmission of monetary policy.Limited progressSDG 8Target support measures in the housing sector to low-income households.Limited progressSDG 8, 10, 1Strengthenthemedium-termbudgetaryframework,alignthepreparationofannualbudgetswiththebudgetary year and limit discretion in the implementation of annual budgets.Limited progressSDG 8, 162023 CSR 2UrgentlyfulfiltherequiredmilestonesandtargetsrelatedtostrengtheningjudicialindependenceandsafeguardingtheprotectionofthefinancialinterestsoftheUnioninordertoallowforaswiftandsteadyimplementationofitsrecoveryandresilienceplan.SwiftlyfinalisetheREPowerEUchapterwithaviewto rapidly starting the implementation thereof. Proceed with the speedy implementation of cohesion 2023 CSR 3Limited ProgressImprove the adequacy of the social assistance system, including unemployment benefits.Limited progressRelevant RRP measures are planned as of 2023.SDG 1, 2, 10Improveaccesstoeffectiveactivelabourmarketmeasures,inparticularupskillingopportunitiesforthemost disadvantaged groups,Limited progressRelevant RRP measures are planned as of 2023.SDG 8, 4, 10and ensure effective social dialogue.Limited progressSDG 16Improvetheregulatoryframeworkandcompetitioninservicesbyavoidingselectiveandarbitraryadministrativeinterventionsandtheuseoftailor-madelegislationprovidingundueadvantageordisadvantage to specific companies,No ProgressSDG 9, 16byapplyingcompetitionscrutinysystematicallytobusinesstransactionsandbyreducingtheuseofemergencymeasurestowhatisstrictlynecessary,inlinewiththeprinciplesofthesinglemarketandofthe rule of law.No ProgressSDG 9, 162023 CSR 4Limited progressReduce overall reliance on fossil fuelsLimited progressRelevant RRP measures planned as of 2023, 2024, 2025 and 2026.SDG 7, 9, 13byacceleratingthedeploymentofrenewables,includingwindenergy,geothermalandsustainablebiomethane,inparticularbystreamliningpermittingprocedures,whileconductingregularenvironmentalimpact assessments, and by creating a supportive and predictable regulatory environment.Some ProgressRelevant RRP measures are planned as of 2023, 2024, 2025 and 2026.SDG 7, 8, 9, 13Phase out subsidies for fossil fuels.No ProgressSDG 12, 13Reformtherulesonthebalancingoftheenergymarketandtariffsettinginordertoallowforcostrecovery and an optimum use of the grid.Limited progressRelevant RRP measures are planned as of 2024 and 2025.SDG 7, 8, 9Where necessary, upgrade the electricity infrastructure, including grid and storage capacities.Limited progressRelevant RRP measures are planned as of 2024.SDG 7, 8, 9DiversifyimportsoffossilfuelsinordertosignificantlydecreasedependenceonRussia,includingbystrengthening cooperation with other Member States, including, where necessary, on infrastructure.Limited progressSDG 7, 8, 9Improveenergyefficiency,inparticularinbuildings,andcontinueeffortstoreduceoverallgasconsumption.Limited progressRelevant RRP measures are planned as of 2023 and 2024.SDG  7, 8, 9Adjustthecurrentsystemofregulatedenergypricesinordertoencourageenergysavingwhileproviding targeted support for low-income households.Limited progressRelevant RRP measures are planned as of 2024 and 2025.SDG  7, 13, 1, 10Stepuppolicyeffortsaimedattheprovisionandacquisitionofskillsandcompetencesneededforthegreen transition.Limited progressRelevant RRP measures are planned as of 2024.SDG 4, 7, 13RRP implementation is monitored through the assessment of RRP payment requests and analysis of the bi-annual reporting on the achievement of the milestones and targets, to be reflected in the country reports. Progress with the cohesion policy is monitored in the context of the Cohesion Policy of the European Union. 
 
 
 
  
 
ANNEX 3: RECOVERY AND RESILIENCE PLAN – IMPLEMENTATION 

the 

REPowerEU 

diversify  its  energy  supplies  and  produce 
more  clean  energy  in  the  coming  years.  To 
kick-start 
chapter’s 
implementation,  EUR  919.6  million  was  disbursed 
as  pre-financing  on  28  December  2023  and  15 
January 2024. This helped launch relevant reforms 
like the introduction of dynamic pricing in the retail 
electricity  market,  improving  regulatory  reserve 
role  of  energy 
markets,  strengthening 
communities  and  aggregators,  incentivising  the 
uptake  of  electricity  storage,  or  increasing  the 
number  of  consumers  to  use  smart  meters  and 
harmonising  the  ways  the  connection  application 
rules  are  applied  by  the  distribution  system 
operators.  

the 

Table A3.1:  Key facts of the Hungarian RRP 

Source: RRF Scoreboard 

The  plan  has  a  strong  focus  on  the  green 
transition, dedicating 66.9% of the available 
funds  to  measures  that  support  climate 
objectives  and  29.1%  of  its  total  allocation 
to support the digital transition. It also retains 
a  strong  social  dimension  with  social  protection 
measures,  especially  related  to  social  inclusion, 
which  are  expected 
to 
to 
mainstream education for disadvantaged students 
and  for  those  with  special  needs,  support  for 
4,500 additional early age childcare places as well 
as  social  measures  dedicated  to  the  300  most 
disadvantaged  settlements  experiencing  high 
levels of poverty. 

improve  access 

This Annex provides a snapshot of Hungary’s 
implementation of its recovery and resilience 
plan  (RRP),  past  the  mid-way  point  of  the 
Recovery  and  Resilience  Facility’s 
(RRF) 
lifetime.  The  RRF  has  proven  central  to  the  EU’s 
recovery  from  the  COVID-19  pandemic,  helping 
speed  up  the  twin  green  and  digital  transition, 
while  adapting  to  geopolitical  and  economic 
developments and strengthening resilience against 
future  shocks.  The  RRF  is  also  helping  implement 
the  UN  Sustainable  Development  Goals  and 
address  the  country-specific  recommendations 
(see Annex 2).   

The  RRP  paves  the  way  for  disbursing  up  to 
EUR  6.5  billion  in  grants  and  EUR  3.9  billion 
in  loans  under  the  RRF  over  the  2021-2026 
period,  representing  5.3%  of  Hungary’s 
GDP (26). As of mid-May 2024, EUR 0.9 billion has 
been  disbursed  to  Hungary  under  the  RRF, 
comprising EUR 0.14 billion in grants and EUR 0.78 
billion in loans. 

Hungary still has EUR 9.5 billion available in 
grants  and  loans  from  the  RRF.  This  will  be 
disbursed  after  the  assessment  of  the  future 
fulfilment  of  the  remaining  368  milestones  and 
targets (27)  included  in  the  Council  Implementing 
Decision (28)  (CID),  ahead  of  the  2026  deadline 
established for the RRF.  

Hungary’s  progress  in  implementing  its  plan 
is  recorded  in  the  Recovery  and  Resilience 
Scoreboard (29).  The 
scoreboard  gives  an 
overview  of  the  progress  made  in  implementing 
the  RRF  as  a  whole.  Graphs  A3.1  and  A3.2  show 
the  current  state  of  play  as  reflected  in  the 
scoreboard. 

Hungary’s RRP includes a REPowerEU chapter 
to  phase  out  its  dependency  on  fossil  fuels, 

(26)  GDP information is based on 2023 data. Source: 

https://ec.europa.eu/economy_finance/recovery-and-
resilience-scoreboard/index.html?lang=en  

(27)  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. 

(28)  https://data.consilium.europa.eu/doc/document/ST-15447-

2022-ADD-1/en/pdf  

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

resilience-scoreboard/country_overview.html  

31 

Initial plan CID adoption date15 December 2021Scope Revised plan with REPowerEU chapterLast major revision8 December 2023Total allocation EUR 6.5 billion in grants and EUR 3.9 billion in loans (5.3% of 2023 GDP)Investments and reforms 47 investments and 67 reforms Total number of milestones and targets368Fulfilled milestones and targets0 (0% of total) 
 
 
 
  
 
 
Graph A3.1: Total grants disbursed under the RRF 

Note: This graph displays the amount of grants, including pre-
financing, 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 

Graph A3.2: Total loans disbursed under the RRF 

Source: RRF Scoreboard 

With  a  significantly  delayed  implementation 
of  its  RRP,  Hungary  is  still  working  on  the 
completion of its first payment request as of 
15  May  2024.  Table  A3.2  highlights  some 
measures  that  will  be  implemented  before  2026 
to  keep  making  the  Hungarian  economy  greener, 
more digital, inclusive, and resilient. 

Table A3.2:  Measures in Hungary's RRP 

Source: FENIX 

32 

EUR 0.14billion (2.2%)Total allocation: EUR 6.512billionEUR 0.779billion (19.9%)Total allocation: EUR 3.918billionUpcoming reforms and investments• Modernisation of the electricity sector• Improving the attractiveness of the teaching profession• Strengthening of the anti-corruption framework 
   
 
   
 
   
 
ANNEX 4: OTHER EU INSTRUMENTS FOR RECOVERY AND GROWTH 

EU funding instruments provide considerable 
resources for recovery and growth to the EU 
Member  States.  In  addition  to  the  EUR 10.4 
billion  of  Recovery  and  Resilience  Facility  (RRF) 
funding  described  in  Annex  3,  EU  cohesion  policy 
funds (30)  provide  EUR 21.7  billion  to  Hungary  for 
the 2021-2027 period (31). Support from these two 
instruments  combined  represents  around  16.38% 
of  the  country’s  2023  GDP,  compared  to  the  EU 
average  of  5.38%  of  GDP (32).  Cohesion  policy 
supports  regional  development,  economic,  social 
and  territorial  convergence,  and  competitiveness 
through  long-term  investment  in  line  with  EU 
priorities and with national and regional strategies. 

During  the  2014-2020  programming  period, 
cohesion  policy  funds  boosted  Hungary’s 
competitiveness, with  tangible achievements 
notably in digital connectivity, water services 
and  improved  public  services  in  several 
areas,  from  childcare  to  telemedicine.  Over 
the whole period, which financed investments until 
December  2023,  cohesion  policy  funds (33)  made 
EUR 22.5 billion available to Hungary (34), of which 
EUR 13.2  billion  has  been  disbursed  since  March 
2020,  when  the  COVID-19  pandemic began (35). 
The  achievements  of  cohesion  policy  funds  over 
the  programming  period  included  support  for 
60 000  businesses.  The  funding  helped  stimulate 
growth,  create  jobs,  improve  skills,  strengthen 
social  inclusion,  boost  competitiveness,  provide 
broadband  access  for  an  additional  256 000 
households  and  provide  improved  water  supply 
and wastewater treatment for the population. The 

(30)  In 2021-2027, cohesion policy funds include the Cohesion 
Fund, the European Regional Development Fund, the 
European Social Fund Plus and the Just Transition Fund. 

(31)  European territorial cooperation (ETC) programmes are 
excluded from the figure. In 2021-2027, the total 
investment, including national financing, amounts to 
EUR 26.1 billion. 

(32)  RRF funding includes both grants and loans, where 

applicable. The EU average is calculated for cohesion policy 
funds excluding ETC programmes. GDP figures are based on 
Eurostat data for 2022. 

(33)  In 2014-2020, cohesion policy funds included the Cohesion 

Fund, the European Regional Development Fund, the 
European Social Fund and the Youth Employment Initiative. 
REACT-EU allocations are included but ETC programmes are 
excluded. 

(34)  In 2014-2020, the total investment, including national 

financing, amounted to EUR 26.5 billion. 

(35) Cut-off date: 14 May 2024. 

33 

to 

REACT-EU  scheme  helped  mitigate  the  impact  of 
the COVID-19 pandemic, for example by providing 
preferential 
job-protection 
loans  to  SMEs,  a 
scheme, support for medical staff and purchasing 
vaccines.  During  the  same  period,  the  European 
Social Fund (ESF) helped provide 177 of the least 
developed  municipalities  access 
improved 
services,  ranging  from  early  childhood  care  to 
social  work  and 
telemedicine.  Another  ESF 
measure with a budget of EUR 3.5 million provided 
support of up to HUF 40 000 (EUR 110) per month 
for  unemployed parents, improved  access  to day-
care services for 5 300 children, reduced the cost 
of  placement  and  helped  at  least  one  parent  to 
return 
the 
digitalisation  of  public  administration,  including 
electronic health records, and improved schools for 
180 000 pupils and the ELI-APLS Laser Institute. 

to  work.  The  ESF  also  funded 

In  the  current  programming  period,  cohesion 
policy  will  provide  a  further  boost  to 
Hungary’s  competitiveness,  to  the  green 
transition  and  to  social  cohesion,  improving 
the  living  and  working  conditions  of  the 
Hungary’s  people.  In  2021-2027,  the  European 
Regional  Development  Fund  and  the  Cohesion 
Fund  will  invest  in  the  digital  transformation  of 
advanced 
businesses, 
technologies 
in 
significant  improvements  to  the  TEN-T  network 
railways  and  clean  suburban  transport,  water 
management  and  sanitation,  sustainable  urban 
development  and 
infrastructure, 
energy  efficiency  and  in  renewable  energy.  The 
Just  Transition  Fund  will  help  workers  and 
businesses  in  three  carbon-intensive  counties  to 
find new jobs and skills.  

of 
innovation, 

local  public 

business 

uptake 

and 

the 

in 

by 

for 

example 

to 
It  will  help 

The  European  Social  Fund  Plus  (ESF+)  will 
improve  the  quality  and  quantity  of  the 
workforce, 
funding 
employment  and  adult  learning  measures.  It 
seeks  to  make  the  teaching  profession  more 
education  and 
attractive,  promote  quality 
inclusive  education  and  social 
contribute 
inclusion. 
skills 
development  by  allocating  EUR 236 000  to  help 
citizens  meet  the  challenges  of  the  digital 
transition. Specific measures are planned to equip 
at 
least  180 000  disadvantaged  people  with 
entry-level  digital  skills.  It  will  support  further 
360 000  people  in  digital  skills  development, 
particularly  targeting  (at  least  160 000)  people 
who  previously  lack  at  least  overall  basic  digital 
skills. With this work, cohesion policy substantially 

fund  digital 

 
 
 
contributes  to  achieving  the  UN  Sustainable 
in 
Development  Goals 
particular 
innovation, 
infrastructure), SDG 8 (Decent work and economic 
growth) and SDG 4 (Quality education). 

in  Hungary, 

(Industry, 

(SDGs) 

SDG 

9 

Graph A4.2: Distribution of RRF funding by pillar in 
Hungary 

Graph A4.1: Distribution of cohesion policy funding 
across policy objectives in Hungary 

Source: European Commission 

Through combined action, cohesion policy and 
the recovery and resilience plan (RRP) have a 
mutually  reinforcing  impact  in  Hungary.  For 
instance, reforms under the RRP tackle barriers to 
renewable investments and connection to the grid, 
which  will  facilitate  cohesion  policy  investments 
through  financial  instruments  to  promote  the 
uptake  of  renewable  energy  by  companies.  The 
national  catching-up  settlements  programme 
improves  basic  public  services  and  housing 
conditions  in  300  lagging  municipalities,  jointly 
financed  by  cohesion  policy  funds  and  the  RRP. 
The  RRP  and  the  ESF+  jointly  promote  inclusive 
education  by 
in  a  sustained  wage 
increase  for  teachers,  teacher  training,  measures 
supporting low achieving schools and digitalisation 
in the education sector. Cohesion policy funds also 
contribute to developing human and infrastructural 
capacity  in  integrated  education,  while  the  RRP 
aims  to  boost  the  capacity  of  inclusive  schools. 
The  contribution  of  cohesion  policy  and  RRP 
funding by policy objective is illustrated by Graphs 
A4.1 and A4.2. 

investing 

(1) Each RRP measure helps achieve the aims of two of the 
six policy pillars of the RRF. The primary contribution is shown 
in the outer circle while the secondary contribution is shown in 
the inner circle. Each contribution represents 100% of the RRF 
funds. Therefore, the total contribution to all pillars displayed 
on this chart amounts to 200% of the RRF funds allocated to 
Hungary. 
Source: European Commission 

interoperable  health  system, 

The Technical Support Instrument (TSI) helps 
Hungary  invest  in  its  public  administration 
and create a better enabling environment for 
EU  and  national  investment.  The  TSI  has 
funded  projects 
to  design  and 
in  Hungary 
implement growth-enhancing reforms  since 2018. 
The  support  provided  in  2023  included  work  to 
to 
develop  an 
improve  the  efficiency  and  quality  of  health 
services, to integrate environmental dimensions in 
public finances, to implement the ‘do no significant 
harm’  principle  in  public  funding  programmes, 
work  to  improve  the  quality  and  use  of  tax 
information  exchanged  between  Member  States 
under  the  Directive  on  Administrative  Cooperation 
and  to  promote  adult  learning  by  introducing 
micro-credentials.  Following  the  approval  of  its 
RRP, Hungary can request TSI support to boost its 
overall capacity to implement the specific reforms 
and investments included in the plan.  

Hungary  also  receives  funding  from  several 
other  EU  instruments,  including  those  listed 
in Table A4.1. 

34 

PO1 Smarter EuropePO2 Greener EuropePO3 Connected EuropePO4 Social EuropePO5 Europe closer to citizensPO8 JTF specific objectiveGreen transitionDigital transformationSmart, sustainable andinclusive growthSocial & territorial cohesionHealth & resilienceNext generation 
   
   
Table A4.1:  Support from EU instruments in Hungary 

(1) RRF implementation period is 2021-2026. 
(2) The public sector loan facility’s programming period is 2021-2025 and the amount reflects the national share in its grant 
component reserved until the end of the period.   
(3) Common agricultural policy programming periods are 2014-2022 and 2023-2027.   
(4) EMFF – European Maritime and Fisheries Fund, EMFAF – European Maritime, Fisheries and Aquaculture Fund. 
(5) Data on the Connecting Europe Facility covers transport and energy and has a cut-off date of 15 May 2024. 
(6) Data on Horizon Europe (2021-2027) has a cut-off date of 13 May 2024. 
(7) 2021-2027 data on the LIFE programme has a cut-off date of 15 May 2024. 
(8) The amount of the EU guarantee signed under the EFSI Infrastructure and Innovation Window was derived based on the 
signed amount of the operations and the average internal multiplier, as reported by the EIB (cut-off date is 31 December 2023). 
(9) The amount of the EU guarantee and of the volume of operations signed under InvestEU includes the EU compartment as well 
as the Member State compartments (cut-off date is 31 December 2023).   
(10) SURE - European instrument for temporary support to mitigate unemployment risks in an emergency. 
Source: European Commission 

35 

Amount 2021-2027 (EUR million)Cohesion policy21 730.1RRF grants (1)6 511.6Public sector loan facility (grant component) (2)19.8Common agricultural policy (3)8 445.0EMFF/EMFAF (4)37.7Connecting Europe Facility (5) 364.7Horizon 2020 / Horizon Europe (6) 144.9LIFE programme (7) 22.8Volume of operations (EUR million)European Fund for Strategic Investment 2015-2020 (8) 613.9InvestEU 2021-2027 (9) 42.9PeriodTotal amount available (EUR million)Disbursed amount (EUR million)SURE (10)2020-2022 651.5 651.5RRF 2021-20263 918 779.5 223.2 16.7EU loans38.41 156.2 369.662.9EU guaranteesEU Guarantee (EUR million)16 200.0EU grantsAmount 2014-2020 (EUR million)22 529.7-- 
 
   
 
ANNEX 5: RESILIENCE 

Table A5.1:  Resilience indices across dimensions for Hungary and the EU-27 

(1)  The synthetic indices aggregate the relative resilience situation of countries across all considered indicators. For an indicator, 
each country’s relative situation in the latest available year is compared with the collection of values of that indicator for all 
Member States and all years in the reference period. 
Source: Resilience Dashboards - version spring 2024, data up to 2022 

resilience 

This  Annex  uses  the  Commission’s  resilience 
dashboards  (RDB) (36)  to  illustrate  Hungary’s 
relative 
and 
vulnerabilities (37)  that  may  be  of  relevance 
for  societal,  economic,  digital  and  green 
transformations, and for dealing with future 
shocks and geopolitical challenges. (38) 

capacities 

According  to  the  RDB’s  set  of  resilience 
indicators,  Hungary  has  medium  overall 
vulnerabilities  (similar  to  the  EU  average) 
and  medium  overall  capacities  (lower  than 
the  EU  average),  both  of  which  have 
remained  stable  with  respect  to  last  year. 
This  is  reflected  in  the  distribution  of  indicators 
across different resilience categories: around 40% 
of  both  vulnerability  and  capacity  indicators  fall 

(36)  Https://ec.europa.eu/info/strategy/strategic-

planning/strategic-foresight/2020-strategic-foresight-
report/resilience-dashboards_en. Resilience is defined as the 
ability not only to withstand and cope with challenges but 
also to undergo transitions, in a sustainable, fair, and 
democratic manner. 2020 Strategic Foresight Report: 
Charting the course towards a more resilient Europe 
(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, 
while capacities refer to enablers or abilities to cope with 
crises and structural changes and to manage transitions. 

(38)  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. 

36 

into  the  top  two  categories  (blue  and  light  blue, 
medium-low or low vulnerability and medium-high 
or high capacity) and into the bottom two (orange 
and 
high 
orange,  medium-high 
vulnerability and medium-low or low capacity).  

light 

or 

With  respect  to  the  2023  RDB,  Hungary  has 
seen  its  social  and  economic  vulnerabilities 
deteriorate.  The  reasons  for  the  deterioration  in 
vulnerabilities are the proportion of employment in 
manufacturing with a high risk of automation (now 
the  highest  in  the  EU),  regional  dispersion  in 
household income (now the second highest in the 
EU), and the variation in performance explained by 
students’  socio-economic  status.  The  country’s 
social  and  economic  capacities  have  also 
deteriorated  for  reasons  such  as  the  drop  in  the 
insurance  sector  solvency  capital  ratio  and  the 
lessening  of  the  impact  of  social  transfers  (other 
than pensions) on poverty reduction. The country is 
currently below the EU average in specific capacity 
indicators such as the proportion of children under 
3 in formal childcare, or standardised preventable 
and treatable mortality. 

and 

information 

In  the  green  dimension,  Hungary  has  mostly 
medium  and  medium-low  vulnerabilities, 
except  for  fossil  fuel  subsidies,  energy  used 
in 
communication 
technology (ICT), and farm income variability 
(medium-high 
overall 
vulnerabilities  have  stayed  stable,  with  a  higher 
waste  generation  rate,  fossil  fuel  subsidies  and 
farm  income  variability,  but  a  lower  harmonised 
risk indicator  1  for  pesticides.  Its  green  capacities 

vulnerability). 

Its 

HUHUEU-272023 RDB2024 RDB2024 RDBHighMedium-highMediumMedium-lowLowHighMedium-highMediumMedium-lowLowCapacitiesGeopoliticalVulnerabilities0.530.470.41Capacities0.480.750.65DigitalVulnerabilities0.370.360.52Capacities0.580.530.65GreenVulnerabilities0.590.600.44Capacities0.460.490.70Social and economicVulnerabilities0.640.550.47Capacities0.550.510.67DimensionDistribution of indicators by vulnerabilities and capacitiesOverall resilienceVulnerabilities0.530.500.50Capacities0.480.540.67Vulnerabilities0%20%40%60%80%100%Vulnerabilities(60 indicators)Capacities(64 indicators) 
 
 
 
   
 
 
are  more  mixed,  having  remained  mostly  stable, 
and  below  the  EU  average.  The  share  of  the 
environmental  goods  and  services  sector  from 
gross  value  added  is  the  lowest  in  the  EU  (2021 
data). 

the 

digital 

In 
dimension,  Hungary’s 
vulnerabilities  and  capacities  are  mostly 
stable with respect to last year’s dashboard, 
but  it  lags  behind  the  EU  on  both  counts.  It 
continues  to  have  high  vulnerabilities  in  terms  of 
the  broadband  access  gap  by  company  size  (with 
some improvement)  and  the  ICT  specialist  gender 
gap. It still shows low capacities in terms of adults’ 
and  young  people’s  advanced  digital  skills,  and 
high  capacities in  areas  such  as the  use  of  social 
networks and gross value added in ICT. It has also 
improved  a  lot  in  the  use  of  the  collaborative 
economy.  However,  it  remains  below  the  EU 
average in capacity indicators such as ICT Master’s 
graduates.  

Its geopolitical vulnerabilities have remained 
stable  while  capacities  have  improved,  and 
are  now  both  on  par  with  the  EU  average. 
Hungary deteriorated in net lending/borrowing and 
supplier  concentration  of  energy  carriers,  while 
there have been improvements in intra-EU trade in 
energy,  trade  openness  (extra-EU),  and  the  net 
migration rate.  

37 

 
ENVIRONMENTAL SUSTAINABILITY 
ANNEX 6: EUROPEAN GREEN DEAL 

Hungary  has  made  progress  in  the  green 
transition,  with  more  action  needed  on 
specifying  the  funding  framework  for  the  climate 
sustainable  water 
energy 
and 
management,  the 
institutional  framework  on 
climate  adaptation,  and  other  areas.  This  Annex 
provides  a  snapshot  of  climate,  energy,  and 
in 
environmental  aspects  of 
Hungary (39). 

transition, 

transition 

the 

The  plan 
the 

Hungary’s draft updated national energy and 
climate plan (NECP) does not yet map all its 
investment needs against sources of funding 
to  achieve  its  2030  climate  and  energy 
limited 
targets. 
information  on 
to 
implement  the  planned  policies  and  measures.  It 
provides  information  on  total  investment  needs 
until 2035 and for 2036-2050 per sector, covering 
transport,  electricity,  district  heating,  households, 
industry and services, but omitting agriculture. The 
plan  outlines  some  of  the  main  sources  of 
financing, but only includes EU funds (40).  

includes  only 
investment  needed 

the 

planned 

Hungary is projected to reach its 2030 effort 
sharing  target,  provided  that  it  adopts  and 
implements 
additional 
measures (41).  In  2022,  Hungary’s  greenhouse 
gas  emissions  from  its  effort  sharing  sectors  are 
levels. 
expected 
Additional  policies  considered  in  Hungary’s  draft 
updated  NECP  are  projected  to  reduce  these 
emissions by 23.8% from 2005 levels. This means 
that  Hungary  will  exceed  its  effort  sharing  target 
to  achieve  a  18.7%  reduction  by  5.1  percentage 
points.  However,  with  current  policies,  Hungary  is 

to  be  37.5%  below  2005 

(39)  This Annex is complemented by Annex 7 on energy transition 

and competitiveness, Annex 8 on the fair transition to 
climate neutrality, Annex 9 on resource efficiency, circularity, 
and productivity, and relevant topics in other annexes to this 
country report. 

(40)  See the Commission’s (2023) assessment of the draft 

national energy and climate plan of Hungary.  

(41)  The national greenhouse gas emission reduction target is 
laid down in Regulation (EU) 2023/857 (the Effort Sharing 
Regulation). The aim is to align action in the sectors 
concerned with the objective to reach the EU-level economy 
wide target of greenhouse gas reductions of at least 55% 
relative compared to 1990 levels. The target also applies to 
the sectors outside the current EU Emissions Trading System, 
notably buildings (heating and cooling), road transport, 
agriculture, waste, and small industry (known as the effort 
sharing sectors). 

38 

projected to reduce its effort sharing emissions by 
20.2% compared to 2005 levels by 2030, leaving 
a  gap  of  3.6  percentage  points  below  Hungary’s 
target (42).  This  highlights  the 
importance  of 
implementing  the  full  range  of  policies  and 
measures  in  the  draft  updated  NECP.  The  draft 
plan 
binding 
commitment  to  achieve  climate  neutrality  by 
2050.  

reiterates  Hungary’s 

legally 

Graph A6.1: Greenhouse gas emissions 
from the effort sharing sectors in Mt CO2eq, 
2005-2022 

Source: European Environment Agency 

There  is  scope  for  increasing  Hungary’s 
targets  for  renewable  energy  and  energy 
efficiency  in  its  final  updated  NECP (43). 
Hungary's renewable energy contribution set in its 
draft  updated  NECP,  29%  by  2030,  is  below  the 
required contribution of 34%. Its energy efficiency 
contribution  of  17.9  Mtoe  in  primary  energy 
consumption  for  2030  set  in  the  draft  updated 
NECP  is  also  less  ambitious  than  required  by  the 
Energy  Efficiency  Directive.  No  target  for  primary 

(42)  The effort sharing emissions for 2022 are based on 
approximated inventory data. The final data will be 
established in 2027 after a comprehensive review. 
Projections on the impact of current policies (‘with existing 
measures’, WEM) and additional policies (‘with additional 
measures’, WAM) as per Hungary’s draft updated NECP. 

(43)  The EU target set out in the revised Renewable Energy 

Directive is to have 42.5% of gross final energy consumption 
coming from renewable energy sources by 2030, with the 
aspiration to reach 45%. The formula in Annex I to Directive 
(EU) 2023/1791 sets the indicative national contribution for 
Hungary at16,2 Mtoe for final energy consumption. The 
Commission communicated a corrected national contribution 
of 29.04 Mtoe in final energy consumption for 2030 in 
accordance with Article 4(5) of the Energy Efficiency 
Directive to increase the contribution towards the Union’s 
binding energy efficiency target. See the Commission 
Recommendation of 18.12.2023 to Hungary. 

0510152025303540455020052022MtCO2eWasteSmall industryAgricultureBuildings (under ESR)Domestic transport (excl. aviation) 
 
 
 
     
 
 
 
energy consumption has been provided in the draft 
plan.  

of  government,  and  the  preparation  and  updating 
of sub-national policies (46).  

electric 

In  2022, 

In  Hungary  there  is  still  much  to  do  to  curb 
rising  greenhouse  gas  emissions  from  road 
transport (44). 
vehicles 
represented  only  0.8%  of  its  passenger  car  fleet. 
In  2023,  Hungary’s  3 250  publicly  accessible 
charging  points  provided  one  charging  point  for 
every nine e-vehicles, compared to the EU average 
of 1:10. Buses and coaches and rail accounted for 
20%  of  passenger  transport,  with  passenger  cars 
accounting  for  only  78%  (EU  average:  85%).  Rail 
accounts for a significant 25% of freight transport, 
while  66%  of  freight  is  transported  by  road  (EU 
average:  75%).  Only  41%  of  Hungary’s  rail 
network is electrified (EU average: 56%).  

Hungary has the potential to increase carbon 
removals  through  land  use,  land  use  change 
(LULUCF).  Hungary  achieves 
and  forestry 
significant  carbon  removals  through  its  forests, 
but its cultivated arable land is a major emitter of 
greenhouse  gases.  To  reach  the  2030  LULUCF 
target, additional carbon removals of 934 kt CO2eq 
are needed (45).  

poses 

change 

forests, 

to 
challenges 
Climate 
Hungary’s 
soils,  water-related 
activities  (due  to  both  droughts  and  floods), 
and other areas. Threats include the impairment of 
forests’  carbon  removal  capacity  and  declining 
agricultural  productivity.  Water  management  in 
changing  climatic  conditions  requires  particular 
attention  due  to  risks  of  electricity  disruption  as 
floods,  heat  and  drought  impact  the  energy 
production.    Appropriate  institutional  mechanisms 
are  crucial  for  climate  adaptation.  Here,  Hungary 
faces  shortcomings 
its  governance  and 
in 
coordination  structures  that  hamper  effective 
planning, 
solutions  and 
investment, the monitoring, evaluation and review 
of policies, coordination between different sectors 

climate  adaptation 

(44)  Unless otherwise indicated, data in this section refer to 
2021. See European Commission, 2023, EU transport in 
figures, transport.ec.europa.eu. 

(45)  National LULUCF targets of the Member States in line with 

Regulation (EU) 2023/839. 

39 

all 

has 

also 

room 

affect 

significant 

Hungary 
for 
improvement  on  wastewater  and  drinking 
water  infrastructure (47).  Water  resources  are 
under  major  pressure,  mainly  due  to  pollution, 
hydromorphological  changes,  and  unsustainable 
agricultural practices, notably the use of nutrients. 
Water  bodies  are  significantly  affected  by 
abstraction and pollution from industrial activities. 
Diffuse  pollution  affects  all  surface  waters,  while 
a majority is under significant pressure from point 
source pollution and water abstraction. Abstraction 
pressures 
groundwaters. 
Exceedances  of  several  pollutants  were  recorded 
in drinking water in several municipalities. Hungary 
also faces a systemic problem in tackling nutrient 
loss  from  agriculture (48).  In  2022,  only  11,3%  of 
surface  water  bodies  reached  good  ecological 
status  and  only  46%  reached  good  chemical 
status (49).  Hungary  is  increasingly  exposed  to 
climatic  risks,  exacerbated  by  climate  change. 
Droughts are common in the great plains (50), and 
one  quarter  of  Hungary’s  territory  is  exposed  to 
floods (51).  The  current  irrigation  strategy  raises 
concerns regarding long-term sustainability where 
‘grey’ infrastructures (such as the rehabilitation of 
irrigation  canals)  are  favoured  to  nature-based 
solutions (52).  The 
investment  gap  to  achieve 
sustainable  water  management  is  estimated  at 
EUR 589 million per year over 2021-2027. 

(46)  See the Commission’s 2023 assessment and 

recommendation on Hungary’s progress on climate 
adaptation. 

(47)  There are infringement cases against Hungary for non-
compliance with the Drinking Water Directive and non-
compliance with the urban Wastewater Directive.  

(48)  Commission Report on the implementation of the Nitrates 

Directive. 

(49)  In the second river basin management plan (RBMP), the 
chemical status of 46,5% and the ecological status of 
13.5% of surface water bodies was unknown. The 
assessment of the third RBMP is not yet available. 

(50)  Financing-water-supply-sanitation-and-flood-protection-

country-fact-sheet-hungary.pdf (oecd.org) 

(51)  European Commission, Assessment of second cycle 

preliminary flood risk assessments and identification of 
areas of potential significant flood risk under the Floods 
Directive: Member State: Hungary, 2022. 

(52)  Examples of nature-based solutions for water retention can 
be found on the Natural Water Retention Measures Platform, 
European NWRM+ platform. 

 
 
 
70%  of  cropland  and  grassland  area,  while  soil 
erosion affects 41% of cropland area. In Hungary, 
the  net  stock  change  of  organic  soils  in  cropland 
and  grassland  areas  decreased  over  time  and 
reached 1 516 kt in 2021. 

Graph A6.2: Changes in livestock density and 
organic farming 

Livestock unit (LSU)/ha of UAA: it measures the stock of 
animals (cattle, sheep, goats, equidae, pigs, poultry and 
rabbits) converted in LSUs per hectare of UAA. 
Source: Eurostat 

Hungary  would  benefit  from  investing  more 
in  sustainable  water  management,  in  the 
circular economy, and in pollution prevention 
and  control.  The  environmental  investment  gap 
increased for the 2021-2027 period, reaching EUR 
1.7  billion.  The 
for  water 
management  has  more  than  doubled  in  this 
sector (62).  The  highest  investment  gap  concerns 
pollution  prevention  and  control  which  has  more 
than  doubled  since  2014-2020.  The  gap  for  the 
circular  economy  has  also  increased.  The  gap  for 
biodiversity has decreased but remains excessive.  

investment  gap 

loss  and 

is  under  pressure 
in  biodiversity 

Nature 
in  Hungary, 
the 
resulting 
deterioration of habitats. In 2021, Natura 2000 
sites  covered  21.4%  of  Hungary’s  territory (53). 
However,  in  2020,  Hungary  reported  that  more 
than  half  of 
its  habitat  assessments  had 
worsened (54).  Moreover,  less  than  8%  of  the 
protected  forest  habitats  are  in  a  favourable 
conservation  status (55).  However,  the  common 
farmland  bird  index  remained  stable  between 
2018  and  2020,  slightly  above  the  EU  average. 
Fragile  habitats  such  as  wetlands,  peatlands  and 
grasslands  are  directly  threatened  by  damaging 
economic activities. 

Hungary’s  agri-food  sector  has  a  major 
environmental  footprint.  The  share  of  the 
country’s  total  utilised  agricultural  area  (UAA) 
under organic farming remains quite low, at 5.8% 
in  2021 (56).  Hungary  is  far  from  achieving  its 
ambition  of  having  280 000  hectares  under 
organic farming by 2027. Only 4.2% of Hungary’s 
agricultural  land  was  covered  with  landscape 
features in 2022. Hungary’s livestock density index 
decreased  to  0.43%  in  2020 (57).  However,  the 
intensive  rearing  of  poultry  and  pigs  was  the 
industrial  activity  that  placed  the  highest  burden 
on  the  environment  in  terms  of  emissions  of 
ammonia  and  non-methane  volatile  organic 
compounds.  In  2021,  the  agricultural  sector  was 
responsible  for  91.4%  of  ammonia  emissions (58). 
Hungary did not meet its 2020 and 2021 emission 
reduction  commitments  for  ammonia  under  the 
National  Emission  Ceilings  Directive (59)  and  is  at 
risk to miss its 2020-2029 commitments. 58% of 
Hungarian  soil (60)  could  be  considered  as 
unhealthy (61).  The  loss  of  organic  carbon  affects 

(53)  Above the EU average. 

(54)  European Environment Agency, Conservation status and 

trends of habitats and species, December 2021. 

(55)  State of nature in the EU - European Environment Agency 

(europa.eu)  

(56)  Versus 9.1% of the EU average in 2020. 

(57)  Below the EU average of 0.75 in 2020. 

(58)  Above the EU average of 90.7%. Statistics | Eurostat 

(europa.eu) 

(59)  Hungary – air pollution country fact sheet - European 

Environment Agency (europa.eu) 

(60)  SWD 417 final of 05.07.2023 

(61)  However, not all soil degradation processes could be 

quantified for all land uses. This number simply indicates an 
order of magnitude. 

(62)  The investment gap in sustainable water management 

concerns in particular wastewater collection and treatment, 
water supply infrastructure, and green infrastructures. 

40 

012024681020162020% LSU per hectare% of total utilised agricultural areaLivestock density index Hungary (% LSU per ha)Livestock density index EU-27 (% LSU per ha)Organic farming Hungary (% of total utilised agricultural area)Organic farming EU-27 (% of total utilised agricultural area) 
 
      
 
Graph A6.3: Environmental investment gap, annual 
average 

The numbers are computed by the European Commission 
based on the latest internal reports, Eurostat, EIB and national 
data sources. 
Source: European Commission 

41 

2881862017687175893165440200400600800Pollution preventionand controlWater managementCircular economyand wasteBiodiversity andecosystemsmillion EUR2014-20202021-2027 
      
 
Table A6.1:  Indicators tracking progress on the European Green Deal from a macroeconomic perspective 

Sources:  (1)  Member  States’  emission  data  for  2019  and  2020  are  in  global  warming  potential  (GWP)  values  from  the  4th 
Assessment Report (AR4) of the Intergovernmental Panel on Climate Change (IPCC). Member States’ 2005 base year emissions 
under  Regulation  (EU)  2018/842,  emissions  data  for  2021  and  2022,  and  2030  projections  are  in  GWP  values  from  the  5th 
Assessment Report (AR5) of the IPCC. 2021 data are based on the final inventory reports, 2022 data are based on approximated 
inventory reports and European Environmental Agency’s calculation of effort sharing emissions. The final data for 2021 and 2022 
will  be  established  after  a  comprehensive  review  in  2027.  The  2030  target  is  in  percentage  change  of  the  2005  base  year 
emissions. Distance to target is the gap between the 2030 target and projected effort sharing emissions with existing measures 
(WEM) and with additional measures (WAM), in percentage change from the 2005 base year emissions. The measures included 
for  the  2030  emission  projections  reflect  the  state  of  play  as  reported  in  Member  States'  draft  updated  national  energy  and 
climate plans or, if unavailable, as reported by 15 March 2023 as per Regulation 2018/1999. (2) Net removals are expressed in 
negative figures, net emissions in positive figures. Reported data are from the 2023 greenhouse gas inventory submission. 2030 
value  of  net  greenhouse  gas  removals  as  in  Regulation  (EU)  2023/839  –  Annex  IIa.  (3)  The  2030  national  objectives  for 
renewable  energy  and  energy  efficiency  are  indicative  national  contributions,  in  line  with  Regulation  (EU)  2018/1999  (the 
Governance  Regulation),  the  EU-level  2030  renewable  energy  target  set  out  in  Directive  EU/2018/2001  amended  by  Directive 
EU/2023/2413 (the revised Renewable Energy Directive) – 42.5% of gross final energy consumption with the aspiration to reach 
45% –, and the formula in Annex I to Directive (EU) 2023/1791 (the Energy Efficiency Directive). (4) Battery electric vehicles (BEV) 
and fuel cell electric vehicles (FCEV). (5) The climate protection gap refers to the share of non-insured economic losses caused by 
climate-related disasters, based on modelling of the risk from floods, wildfires, windstorms, and the insurance penetration rate. 
Scale: 0 (no protection gap) –4 (very high gap) (European Insurance and Occupational Pensions Authority, 2022). (6) Total water 
consumption in renewable freshwater resources available for a territory and period. (7) Material extractions for consumption  and 
investment. (8) Years of potential life lost through premature death due to exposure to particulate matter with a diameter of less 
than 2.5 micrometres. (9) Share of habitats in good conservation status according to the records submitted under Art. 17 of the 
Habitats Directive (Directive 92/43/EEC) for 2013-2018. (10) Multi-species index measuring changes in population abundances of 
farmland bird species. (11) Source: annex 12 of the Commission’s proposal for a soil monitoring law, SWD (2023) 417 final. (12) 
Estimates of organic carbon content in arable land. 

42 

Target200520192020202120222030WEMWAMProgress to climate and energy policy targetsGreenhouse gas emission reductions in effort sharing sectors (1)Mt CO2eq, %, pp47,826.9-7%-9%-3%-8%-19%-65Net greenhouse gas removals from LULUCF (2)Kt CO2eq-6 003-5 382-7 106 -7 195-6 803-5,724n/an/aShare of energy from renewable sources (1) (3)%7%13%14%14%15%34%--Energy efficiency: primary energy consumption (3)Mtoe26.324.623.924.923.923.3Energy efficiency: final energy consumption (3)Mtoe18.718.618.019.118.316.2Projected20182019202020212022202120222030Green transition: mobility         Greenhouse gas emissions: road transportMt CO2e---14.015.1769.0786.611.4Share of zero-emission vehicles in new registrations (4)% 0.91.22.33.54.2912.1n/aNumber of publicly accessible AC/DC charging points --123126363323299178446956n/aShare of electrified railways%39.7%40.2%40.0%40.8%-56.1%-n/aGreen transition: buildings         Greenhouse gas emissions: buildingsMt CO2e---13.511.8537.0486.710.1Final energy consumption in buildings2015=10096.9%94.5%97.6%103.4%94.7%104.0%97.2% Climate adaptation         Climate protection gap (5)score 1-4--1.31.21.11.51.5n/a20182019202020212022202020212022State of the environmentWater | Water exploitation index (WEI+) (1) (6)% of renewable freshwater1.41.3---3.6--Circular economy | Material footprint (7)tonnes per person15.916.714.314.514.514.214.814.9Pollution | Years of life lost due to air pollution by PM2.5 (8)per 100.000 inhabitants1,4201,0111,0561,155-545584-Biodiversity | Habitats in good conservation status (9)%13.314.7                       Common farmland bird index (10)2000=100818181--78--Green transition: agri-food sectorOrganic farming% of total utilised agricultural area3.925.716.035.81-9.1--Nitrates in groundwatermg NO3/litre-----20.42--Food waste per capitaKg per capita9391-130131-Share of soil in poor health (11)%5841Soil organic matter in agricultural land (12)Mt per ha286----7,904--DistanceEU-27 
 
     
 
ANNEX 7: ENERGY TRANSITION AND COMPETITIVENESS 

This  Annex (63)  sets  out  Hungary’s  progress 
and  challenges  in  accelerating  the  net-zero 
energy  transition  while  bolstering  the  EU’s 
competitiveness 
energy 
sector (64). It considers measures and targets put 
forward in the draft updated National Energy and 
Climate Plans (NECP) for 2030 (65). 

clean 

the 

in 

Hungary  has  shown  progresses  in  terms  of 
renewable  energy  development  and  aims  to 
become  a  manufacturing  hub  for  batteries. 
However, the lack of a strong price signal, reliance 
on  Russia  fossil  fuels  and  grid  constraints  hinder 
the competitiveness of the energy sector.  

Retail energy prices for households have not 
reflected  the tight  energy  market  conditions 
in  the  past  2  years,  due  to  a  government 
price  cap  which  keeps 
level 
considerably  lower  than  the  EU  average.  Despite 
the  2022  changes  in  household  price  ceilings, 
Hungarian energy (electricity and gas) retail prices 
remain among the lowest in the EU.  

them  at  a 

The  situation  is  very  different  for  industrial 
consumers, who are not covered by the price 
regulation and have seen their electricity and 
gas  prices  drastically  increased  throughout 
2022, remaining at levels considerably above 
the  EU  average.  While  gas  prices  peaked  in 
December  2022  before  commencing  a  steep 
for  non-household 
decline,  electricity  prices 
consumers  more  than  doubled  in  the  first  half  of 
2023, the largest increase in the EU.  

Graph A7.1: Hungary’s energy retail prices for 
households and industry & service 

(1) For industry, consumption bands are I3 for gas and IC for 
electricity, which refer to medium-sized consumers and 
provide an insight into affordability 
(2) For households, the consumption bands are D2 for gas 
and DC for electricity 
(3) Industry prices are shown without VAT and other 
recoverable taxes/levies/fees as non-household consumers 
are usually able to recover VAT and some other taxes 
Source: Eurostat 

consumers 

In  relative  terms,  electricity  prices  for  non-
household 
increased 
significantly compared to the US, Japan, and the 
UK,  thus  potentially  affecting  the  international 
competitiveness  of  energy-intensive  industries  in 
Hungary. 

have 

Graph A7.2: Trends in electricity prices for non-
household consumers (EU and foreign partners) 

(63)  It is complemented by Annex 6 as the European Green Deal 
focuses on the clean energy transition and by Annex 8 on 
action taken to protect the most vulnerable groups, 
complementing ongoing efforts under the European Green 
Deal, REPowerEU and European Green Deal Industrial Plan. 

(64)  In line with the Green Deal Industrial Plan and the Net-Zero 

Industry Act 

(65)  Hungary submitted its draft updated NECP in August 2023. 
The Commission issued an assessment and country-specific 
recommendations on 18 December 2023. Commission 
Recommendation, Assessment (SWD) and Factsheet of the 
draft updated National Energy and Climate Plan of Hungary - 
European Commission (europa.eu) 

(1) For Eurostat data (EU and HU), the band consumption is ID 
referring to large-sized consumers with an annual 
consumption of between 2 000 MWh and 20 000 MWh, such 
as in electricity intensive manufacturing sectors, and gives an 
insight into international competitiveness  
(2) JP = Japan  
Source: Eurostat, IEA 

Hungary’s  cap  on  electricity  and  gas  prices 
for  households  remains  largely  untargeted, 

43 

0.000.050.100.150.200.250.300.35€/KWhGas (industry & service) - HUGas (industry & service) - EUGas (households) - HUGas (households) - EUElectricity (industry & service) - HUElectricity (industry & service) - EUElectricity (households) - HUElectricity (households) - EU050100150200250300350Index ( 2018 S2 = 100)JPUKUSHUEU 
 
 
   
  
 
weakening  incentives  for  energy  saving  and 
producing regressive distribution effects. Due 
to  increasing  energy  prices,  the  cost  of  the  price 
freeze  amounted  to  around  2%  of  GDP  in  2022-
2023,  thus  provoking  a  growing  strain  on  the 
public  budget.  Since  August  2022  the  capped 
utility  price  applies  up  to  the  level  of  average 
consumption,  with  the  excess  being  exposed  to  a 
price 
higher 
considerably 
regulation  still  does  not  account 
the 
households’  income  level  and  prices  are  not 
responsive  to  market  dynamics.  As  Hungary 
reduced  its  gas  demand  between  August  2022 
and  December  2023  by  19%  compared  to  the 
average  of  the  previous  five  years,  the  level  of 
average  consumption  could  be  updated  to  reflect 
new lower levels. 

price.  However, 

for 

Consumer empowerment opportunities in the 
electricity  and  gas  markets  are  still  limited, 
and  the  deployment  of  smart  meters  is  still 
lagging.  Switching  times  are  still  well  above  the 
legal  time  limit  of  three  weeks  and  only  7.3%  of 
final  household  consumers  had  smart  meters  in 
2022 (EU average: 80%).  

In 2022, 100% of household consumers held 
fixed-price  contracts  in  both  electricity  and 
gas.  A  reform  in  the  Hungarian  REPowerEU 
Chapter  of  the  RRP  aims  at  facilitating  the 
application  of  dynamic  pricing  in  the  residential 
segments. 
and  microenterprises 
consumer 
Hungary  allows  for  collective  self-consumption 
within  the  same  building.  However,  unanimity 
among co-owners is required to install solar PV on 
multi-apartment buildings. In terms of operational 
support,  Hungary 
introduced 
has 
measures, including as part of their reform in the 
recovery  and  resilience  plans,  to  phase  out  net-
metering  that  does  not  account  separately  of 
electricity  injected  and  taken  off  the  grid,  for  the 
purpose  of  calculating  the  network  tariffs.  There 
are no ‘time of use’ grid tariffs in place in Hungary, 
limiting the incentive for active consumers to align 
their  consumption  with  production  in  real-time 
during off-peak hours.  

recently 

Hungary  is  providing  financial  support  to 
energy communities through an open call for 
proposals and has planned to invest in social 
solar  plans  under  its  RRP.  However,  to  date, 
there  are 
communities 
operational  in  Hungary,  in  part  due  to  a  limited 
enabling  framework.  There  is  no  indicative  target 
for the number of energy communities by 2025. 

few  energy 

very 

through 

Hungary  continues  to  heavily  depend  on 
Russia for most of its imports of fossil fuels 
and  diversification  efforts  have  remained 
slow.    Serbia  is  the  main  entry  point  for  Russian 
gas  into  the  country,  following  the  significant 
decrease  in  flows  through  Ukraine.  Following  the 
expiration of the Russia-Ukraine transit contract at 
the end of 2024, Hungary will rely for a dominant 
share of its supply on a single-entry point, further 
increasing supply disruption risks.   Plans to secure 
additional  supply  sources 
increased 
domestic  production  and  drawing  from  Azeri  gas 
supplies, future production in Romania, and Greek 
and  Turkish  LNG  via  the  “Solidarity  Ring”  project 
and the Krk terminal (to be expanded from 2.9 to 
6.1  bcm/y),  have  been  thwarted  by  infrastructure 
bottlenecks in neighbouring countries and the lack 
of a clear source diversification strategy. Following 
successful  market 
Hungarian 
transmission system operator (TSO) is cooperating 
with  the  respective  national  TSOs  to  increase  the 
capacity  of 
interconnection  points  with 
Romania and Slovakia. In 2022, Hungary depended 
on  Russia  for  around  84%  of  its  oil  imports,  the 
highest level since 2014. Moreover, MOL refineries 
are  designed  to  process  mainly  Russian  Urals 
crude and would require substantial investment to 
process  other  crude  grades.  Hungary  has  a  large 
storage capacity of around 6.5 bcm, equal to 67% 
of  its  annual  gas  consumption  in  2022.  The 
country  operates 
five  underground  storage 
facilities managed by two operators: HEXUM (UGS 
Szöreg-1)  and  HGS  (Pusztaederics,  Zsana-Nord, 
Kardoskút-Pusztaszolos, Hajdúszoboszló). Hungary 
fulfilled  its  gas  storage  obligations  last  winter, 
reaching  98%  by  1  November  2023,  and  ended 
the winter season with a storage filled at 66.22% 
by 1 April 2024. 

tests, 

the 

the 

Electricity  demand  is  projected  to  increase 
rapidly, especially in the industrial sector, as 
Hungary  pursues  plans  to  electrify 
its 
economy and to become a manufacturing hub 
for  electric  vehicles  (EVs)  and  batteries. 
Hungary depends on imports for around one third 
of its electricity supply, and its domestic electricity 
supply is largely reliant on its four Russia-designed 
nuclear  reactors  at  the  Paks  power  plant,  which 
generate almost half of its electricity. In December 
2023,  the  operator  submitted  a  plan  for  Paks 
which  would  extend  its  lifetime  until  the  2050s. 
The completion of the two additional Rosatom 1.2 
GW  reactors  is  scheduled  for  2030.  To  address 
increasing  electricity  needs  and  provide  flexibility 
to  the  electricity  system,  1.5  GW  combined  cycle 

44 

 
turbine 

gas 
commissioned by 2027.  

plants  are 

planned 

to  be 

Graph A7.3: Hungary's installed renewable 
capacity (left) and electricity generation mix 
(right) 

system 

electricity 

Hungary 
is  well 
interconnected.  Interconnection  capacities  are 
available  with  all  neighbouring  countries  and  in 
total  their  capacity  reaches  50%  of  the  total 
domestic generation capacities.  

Hungary  intends  to  phase  out  coal  from 
domestic  electricity  production  by  2030  as 
declared  in  the  draft  updated  NECP,  with  a 
deadline  for  phase  out  of  lignite  for  the  Mátra 
Power Plant by 2025, to which Hungary committed 
in  their  territorial  just  transition  plan  under  the 
in  2022.  However,  by 
Just  Transition  Fund 
lignite 
government  Resolution  1500/2023  the 
phase-out deadline for Mátra was postponed until 
the  commissioning  of  the  combined  cycle  gas 
turbine  power plant  that  is  planned  for  the  Mátra 
site,  expected  by  the  end  of  2027.  Any  further 
postponement of the coal phase out of Matra after 
2025 would hinder Hungary’s achievements under 
the JTF. Hungary also intends to keep lignite-based 
electricity  production  available  as  a  strategic 
reserve.  Hungary's  intentions  in  the  area  of  coal 
may put at risk the achievement of climate targets 
and the just transition objectives. 

2023  confirmed  the  strong  growth  of 
installed  solar  energy  capacity  in  Hungary, 
with  1.6GW  of  newly  installed  capacity, 
bringing the total to around 5.6GW. In its draft 
updated  NECP,  Hungary  plans  to  reach  12  GW  of 
installed  solar  capacity  by  2030.  Residential  PVs 
installations  are  supported  via  the  RRP  and 
national  programs. 
the 
In 
government  had  almost  completely  lifted the  ban 
(imposed in October 2022) on solar energy feed-in 
to the grid. 

January  2024 

45 

(1) "Other" includes solid biofuels, renewable municipal waste, 
biogas and geothermal energy 
Source: IRENA, Ember 

Wind  energy  has  been  at  a  standstill  due  to 
the  hostile  regulatory  environment,  but 
legislative  developments  as  laid  out  in  the 
recovery  and  resilience  plan  (RRP)  should 
improve  the  outlook  significantly.  Wind 
represents  less  than  1.5%  of  total 
installed 
capacity  in  Hungary  and  the  wind  capacity  target 
of  1GW  indicated  in  the  draft  updated  NECP  is 
modest.  On  1  January  2024,  a  new  package  of 
legislation  reduced  the  setback  distance  to  700 
meters  from  the  current  12km  and  repealed  the 
mandatory  tendering  procedure  for  wind  farm 
capacity. However, various factors (the scarce grid 
connection  capacity,  the  long  applications  queue 
distance 
and 
high 
the 
requirements,  which  considerably 
available areas for wind projects) still cast doubts 
over wind power development in the country.  

remaining 

security 

reduce 

The  major  challenge  to  future  renewable 
energy  growth  is  represented  by  scarce  grid 
capacity,  which  constrains  further  renewables 
expansion  and  creates  balancing  issues  for  the 
grid.  New  energy  projects  applying  today  for 
connection  to  the  grid  cannot  expect  to  be 
connected  before  2030.  The  grid  expansion  and 
upgrade  will  need  to  accelerate  to  keep  up  the 
pace  of  new  connection  requests  and  achieve 
Hungary’s renewables targets.  The RRP reform to 
harmonise  grid  connection  requirements  has  the 
the 
significantly 
potential 
administrative  burden  on  project  developers  and 
increase  transparency  and  efficiency.  Plans  for 
increasing  manufacturing  capacity 
in  energy 
intensive  sectors  (EVs  and  Batteries)  will  put 
additional pressure on the grid. It is important that 
grid  is  expanded  especially  in  those  area  of  the 
country with more renewable energy potential.  

alleviate 

to 

 
 
Hungary’s  National  Hydrogen  Strategy  and 
NECP envisage the installation of 240MW of 
electrolyser capacity by 2030. Hungary aims to 
use hydrogen for industrial decarbonisation and in 
heavy-duty  transport  by  2030.  By  2030,  Hungary 
aims  to  install  240  MW  of  electrolysis  capacity. 
Hungary  is  exploring  adapting  its  gas  storage 
facilities  to  the  shift  from  east-west  transport 
routes  to  a  more  south-north-west  direction  and 
making them hydrogen-compatible.  

final 

energy 

Hungary´s 
consumption 
contribution  is  not  in  line  with  reaching  the 
2030  EU  energy  efficiency  target,  and 
further  progress  is  needed  to  reach  it.  In 
2022,  Hungary’s  primary  energy  consumption 
decreased  by  4.3%  compared  to  2021  and  was 
3.2% higher than in 2012. Final energy decreased 
by 4.1% year on year and was 11.2% higher than 
in  2012.  In  2022,  the  sector  that  decreased  its 
consumption most was industry, which cut its final 
energy 
consumption  by  9.4%.  The  worst 
performance  came  from  the  transport  sector, 
which  increased  its  final  energy  consumption  by 
10.3%. High energy prices for industrial consumers 
might  have  impacted  energy  consumption  in  the 
industrial sector.  

intensity 

final  energy 

Hungary’s  energy  efficiency  improvements 
have  been  lagging,  also  due  to  weak  price 
signals.  In  the  last  decade,  its  final  energy 
consumption has been on an increasing trend and 
its  primary  and 
is 
significantly  higher  than  the  EU  average.  RRP 
support  has  been  complemented  by  the  new 
REPowerEU Chapter, notably by new investment in 
residential  and  public  buildings  and  in  energy-
efficiency improvements in businesses. The Energy 
Efficiency  Obligation  Scheme  introduced  in  2021 
has produced good results in the industrial sectors 
not  covered  by  the  price  cap  and  therefore  more 
receptive to adopting energy efficiency solutions.  

incentive 
consumption 

The energy performance of the building stock 
is  very  low  and  regulated  residential  energy 
for 
prices 
little 
provide 
in 
renovations.  Final  energy 
residential  did  not  decrease  between  2018  and 
2022,  while  the  national  long-term  renovation 
strategy  plans  a  reduction  in  building  energy 
consumption  by  20%  during  the  same  period. 
Heating and cooling represent the highest share of 
final  energy  consumption  in  residential  being  at 
about  85%  in  2021,  with  renewables  supplying 

46 

20.35%  of  the  total  energy  used  for  heating  and 
cooling across all sectors. A 2.5% increase year on 
year,  after  five  years  of  decrease  or  stagnation, 
was  mainly  driven  by  a  significant  decrease  in 
consumption.  

The heat pump market has seen a significant 
acceleration  following  the  increase  of  fossil 
fuel  prices.  Approximately  15  000  heat  pumps 
were sold in 2022, an increase of 110% over the 
previous year (66), reaching a total stock of around 
36 000  installed  heat  pumps  in  the  residential 
sector. In H1 2023, average electricity prices were 
3.45  times  more  than  natural  gas  in  residential 
and  2.8  times  more  than  natural  gas  in  the  non-
residential sector. These indicates that the context 
is  apparently  unattractive  financially  for  the 
deployment  of  efficient  heat  pumps 
in  the 
residential  sector  and  slightly  favourable  in  the 
non-residential  sector.  Bioenergy  still  remains  the 
by  far  primary  energy  source  for  household 
heating  purposes,  which  poses  sustainability  and 
air pollution issues.  

has 

domestic 

PV 
limited 
Hungary 
manufacturing  capacity  compared  to  the 
total  solar  energy  capacity  installed  in  the 
country.  One  Hungarian  manufacturer  stands  as 
the  sole  active  player,  operating  one  production 
facility with an annual cell manufacturing capacity 
of  approximately  100MW.  It  has  ambitious  plans 
to  expand  this  capacity  significantly,  targeting  a 
range of 500-600MW in the coming years.  

Hungary  is  positioning  itself  as  one  of  the 
world's leading batteries suppliers for EVs. A 
South-Korean  multinational  operates  a  prominent 
battery  cell  plant  in  Göd,  recently  expanded  to  a 
total capacity of 30 000 MWh. The same company 
has  announced  an  investment  project  of  nearly 
EUR  62  million  in  September  2023,  to  boost 
research  and  development  activities 
in  Göd. 
Another South Korean company operates a plant in 
Komárom with a capacity of 7 500 MWh. In 2023, 
several  manufacturers  –  mainly  Chinese 
- 
announced around EUR 10 billion of investment in 
battery  manufacturing.   A  planned  joint  Chinese-
German  investment  project  in  Debrecen  is  worth 
more than EUR 7.3 billion and would have a total 
capacity  of  100GWh.  This  would  be  the  largest 
battery  manufacturing  plant  in  Europe. Hungary’s 

(66)  Energy Poverty Advisory Hub, 2023. 

 
 
appeal  for  battery  producers  is  also  explained  by 
the  presence  of  a  significant  number  of 
automotive  manufacturers  already  based  in  the 
country.  Adding  to  the  momentum,  a  prominent 
Chinese company announced plans in December to 
construct  a  new  EV  plant  near  the  southern 
Hungarian city of Szeged.  

Public  R&I  spending  for  Energy  Union 
priorities (67)  reached  EUR  64  m  in  2021,  a 
significant  jump  forward  compared  to  2020 
(EUR  16  m);  half  of  it  was  invested  in  smart 
energy  systems,  while  the  other  half  went  to 
sustainable 
transport,  energy  efficiency  and 
renewables  technologies.  Private  R&I  in  energy 
spending was EUR 45 m in 2020 (2021 data is not 
available),  mostly  on  sustainable  transport  and 
energy  efficiency.  Venture  capital  investment  in 
clean  energy  technology  start-ups  and  scale-ups 
showed a strong increase in recent years, although 
starting from a very low baseline:  from EUR 0.1 m 
in 2019 to EUR 7.6 in 2023 (68).  

(67)  JRC SETIS research and innovation data: 

https://setis.ec.europa.eu/publications/setis-research-and-
innovation-data_en  

(68)  Source: JRC SETIS (2024) 

47 

 
  
 
Table A7.1:  Key Energy Indicators 

(1) The ranking of the main suppliers is based on the latest available figures (for 2022) 
(2) Venture Capital investment includes Venture Capital deals (all stages), Small M&A deals and Private Equity (PE) growth deals 
(for companies that have previously been part of the portfolio of a VC investment firm or have received Angel or Seed funding). 
Source: Eurostat, Gas Infrastructure Europe, JRC elaboration based on PitchBook data (03/2024), JRC SETIS (2024) 

48 

20192020202120222019202020212022Import Dependency [%] 69.7%56.6%54.1%64.2%60.5%57.5%55.5%62.5%of Solid fossil fuels 45.7%43.7%38.5%41.5%43.3%35.8%37.3%45.8%of Oil and petroleum products 86.6%87.1%86.9%89.4%96.7%96.8%91.7%97.7%of Natural Gas 115.2%75.6%67.2%99.1%89.7%83.6%83.6%97.6%Dependency from Russian Fossil Fuels [%]of Natural Gas 95.0%95.0%95.0%82.4%39.7%41.3%41.1%21.0%of Crude Oil72.6%58.8%56.9%84.1%28.8%26.7%26.4%19.5%of Hard Coal9.7%21.7%18.1%7.3%43.5%49.1%47.4%21.5%2016201720182019202020212022Gas Consumption (in bcm)10.0                 10.7                 10.3                 10.4               10.9               11.4               9.7                 Gas Consumption year-on-year change [%]5.9%7.0%-3.6%0.7%4.2%5.1%-14.9%Gas Imports - by type (in bcm)7.6                   9.8                   7.7                   11.7               7.9                 7.5                 9.3                 Gas imports - pipeline7.6                   9.8                   7.7                   11.7               7.9                 7.5                 9.3                 Gas imports - LNG0.00.00.00.00.00.0-                 Gas Imports - by main source supplier (in bcm) (1)Russia7.2                   9.4                   7.4                   11.1               7.5                 7.1                 7.7                 Not specified0.4                   0.5                   0.4                   0.6                 0.4                 0.4                 1.6                 20192020202120222023LNG Terminals - storage capacity m3 LNGNumber of LNG Terminals00000LNG Storage capacity (m3 LNG)00000Underground StorageNumber of storage facilities5                      5                      5                      5                    5                 Technical Capacity (bcm)6.0                   6.2                   6.2                   6.0                 6.3                 20162017201820192020202120222023Gross Electricity Production (GWh) (2)31,902            32,915            32,067            34,291          34,930          36,120          35,775          -              Combustible Fuels14,583         15,407         14,725         15,429       15,358       15,301       14,365       -              Nuclear16,054         16,098         15,733         16,288       16,055       15,990       15,812       -              Hydro259               220               222               219             244             212             178             -              Wind684               758               607               729             655             664             610             -              Solar244               349               629               1,497         2,459         3,796         4,732         Geothermal01                   12                 18               16               12               4                 -              Other Sources78                 82                 139               111             143             145             73               -              Gross Electricity Production [%]Combustible Fuels45.7%46.8%45.9%45.0%44.0%42.4%40.2%-              Nuclear50.3%48.9%49.1%47.5%46.0%44.3%44.2%-              Hydro0.8%0.7%0.7%0.6%0.7%0.6%0.5%-              Wind2.1%2.3%1.9%2.1%1.9%1.8%1.7%-              Solar0.8%1.1%2.0%4.4%7.0%10.5%13.2%-              Geothermal0.0%0.0%0.0%0.1%0.0%0.0%0.0%-              Other Sources0.2%0.2%0.4%0.3%0.4%0.4%0.2%-              Net Imports of Electricity (GWh)12,711            12,878            14,348            12,584          11,677          12,754          12,152          -              As a % of electricity available for final consumption 32.9%32.1%35.1%30.4%28.2%29.1%28.2%-              Electricity Interconnection [%]-                58.3%58.8%53.1%35.3%32.5%41.4%48.0%Share of renewable energy consumption - by sector [%]Electricity7.3%7.5%8.3%10.0%11.9%13.7%15.3%-              Heating/cooling21.0%19.9%18.2%18.2%17.7%17.9%20.3%-              Transport7.8%7.7%7.7%8.1%11.6%6.2%7.8%-              Overall14.4%13.6%12.5%12.6%13.9%14.1%15.2%-                 20192020202120222023VC investments in climate tech start-ups and scale-ups (EUR Mln)0.09              0.65              1.51              3.17               7.62               as a % of total VC investment (3) in Hungary start-ups and scale-ups0.0%0.4%1.7%1.6%5.4%Research & Innovation spending in Energy Union R&i prioritesPublic R&I (EUR mln)6.3                16.1              64.4              -              -              Public R&I (% GDP)0.004%0.012%0.042%-              -              Private R&I (EUR mln)43.9              45.0              -                -              -              Private R&I (% GDP)0.030%0.033%-                   -                 -                 ELECTRICITY/ENERGYCLEAN ENERGYHungaryEUENERGY DEPENDNCEDIVERSIFICATION OF GAS SUPPLIES 
 
   
 
ANNEX 8: FAIR TRANSITION TO CLIMATE NEUTRALITY 

This  Annex  monitors  Hungary’s  progress  in 
ensuring  a  fair  transition  towards  climate 
neutrality  and  environmental  sustainability, 
particularly  for  workers  and  households  in 
vulnerable situations. Hungary’s green economy 
is  relatively  underdeveloped.  Total  jobs  in  the 
environmental  goods and services sector stood at 
0.9%  of  total  employment  in  2021  (EU:  2.7%). 
Between  2015  and  2022,  the  greenhouse  gas 
emissions  intensity  of  Hungary’s  workforce  (see 
Graph A8.1 and Table A8.1) declined from 12.4 to 
10.5  tonnes  per  worker,  below  the  EU  average  of 
14.3 (69),  indicating  a  positive  trend  in  the  green 
transition.  However,  the  progress  made  towards 
the greening of Hungary’s economy has been slow, 
and  further  policy-relevant  research  and  analysis, 
particularly  of  the  labour  market  impacts  of  the 
green transition, is needed. Investment in relevant 
increased, 
upskilling  and  reskilling  should  be 
especially 
and 
for  workers 
transforming  sectors,  to  ensure  a  fair  green 
transition in line with the Council Recommendation 
on  ensuring  a  fair  transition  towards  climate 
neutrality (70).  The  recovery  and  resilience  plan 
(RRP)  outlines  some  measures  in  this  regard, 
complementing  the  territorial  just  transition  plans 
and  actions  supported  by  the  European  Social 
Fund Plus (ESF+). 

declining 

in 

Graph A8.1: Fair transition challenges in Hungary 

in  2023).  The 

job  vacancy  rate 

In  2023,  employment 

Employment  in  Hungary’s  sectors  that  are 
most  affected  by  the  green  transition 
remains  stable. 
in 
Hungary’s  energy-intensive  industries  comprised 
4.9%  of  total  employment  (3.5%  in  the  EU). 
However, employment in mining and quarrying has 
fallen  by  28.4%  since  2015  (to  around  7 300 
workers 
in 
construction (see Graph A8.2), a key sector for the 
green transition, is relatively low (1.6% vs 3.6% in 
EU  in  2023).  Nevertheless,  57%  of  small  and 
medium-sized  enterprises  (SMEs)  in  the  sector 
reported  that  skills  shortages  are  holding  them 
back in general business activities (71). According to 
the  European  Labour  Authority  (ELA) (72),  labour 
shortages were reported in 2023 for a number of 
required  specific  skills  or 
occupations 
knowledge  for  the  green  transition (73),  including 
roofers,  insulation  workers  and  civil  engineering 
labourers.  Overall, 
all 
transforming sectors increased between 2015 and 
2022,  particularly  in  manufacturing,  and  could 
hinder the transition  towards  climate  neutrality.  A 
recent  report  from  Eurofound  also 
identified 
labour  shortages  linked  to  the  green  transition  in 
the  energy  sector (74).  This  underlines  the  need  to 
ensure  green  jobs  and  skills  are  developed  for  a 
successful  and  fair  green  transition .  To  this  end, 
Hungary  allocated  5%  (EUR  55  million)  of  its 
available  ESF+  funding  to  active  labour  market 
measures  and  adult  education  over  the  2021-
2027 period to increase green skills and jobs. 

vacancy 

rates 

that 

in 

and 

supporting 

Upskilling  and  reskilling  in  declining  and 
transforming  sectors  requires  further  policy 
low-skilled 
measures, 
workers  remains  crucial  for  a  fair  green 
transition. 
industries, 
workers’  participation  in  education  and  training 
decreased from 9.5% in 2015 to 7.6% in 2023 (vs 
10.9%  in  the  EU).  In  Hungary,  only  31%  of  SMEs 
reported  that  the  skills  required  for  greening 

energy-intensive 

In 

Source: Eurostat, EU Labour Force Survey, EMPL-JRC GD-
AMEDI/AMEDI+ and DISCO(H) projects (see Table A8.1). 

(69)  Workforce-related calculations are based on the EU Labour 
Force Survey. Note, in the 2023 country report for Hungary, 
such indicators were calculated based on employment 
statistics in the national accounts. This may result in limited 
comparability across the two reports. 

(71)  Eurobarometer on skills shortages, recruitment, and retention 

strategies in small and medium-sized enterprises. 

(72)  Based on the European Labour Authority 2024 EURES Report 
on labour shortages and surpluses 2023, i.e. data submitted 
by the EURES National Coordination Offices. 

(73)  Skills and knowledge requirements are based on the 

European Skills Competences and Occupations (ESCO) 
taxonomy on skills for the green transition. 

(70)  Council Recommendation of June 2022 (2022/C 243/04) 

(74)  Eurofound (2021), Tackling labour shortages in EU Member 

covers employment, skills, tax-benefit and social protection 
systems, essential services and housing. 

States, Publications Office of the European Union, 
Luxembourg. 

49 

0.00.51.01.52.0Greenhouse gasemissions per workerEmployment inEnergy-IntensiveIndustriesEducation & trainingin Energy-IntensiveIndsutriesEnergy povertyTransport poverty(proxy)Carbon inequalityHU Latest vs EU LatestEU LatestHU 2015 vs EU Latest 
 
 
  
 
 
 
Table A8.1:  Key indicators for a fair transition in Hungary 

Source: Eurostat (env_ac_ainah_r2, lfsa_egan2d, ilc_mdes01), EU Labour Force Survey (break in time series in 2021), EMPL-JRC 
GD-AMEDI/AMEDI+ and DISCO(H) projects. 

business  activities  are  becoming  more  important 
(vs  42%  in  the  EU)  (62).  If  Hungary  matches  its 
projected contribution to the EU’s 2030 renewable 
energy target, between 600 and 1 400 additional 
skilled workers will be needed for the deployment 
of  wind  and  solar  energy,  which  may  require  an 
investment  in  skills  of  EUR  1.7-2.2  million (75). 
Hungary  has  committed  to  adopting  a  national 
strategy  for  developing  skills  needed  for  a  fair 
green  transition  by  the  end  of  2024  under  the 
RepowerEU  chapter  of  its  RRP.  The  RepowerEU 
plan  will  also 
least  50 000 
professionals to participate in green skills training 
courses by Q2-2026. 

finance  at 

Graph A8.2: Job vacancy rate in transforming 
sectors and mining and quarrying 

B - Mining and quarrying 
C - Manufacturing 
D - Electricity, gas, steam and air conditioning supply 
E - Water supply; sewerage, waste management and 
remediation activities 
F - Construction 
H - Transportation and storage 
Source: Eurostat jvs_a_rate_r2. 

Energy  poverty  indicators  deteriorated  in 
Hungary  in  2023  due  to  persistent  inflation 
leading  to  a  decline  in  real  wages.  The  share 
of  the  population  unable  to  keep  their  homes 
adequately warm decreased from 9.6% in 2015 to 

(75)  EMPL-JRC AMEDI+ project. 

50 

4.7% in 2022, but rose sharply to 8% in 2023 (76), 
despite  access to  regulated  prices  for  all  gas  and 
electricity  households  consumers.  Energy  poverty 
is  particularly  high  in  the  least  developed  regions 
(42% Észak-Alföld and 46% Dél-Dunántúl) and in 
villages  (65%).  In  2022,  energy  poverty  affected 
10%  of  the  population  at  risk  of  poverty  (AROP) 
(EU: 20.1%)  and  4.3%  of  lower  middle-income 
households  (deciles  4-5)  (EU: 11.6%).  In  January 
2023,  21.3%  (vs  37.1%  in  the  EU)  of  the 
population at risk of poverty  spent a considerable 
proportion  of  their  budget  (more  than  6%)  on 
private transport fuels (77). 

High  levels  of  air  pollution  are  increasing 
health  risks  in  Hungary  while  environmental 
inequalities  remain  an  issue.  In  2021,  the 
average levels of air pollution stood above the EU 
average  (14.4  vs  11.4  µg/m3  PM2.5),  with  critical 
levels of air pollution (78) registered in each NUTS-
3  region  of  Hungary.  This  has  led  to  a  significant 
impact  on  health,  affecting  vulnerable  groups  in 
particular,  and  to  around  10 400  premature 
deaths  annually (79).  Meanwhile,  the  consumption 
footprint of the richest 20% of the population was 
1.9  times  as  high  as  the  footprint  of  the  poorest 
20%  in  2021  (vs  1.8  in  the  EU).  For  both  groups, 
the  consumption  footprint  is  highest  for  housing 
and food (80). 

(76)  According to reporting by the Hungarian Central Statistical 

Office. 

(77)  Affordability of private transport fuels is one key dimension 

of transport poverty. The indicator has been developed in the 
context of the EMPL-JRC GD-AMEDI/AMEDI+ projects. 
Methodology explained in Economic and distributional effects 
of higher energy prices on households in the EU. 

(78)  Two times higher than the recommendations in the WHO Air 

Quality Guidelines (annual exposure of 5µg/m3). 

(79)  EEA - Air Quality Health Risk Assessment 

(80)  Developed in the context of the EMPL-JRC DISCO(H) project. 

Methodology explained in Joint Research Centre, 
2024. Carbon and environmental footprint inequality of 
household consumption in the EU. JRC137520. The EU 

0.0%0.5%1.0%1.5%2.0%2.5%3.0%3.5%4.0%BCDEFHEU 2023HU 2023HU 2015IndicatorDescriptionHU 2015HUEUGHG per workerGreenhouse gas emissions per worker – CO2 equivalent tonnes12.410.5 (2022)14.3 (2022)Employment EIIEmployment share in energy-intensive industries, including mining and quarrying (NACE B), chemicals (C20), minerals (C23), metals (C24) and automotive (C29)5.3%4.9% (2023)3.5% (2023)Education & training EIIAdult participation in education and training (last 4 weeks) in energy-intensive industries9.5%7.6% (2023)10.9% (2023)Energy povertyShare of the total population living in a household unable to keep its home adequately warm9.6%4.7% (2022)9.3% (2022)Transport poverty (proxy)Estimated share of the AROP population that spends over 6% of expenditure on fuels for personal transport17.9%21.3% (2023)37.1% (2023)Carbon inequalityRatio between the consumption footprint of the top 20% vs bottom 20% of the income distribution1.91.9 (2021)2.7 (2021) 
 
     
 
 
 
 
  
 
Hungary has started to implement measures 
which  could  help  it  make  progress  towards 
achieving  a  fair  green  transition.  Hungary’s 
measures  to  boost  employment  and  support 
businesses  as  well  as  analyse  and  manage  the 
impact  of  climate  change  (based  on  the  national 
occupational  safety  and  health  policy)  are 
welcome (81).  Also  welcome  is  its  commitment  to 
adopting  a  national  strategy  for  green  skills. 
However,  further  action  is  needed  to  address  the 
existing challenges in education and the upskilling 
of  workers  with  an  emphasis  on  green  skills  and 
sectors. In addition, targeted efforts are needed to 
intensify  and  align  the  country’s  policies  with  the 
environmental  objectives,  to  support  the  most 
affected  and  vulnerable  groups,  and  to  actively 
involve social partners.  

average refers to EU27 without Italy (household income data 
not available for IT in the HBS) 

(81)  See monitoring review of the Council Recommendation of 

June 2022, which took place in October 2023. 

51 

 
 
PRODUCTIVITY 
ANNEX 9: RESOURCE PRODUCTIVITY, EFFICIENCY AND CIRCULARITY 

The green transition of industry and the built 
environment,  in  particular  decarbonisation, 
resource  efficiency  and 
is 
Hungary’s 
essential 
competitiveness (82). In this regard, priorities for 
Hungary  are  waste  management  and  the  use  of 
circular materials in industry and construction. 

circularity, 

boost 

to 

Hungary’s  circular  economy  transition 
is 
insufficient  to  achieve  the  EU  Circular 
Economy Action Plan goals. Hungary’s material 
footprint  was  at  the  EU  average  in  2022  with 
14.52 tonnes  per 
capita.  Waste  production 
increased  to  1.8 tonnes  per  capita  in  2020.  The 
construction,  mining  and  energy  sectors  are  the 
main  waste  generators.  The  trends  show  that 
Hungary  is  just  at  the  beginning  of  its  circular 
economy  transition.  The  2022  Eco-Innovation 
Scoreboard  placed  Hungary  in  the  ‘catching-up 
group’,  with  a  score  of  81.2.  As  of  September 
2023,  Hungary  totalled  only  26  awarded  EU 
Ecolabel  licences  and  93  products  with  the  EU 
Ecolabel, showing a low but increasing take-up of 
licences and products. 

(ETS) 

system 

trading 

in  2013-2019. 

In  2019-2023,  greenhouse  gas  emissions 
from  the  sectors  covered  by  the  EU 
emissions 
in 
Hungary (83)  declined  by  32%,  after  a  strong 
In  2023,  half  of 
increase 
greenhouse  gases  emitted  by  Hungary’s  ETS 
installations  came  from  power  generation,  a  bit 
below the EU average, 57%. Of the total emissions 
from  all  industry  sectors,  the  chemical  industry 
emitted  almost  one  third,  cement  and 
lime 
production  about  15%,  the  metals  industry  7%, 
and  other  industries  48% (84).  Between  2019  and 
2023,  the  power  sector  registered  a  higher 
emissions  reduction  (35%) (85)  than  the  industry 
sectors 
(28%).  Between  2013  and  2023, 
greenhouse  gas  emissions  declined  by  45%  in 

power  generation  but  only  by  5%  in  the  industry 
sectors,  driven  by  the  metals 
industry.  This 
resulted  in  a  combined  greenhouse  gas  reduction 
of 30% in this period.  

Graph A9.1: ETS emissions by sector since 2013 

Source: European Commission 

The transition to a circular economy is key to 
improving  the  efficiency  of  the  Hungarian 
industry.  Although  below  the  EU  average,  the 
country  has  shown  an  increase  in  the  use  of 
circular materials over the last few years, reaching 
7.9%  in  2022.  A  similar  trend  can  be  seen  for 
resource  productivity,  with  1.99  purchasing  power 
standards (PPS) per kilogram in 2022 (86), showing 
an  improvement  in  the  Hungarian  economy’s 
ability  to  efficiently  use  material  resources  to 
produce  wealth.  Most  materials  are  used  by  the 
construction  and  energy  sectors (87).  Hungary  was 
dependent on imports for 28.8% of materials used 
in  2022 (88),  making  the  country  comparatively 
more  vulnerable  to  supply  chain  disruptions  than 
other  countries.  Energy  production  is,  by  far,  the 
most  water-consuming  economic  activity 
in 
Hungary  (with  more  water  abstraction  than  all 
other  economic  sectors  together) (89).  Circular 
economy  measures  in  agrifood  are  insufficient. 
Despite  some  progress,  there  is  a  need  for  a 
strengthened  policy  framework,  focusing  on  food 
waste  reduction,  food  waste  and  biomass  use  for 
composting  or  energy  valorisation,  and 
the 
development of the bioeconomy (90). 

(82)  See also Annexes 6, 7 and 12. 

(83)  This analysis excludes air travel. For more details and the 
data sources, see Weitzel, M; van der Vorst, C. (2024), 
Uneven progress in reducing emissions in the EU ETS, JRC 
Science for policy brief, JRC138215, Joint Research Centre. 

(84)  Of the greenhouse gas emissions classified as coming from 

the ‘other’ group, almost half originated from the 
manufacture of refined petroleum products. 

(86)  Below the EU average of 2.45 PPS per kg. 

(87)  OECD (2018), OECD Environmental Performance Reviews: 

Hungary, available at this link. 

(88)  Above the EU average of 22.4%, available at this link. 

(89)  European Environment Agency (2023), Water abstraction by 

economic sector, 2000-2019, available at this link. 

(85)  This includes a steep decrease of 15% year-on-year in 2020, 

and a gradual rebound in the next 2 years. 

(90)  OECD (2023), Towards a National Circular Economy Strategy 
for Hungary, OECD Publishing, Paris, available at this link. 

52 

00.20.40.60.810510152020132014201520162017201820192020202120222023Emissions relative to 2013Mt CO2eCement & LimeChemicalsMetalsRefineriesPower generationOtherHungary (both axes) 
 
 
 
  
 
 
Table A9.1:  Circularity indicators 

Source: Eurostat, European Environment Agency 

Graph A9.2: Treatment of municipal waste 

Source: Eurostat 

in 

performance 

Hungary’s 
waste 
management  is  insufficient.  Municipal  waste 
generation  is  below  the  EU  average,  but  some 
properly 
generated  waste  might  not  be 
reported (91). Hungary recycled 32.8% of municipal 
waste  in  2022 (92),  while  the  plastic  packaging 
recycling  rate  stood  at  24.9%  in  2020,  below  the 
EU  average.  Hungary  missed  the  2020  waste 
targets  and  risks  missing  all  the  2025  ones  for 
municipal  waste  and  packaging (93).  Landfilling  of 

municipal waste stood at 55,2% in 2022, far from 
the  target  of  a  maximum  of  10%  by  2035  and 
showing an increasing trend. The main challenges 
for  waste  management 
insufficient 
include 
treatment  capacity  for  some 
collection  and 
specific streams such as packaging, biowaste and 
textile.  Significant  reforms  are  ongoing  in  the 
waste  management  sector,  but  their  impacts  are 
still to be assessed. 

Improving resource efficiency is essential for 
the  transition  of  the  building  sector  in 
Hungary.  Hungary’s  building  permits  index shows 
an  increasing  trend  in  construction  activities  over 
the  last  years,  standing  at  162.9  in  2023 (94).  In 
2020,  Hungary  submitted  a  long-term  renovation 
strategy aiming to decarbonise the building stock. 
Construction  and  demolition  waste  per  capita 
remains well below the EU average. The proportion 
of  backfilling  increased  to  88.1%  in  2020,  well 
above the EU average of 9.9%. Hungary’s recovery 
rate rapidly increased to 98.3% in 2021, achieving 
the  Waste  Framework  Directive’s  target  for  2020 
of 70%. In 2021, 84% of the Hungarian population 
was  connected  to  at  least  secondary  wastewater 
treatment.  Several  urban  areas  in  Hungary  have 
levels  of  arsenic,  boron  and  fluoride  in  drinking 
water  that  are  above  the  EU  parametric  values, 
which is a major public health issue. 

(91)  European Commission (2023), The early warning report for 

Hungary, available at this link. 

(92)  Below the EU average recycling rate of 48.6% for municipal 

waste in 2022, available at this link. 

(93)  Specifically for plastics and glass. European Environment 
Agency (2023), Many EU Member States not on track to 

meet recycling targets for municipal waste and packaging 
waste, available at this link. 

(94)  with 2015 as base (2015=100). Statistics | Eurostat 

(europa.eu). 

53 

381387403416406010020030040050020182019202020212022Kg per capita Waste treatment to be determinedLandfill/disposalTotal incineration (including energy recovery)Composting and digestionMaterial recyclingEU-27201820192020202120222023EU-27Latest yearIndustryResource productivity (purchasing power standard (PPS) per kilogram)1.41.41.61.72.0-2.52022Circular material use rate (%)7.05.65.27.37.9-11.52022Eco-innovation index (2013=100)64.864.065.269.681.2-121.52022Recycling of plastic packaging (%)30.033.024.9---40.72021Cost of air emissions from industry (EUR bn)6.46.26.56.6--352.72021Built environmentRecovery rate from construction and demolition waste (%)99.0-98.098.3--89.02020Soil sealing index (base year = 2006)103.4-----103.42018Non-residential floor area (m2 per capita)11.611.711.9---18.02020Waste backfilled (%)6.7-88.1-50.9-9.92020 
        
 
 
 
 
 
       
 
ANNEX 10: DIGITAL TRANSFORMATION 

infrastructure/connectivity 

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  29.1%  of  its  total  RRP 
(EUR 2.23 billion) (95).  Under 
budget  to  digital 
Cohesion Policy, an additional EUR 2.5 billion (12% 
of  the  country’s  total  Cohesion  Policy  funding)  is 
allocated 
digital 
transformation (96). 

country’s 

and 

the 

to 

The  Digital  Decade  Policy  Programme  sets 
out  a  pathway  for  EU’s  successful  digital 
transformation  by  2030.  Hungary’s  national 
roadmap outlines the actions it intends to take to 
reach the objectives  and targets at national  level. 
The first Report on the State of the Digital Decade 
highlighted the need to accelerate and deepen the 
collective efforts to reach the EU-wide targets and 
objectives (97).  Among  others,  a  digitally  skilled 
population 
the  development  and 
adoption  of  digital  technologies  and  leads  to 
productivity  gains  and  new  business  models.  It 
also  leads  to  higher  inclusion  and  participation  in 
an environment increasingly shaped by the digital 
transformation (98). 
technologies, 
infrastructure  and  tools  all  play  a  role 
in 
addressing 
the  current  structural  challenges, 
including  strategic  dependencies,  cybersecurity 
and climate change. 

increases 

Digital 

(95)  The share of financial allocations that contribute to digital 
objectives has been calculated using Annex VII to the 
Recovery and Resilience Facility Regulation. 

(96)  This amount includes all investment specifically aimed at or 
substantially contributing to digital transformation in the 
2021-2027 Cohesion Policy programming period. The source 
funds are the European Regional Development Fund, the 
Cohesion Fund, the European Social Fund Plus, and the Just 
Transition Fund. 

(97)  European Commission (2023): Report on the State of the 

Digital Decade 2023, 2023 Report on the state of the Digital 
Decade | Shaping Europe’s digital future (europa.eu). 

(98)  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) and OECD (2019): Going Digital: 
Shaping Policies, Improving Lives – 
Summary, https://www.oecd.org/digital/going-digital-
synthesis-summary.pdf. 

54 

Hungary  has 
improved  significantly  and 
scores  slightly  above  the  EU  average  in 
terms  of  digital  skills.  59%  of  the  population 
possesses at least basic digital skills, representing 
a  10  percentage  point  increase  in  two  years. 
However,  people  who  are  above  55  years  of  age 
lag behind the national average. The proportion of 
specialists  in  information  and  communications 
technology  (ICT)  in  the  Hungarian  workforce  has 
increased  slightly  in  recent  years  but  remains 
relatively  low,  at  4.2%  compared  to  the  EU 
average of 4.8%. The Hungarian RRP and cohesion 
policy  programmes include  several  measures  that 
target digital skills (99). 

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  80%  in  2022  to  84%  in 
2023, above the EU average of 79%. 5G coverage 
in  Hungary  increased  to  84%  in  2023  (up  by  26 
percentage  points  from 
the  previous  year). 
However,  it  is  still  lower  than  the  EU  average, 
which stands at 89%. 

The  digitalisation  of  businesses  remains  a 
major challenge in Hungary. Only 53% of SMEs 
in  Hungary  had  at  least  basic  digital  intensity  in 
2023 (compared with an EU average of 58%). The 
use of advanced digital technologies, such as data 
analytics,  cloud  or  artificial  intelligence  (AI),  has 
improved  significantly  during  the  last  year,  as 
already 66% of enterprises have taken up at least 
one of these three technologies (compared to the 
EU average of 55%). However, the use of AI is half 
the EU average (4% in Hungary against 8% in the 
EU). Further investments and large-scale, targeted 
and  effective measures  are  necessary  to  keep  up 
transformation  of 
the  pace  of 
businesses,  especially  for  SMEs,  including  the 
development  of  digital  skills  in  order  to  increase 
SMEs’  use  of  digital  technology  and  to  develop 
digital  start-ups.  In  2022,  2.6%  of  enterprises  in 
Hungary  reported  ICT  service  outage  due  to 
cyberattacks  (e.g.  ransomware  attacks,  denial  of 
service  attacks).  Over  the  same  year,  21.1%  of 

the  digital 

(99)  The Digital Renewal Operational Programme Plus contains 
digital skills measures worth up to EUR 400 million; the 
Economic Development and Innovation Operational 
Programme Plus contains measures in vocational education 
and training investments. 

 
 
 
 
 
 
Table A10.1:Key Digital Decade targets monitored by the Digital Economy and Society Index 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 evolution will also be monitored separately and taken 
into consideration when interpreting VHCN coverage data in the Digital Decade.      
(3) At least 75% of EU 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 

enterprises  developed  or  reviewed  their 
security policy within the previous 12 months. 

ICT 

Hungary  continued  to  progress  on  the 
digitalisation  of  public  services,  but 
its 
performance  remains  below  the  EU  average, 
mainly because of low scores on cross-border 
services.  The  use  of  national  eID  cards  remains 
limited,  as  most  users  prefer  the  client  gate 

trusted  profile,  which  is  a  basic  authentication 
method  using  a  login  name  and  a  password (100). 
The Hungarian RRP includes several measures that 

(100) In the fourth quarter of 2023, there were approximately 6.7 
million national eID cards capable of e-identification in 
Hungary (covering 67% 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 cases, the basic client gate 
was used, while the national eID card was chosen by 1.5% of 
users. 

55 

EUDigital Decade target by 2030 2022202320242024(EU)Digital skillsAt least basic digital skills49%49%59%56%80%% individuals20212021202320232030ICT specialists (1)3.9%4.1%4.2%4.8%20 million% individuals in employment aged 15-7420212022202320232030Digital infrastructure/connectivityFixed very high capacity network (VHCN) coverage72%80%84%79%100%% households20212022202320232030Fibre to the premises (FTTP) coverage (2)64%70%76%64%-% households2021202220232023Overall 5G coverage18%58%84%89%100%% populated areas20212022202320232030Digitalisation of businessesSMEs with at least a basic level of digital intensity34%NA53%58%90%% SMEs2021202320232030Data analyticsNANA53%33%-% enterprises20232023Cloud21%21%37%39%-% enterprises2021202120232023Artificial intelligence3%3%4%8%-% enterprises2021202120232023AI or cloud or data analytics (3)NANA66%55%75%% enterprises202320232030Digitalisation of public servicesDigital public services for citizens64687379100Score (0 to 100)20212022202320232030Digital public services for businesses74767585100Score (0 to 100)20212022202320232030Access to e-health recordsNA808679100Score (0 to 100)2022202320232030Hungary 
 
 
     
 
 
focus  on  improving  digitalisation  in  healthcare. 
Regarding  access  to  electronic  health  records, 
Hungary  has  already  a  high  score  of  86  out  of 
100.  The  Digital  Renewal  Operational  Programme 
Plus  also  allocates  EUR 2.042  billion  to  the 
digitalisation of businesses and the public sector in 
Hungary  –  supporting  key  EU  initiatives  (e.g.  the 
Digital  Wallet,  eIDAS  and  the  interoperability 
framework)  and  the  UN  Sustainable  Development 
Goals. 

56 

 
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  transition  and  ensuring  long-term 
competitiveness. 

spillovers that are needed to raise productivity and 
remain competitive. 

Graph A11.1: R&D intensity in 2022 

of 

the 

Hungary  is  a  ‘moderate  innovator’  and  the 
gap  between  its  performance  and  the  EU 
average  is  broadening.  According  to  the  2023 
edition 
Innovation 
Scoreboard (101),  its  innovation  performance  has 
increased by 7.7 percentage points since 2016, at 
a  lower  rate  than  the  EU.  Its  overall  performance 
remained below the EU average (70.4% of the EU 
performance)  but  has  caught  up  slightly in  recent 
years (since 2020). 

European 

Low  public  spending  on  R&D  undermines  the 
quality and performance of the science base, 
thus hindering Hungary’s transition toward a 
more knowledge-based economy. Driven by the 
private  sector,  with  1.39%  of  GDP  in  2022, 
Hungary’s total R&D spending remained below the 
EU  average  of  2.24%  and  the  country’s  1,8% 
target  initially  set  for  2020  as  well  as  the 
ambitious  3%  goal  by  2030 (102).  With  the  new 
John von Neumann Programme (103), Hungary aims 
to  reinforce  a  knowledge-based  economy  and  to 
become  one  of  the  top  innovators  in  Europe  by 
2030. However, low public R&D intensity (standing 
at  0.38%  of  GDP  in  2022)  hampers  the  quality 
and efficiency of the public R&I system. Following 
a  peak  at  6.4%  in  2019,  the  share  of  scientific 
publications  within  the  top  10%  most  cited 
scientific  publications  worldwide  dropped  to  5.9% 
in  2020  and  remained  below  the  EU  average  of 
9.6%. A break in trend can also be observed in the 
share of international co-publications as % of total 
number of publications, with a decline from 52.4% 
in 2021 to 50.9% in 2022 (compared to 55.5% for 
the EU average) (104). A weak public research base 
for  generating  knowledge 
limits 

the  scope 

(101) 2023 European Innovation Scoreboard (EIS), country profile: 
Hungary https://ec.europa.eu/assets/rtd/eis/2023/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). 

(102) https://nkfih.gov.hu/hivatalrol/strategia-alkotas/kutatasi-

fejlesztesi-innovacios-strategia. 

(103) https://kormany.hu/dokumentumtar/neumann-janos-program. 

(104) Source: Science-Metrix. 

Source: Eurostat, 2023 

Skill shortages remain a major challenge for 
the  Hungarian  research  and 
innovation 
system, further exacerbated by deteriorating 
conditions  for  researchers.  Against  the  EU 
average  of  43.1%,  the  share  of  population  aged 
25-34  who  have  successfully  completed  tertiary 
education  was  29.4%  in  2023  and  is  one  of  the 
lowest  in  the  EU.  Following  a  peak  in  2020,  the 
number  of  new  graduates 
in  science  and 
engineering  per  thousand  population  aged  25-34 
fell back from 17.6 to 9.1 in 2021, to a pre-2014 
level  and  well  below  the  EU  average  of  16.9.  A 
series  of  factors  and  recent  developments  are 
creating 
research 
the 
community  and  are  severely  affecting 
attractiveness  of  research  careers.  This  includes 
the low salaries for PhD students and researchers, 
the  change  of  the  employment  status  of  public 
researchers  from  public  servants  to  workers 
directly covered by the labour code, and finally the 
introduction  of  a  performance-based  funding 
model  of  public  research  centres  based  on  an 
unclear  evaluation  system (105).  In  addition,  the 
differentiation  of  state-owned  universities 
in 
favour  of  institutions  governed  by  public  trust 
funds  when  it  comes  to  the  allocation  of  public 
funding  affects 
scientific 
excellence (106).  Concerns  over  academic  and 

the  quality  of 

uncertainty 

among 

the 

(105) In 2023 HUN-REN introduced a new indicator-based 
evaluation system with retroactive performance 
requirements for 2022 which set the financial allocations for 
the research centres in 2024. 

(106) While the non-model changed public universities receive 
basic funding for maintenance and headcount, the model 
changed institutions receive extra funding for example for 
salaries or R&I activities from the government. with focus on 
quantitative rather than qualitative output. 

57 

00.511.522.5R&D IntensityPublic expenditurePrivate expenditureas % of GDPEUHU 
 
 
     
 
 
Public  expenditure  on  R&D  financed  by  business 
total  public 
(national)  as  %  of 
enterprises 
expenditure  on  R&D  remains  lower  than  the  EU 
average (2.89% in 2021, compared to 7.11%). 

The  very  limited  support  for  R&I  in  the 
Hungarian recovery and resilience plan (RRP) 
is  a  missed  opportunity.  The  Hungarian  RRP 
includes  only  one  R&I-supporting  measure,  which 
aims  at  creating  national  laboratories  to  foster 
public-private collaboration around socio-economic 
and  environmental  challenges.  In  light  of  the  low 
public  expenditure  for  R&D  in  Hungary  and  the 
challenges that hinder the country’s scientific and 
innovation  performance,  full  exploitation  of  the 
ERDF  would  be  important  to  provide  stronger 
is 
support  for  such  a  strategic  area,  which 
essential to build a more resilient and competitive 
economy. 

scientific  freedom  also  remain (107).  (See  also 
Annex 15 on education.) 

capacity 

innovation 

Hungary’s 
remains 
limited to a small group of big foreign-owned 
large  domestic 
some 
enterprises  and 
companies. The Hungarian economy largely relies 
(FDI)  net 
on  high  foreign  direct 
flows (108)  of  big  companies  that  engage 
in 
medium-high-tech and high-tech manufacturing. A 
significant  proportion  of  the  small  and  medium 
enterprises  do  not  engage  in  innovation  activities 
or  perceive  a  need  to,  while there  is  a  high  share 
of non-innovators with a potential to innovate (109). 

investment 

Businesses  do  not  systematically  seek  out 
Public-private 
collaboration. 
public-private 
relationship  shows  asymmetry  when  it  comes  to 
cooperation  between  academia  and  businesses. 

(107) EC, Education and training monitor 2023. 

(108) Source EIS Hungary country profile: 61% of GDP is 
outstanding against the EU average of 2.1%. 

(109) See EIS Hungary country profile: Non-innovators with 

potential to innovate 39.6% against the EU average of 
17.2%. 

58 

 
 
 
 
 
Table A11.1: Key innovation indicators 

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

59 

R&D intensity (GERD as % of GDP)1.131.341.591.641.392.24Public expenditure on R&D as % of GDP0.430.340.370.40.380.73Business enterprise expenditure on R&D (BERD) as % of GDP0.680.981.221.2411.48Scientific publications of the country within the top 10% most cited publications worldwide as % of total publications of the country 5.14.85.9::9.6Patent Cooperation Treaty (PCT)  patent applications per billion GDP (in PPS)1.41.51.17::3.4Public-private scientific co-publications as % of total publications9.29.410.711.510.77.6Public expenditure on R&D financed by business enterprise (national) as % of GDP0.0570.0290.0080.01:0.054New graduates in science & engineering per thousand pop. aged 25-347.210.717.69.116.9Total public sector support for BERD as % of GDP0.2650.3530.2380.26:0.204R&D tax incentives: foregone revenues as % of GDP0.1630.1480.0380.035:0.104Share of environment-related patents in total patent applications filed under PCT (%)12.1 12.98.3::14.7Venture capital (market statistics) as % of GDP0.010.0390.080.0890.0740.085Employment share of high growth enterprises measured in employment (%):20.69::12.51Finance 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 Hungary20102015202020212022 
 
  
 
ANNEX 12: INDUSTRY AND SINGLE MARKET 

indicator 

continue 

Hungarian  businesses 
to  be 
confronted  by  a  tough  economic  climate 
linked to high inflation, including high energy 
prices.  The  economy  began  to  contract  in  2022 
amid  high  inflation,  low  business  confidence  and 
declining investment. Producer prices continued to 
increase  more  rapidly  than  in  almost  all  other 
Member  States  throughout  2023 (110).  Because  of 
in 
this  environment,  the  confidence 
industry  remained  considerably  below  the  EU 
average throughout  2023 (111),  adversely  affected 
in  particular  by  the  decrease 
in 
manufacturing and the general price environment. 
The energy crisis and tough economic climate have 
had  an 
their 
competitiveness,  with  a  sizeable  increase  in  the 
rate  of  bankruptcies  over  the  past  3  years.  The 
index of industrial producer prices on the domestic 
market  increased  more  in  Hungary  than  in  any 
other  Member  State 
throughout  2022  and 
2023 (112).  According  to  a  2023  EIB  Investment 
Survey (113), firms in Hungary are more likely than 
other  EU  Member  States  to  have  faced  increases 
in  energy  costs  (97%  vs  93%),  with  a  larger 
proportion facing increases of 25% or more (86% 
vs 68%). The major concerns for firms in Hungary 
are energy prices (91%) and uncertainty (83%).  

impact  on  businesses  and 

in  orders 

Hungarian labour productivity is around two-
thirds  of 
the  EU  weighted  average. 
Convergence of productivity  with the EU,  in terms 
of  both  GDP  per  hour  worked  and  total  factor 
productivity  growth,  began  to  re-emerge  in  2017. 
Over  the  past  5  years,  Hungary  has  recorded  the 
fourth-highest  growth  in  labour  productivity  and 
the fifth-highest growth in total factor productivity 
among the Member States that joined the EU after 
2004. Real GDP per person employed increased by 
2.8%  in  2022  and  by  0.5%  in  2023.  Gross  value 
added  per  person  employed  at  constant  prices 
increased by 4.9% in 2022, above the EU average 
of 3.6%.  

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

total – quarterly data. 

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

indicator. 

(112) Industrial producer prices down by 0.3% in the euro area and 

by 0.2% in the EU – Eurostat (europa.eu) 

real 

industry, 

Productivity  varies  significantly  by  sector 
(Graph A12.2), with industry and construction 
lagging  behind.  For 
labour 
productivity per person increased by 0.5% in 2022 
and  decreased  by  5.1%  in  2023,    well  below  the 
EU  average  (-1.24%).  This 
likely  a 
reflection  of  exposure  to  international  markets, 
with 
firms 
performing relatively well and domestic small and 
medium-sized  enterprises  (SMEs)  less  so.  This 
difference points to the importance both of global 
competition  and  of  foreign  direct  investment 
inflows for productivity.  

internationally 

is  most 

oriented 

(large) 

Graph A12.1: Total factor productivity 

Source: Commission AMECO database 

Graph A12.2: Labour productivity by sector (GDP 
per person employed, 2015=100 

Source: Eurostat national accounts 

Hungarian SMEs face some difficult financing 
conditions,  according to the 2023 Survey on the 
Access  to  Finance  of  Enterprises  (SAFE) (114). 
Access to public financial support is below the EU 
average, and –  with a high number of SMEs in the 

(113) EIB Investment Survey 2023 – Hungary overview 

(114) Data and surveys – SAFE (europa.eu) 

60 

981001021041061081101121516171819202122232425European UnionCzechiaGermanyHungarySlovakia708090100110120130140150201520162017201820192020202120222023Industry (except construction)ConstructionWholesale and retail trade, transport, accommodation and food service activitiesInformation and communicationFinancial and insurance activitiesProfessional, scientific and technical activities; administrative and support serviceactivities 
 
 
 
      
 
      
 
 
economy – this can be a considerable constraint to 
the scaling up and growth of these companies. 

In 
light  of  demographic  ageing  and  a 
declining  fertility  rate,  Hungary’s  economic 
development  relies  on  the  capacity  to 
remove obstacles to sustainable productivity 
growth.  While  part  of  the  productivity  slowdown 
reflects  increasing  labour  shortages  (with  low-
productivity  workers  included  in  the  labour  force), 
structural  weaknesses 
remain  significant.  A 
comprehensive  SME  strategy,  particularly  one 
focused  on  digitalisation  and  digital  skills,  could 
benefit  the  country,  accompanied  by  addressing 
weaknesses  in  the  business  environment.  The 
2022  European 
Innovation  Scoreboard  shows 
Hungary  is  among  the  innovation  laggards,  with 
performance  relative  to  the  EU  decreasing  over 
time  (see  also  Annex  11).  Innovation  and  R&D  by 
business is low. 

for 

International 

A  major  contributory  factor  to  future 
Hungarian  competitiveness  is  the  quality  of 
its  Human  Capital.  Students’  socio-economic 
background  remains  a  strong  predictor  of 
their performance according to the latest, 2022 
“Programme 
Student 
Assessment”  (PISA)  study  published  by  the  OECD. 
The  study  reveals  that  3  out  of  10  Hungarian 
students  in  mathematics  and  1  in  4  students  in 
reading  and  science  do  not  meet  the  basic 
the 
proficiency 
achievement  gap  by  socio-economic  status  being 
also  larger  than  in  other  EU  countries.  More  than 
half  of  students  (54.9%  vs  EU  average  48.0%) 
from  the  bottom  quarter  of  the  socio-economic 
status underachieve in mathematics, a share that 
increased by 6.7 percentage points between 2018 
and 2022 (see annex 15 for more detail).   

these  areas,  with 

levels 

in 

low 

are 

relatively 

environment 

environment 

The  business  environment  and  general 
economic 
affecting 
Hungarian  competitiveness.  Business  entry 
in  Hungary  and 
rates  are 
bankruptcies have been high throughout 2022 and 
2023.  Regulation,  ad  hoc  taxes  and  an  uncertain 
entry, 
business 
competition  and  ultimately  innovation  in  several 
sectors  of  the  economy.  The  government’s  policy 
of  pushing  non-domestic  companies  out  of  the 
Hungarian market can have important implications 
for innovation and productivity and can negatively 
impact  on  cohesion  policy  support  for  SMEs.  In 
recent  years  there  have  been  interferences  in 
markets,  weakening  the  business  environment. 

limit  market 

foreign 

investment, 

These have the potential to discourage or limit EU 
in  effect  enabling 
and 
purchases  of  companies  by  (less  efficient)  state-
owned enterprises or private firms with ties to the 
government. 

firms 

industries 

Certain 
face 
and 
discriminatory  treatment  through  tailor-
made  taxes,  price  caps  and  regulations 
imposed  at  short  notice  and  without  prior 
consultation.  Examples  include  price  caps  and 
profit  taxes  on  the  production  of  cement  and 
ceramic materials,  together  with  increased tax  on 
insurance  and  pharmaceutical  companies.  For 
several  years  the  government  has  used 
its 
extraordinary power under the ‘state of danger’ to 
introduce such measures. The ‘state of emergency’ 
continues to be extended and will also continue in 
2024.  The  retail  sector  faces  specific  regulations 
that 
for 
authorising  the  establishment  of  or  changes  to 
shops  above  400m2  are  not  transparent.  The  tax 
on  the  retail  sector  disproportionately  burdens 
larger companies that are typically foreign owned. 
Legislation  forbids  European  operators  from 
adopting  a  franchised  structure  (common  among 
larger  Hungarian  retail  operators)  if  restructuring 
occurs for economic reasons (e.g. to lower the tax 
burden). 

development. 

Conditions 

hinder 

The government frequently uses its power to 
exempt  transactions  from  merger  control. 
The  impact  of  such  transactions  on  the  economy, 
competition and the single market is therefore not 
assessed. The criteria for these exemptions are not 
clear, and there is no formal procedure to contest 
them or the decision itself.  

State  or  state-friendly  domestic  ownership 
has  increased  in  banking,  telecommunications, 
utilities,  media,  TV  and  radio  broadcasting,  to  the 
detriment  of  foreign  ownership.  Government 
announcements  suggest  similar  transactions  can 
be  expected  in  insurance,  retail  and  the  transport 
sector.  The  decreased  presence  of  foreign  capital 
and  know-how  in  high value-added  industries  like 
banking  and  telecommunications  risks  curbing 
Hungary’s  opportunities  for  productivity  growth 
and innovation. 

In  some  sectors,  product  market  regulations 
create  barriers  to  competition  and  market 
entry.  State  ownership  is  prevalent  in  these 
sectors  and  is  on  the  increase.  Hungary  has  the 
highest number of regulated professions in the EU, 

61 

 
with  professions 
tourist  guides,  patent 
trademark  agents  and  transport  workers  having 
levels of restrictiveness above the EU average.   

like 

Hungary’s  REPowerEU  chapter  represents  an 
ambitious  package  of  measures  to  help 
address  significant  energy  challenges  that 
Hungary  is  currently  facing  in  order  to 
increase  its  energy  savings  and  renewable 
potential.  Large  parts  of  the  reforms  focus  on 
improving  the  electricity  system.  These  include 
setting  up  dynamic  pricing  in  the  retail  electricity 
market,  incentivising  the  uptake  of  electricity 
storage, and increasing the number of consumers 
that  use  smart  meters.  The  plan  includes  an 
ambitious  target  for  connecting  power  plants  to 
the grid based on renewable energy sources. Other 
reforms 
include  a  strategy  for  biogas  and 
biomethane with a biomethane action plan, and a 
national strategy on skills for the green transition.  

This 

offered 

opportunities 

by 
affects 

The  digitalisation  of  businesses  remains  a 
major challenge in Hungary. Most businesses, 
in  particular  SMEs,  are  not  yet  maximising 
digital 
the 
technologies. 
the 
competitiveness  of  the  economy.  The  2023 
indicates 
Digital  Economy  and  Society 
Index 
performances  below 
the  EU  average  and 
objectives 
several  dimensions.  Hungary 
performs  best  on  broadband  connectivity  and 
worst  on  the  integration  of  digital  technology  in 
firms’  activities.  According  to  the  index,  only  52% 
of  SMEs  have  at  least  a  basic  level  of  digital 
intensity, compared with 69% for the EU (115). Use 
of electronic information sharing and e-invoicing is 
far below the EU average. 

in 

Hungary 
is  an  open  economy,  highly 
integrated into the single market and heavily 
reliant on EU sources. In 2023, 27.3% of value 
added  was  sourced  from  the  rest  of  the  EU 
compared to an EU average of 19.7%. The Single 
that  Hungary 
Market  Scoreboard 
experienced  a 
in 
significant 
transposing  EU  law  from  2022  to  2023.  The 
transposition deficit was 0.2% at the end of 2023 
(EU average 0.7%), compared with 1.5% in 2022. 
However,  the  transposition  delay 
in  overdue 
directives  and  the  conformity  deficit  are  both 

improvement 

indicates 

significantly  above  the  EU  average.  There  are  41 
infringement  procedures,  significantly 
ongoing 
above  the  EU  average  of  26 (116).  The  Hungarian 
SOLVIT  center  handled  10%  of 
the  cases 
submitted  to  SOLVIT  network  in  2023.  Hungary 
solved  75%  of  SOLVIT  cases  (21)  it  handled  as 
lead  centre,  below  the  EU  average  of  88.3%.  The 
caseload of the Hungarian SOLVIT as home centre 
is  the  second  highest  among  Member  States  . 
Hungary  does  not  actively  participate  in  EU  tools 
such as the Single Market Enforcement Taskforce, 
which  is  designed  to  improve  the  functioning  of 
the single market.  

improve 

the  competition 

Hungary  is  implementing  several  measures 
in  public 
to 
contracts 
procurement.  The  proportion  of 
awarded  in  procedures  where  there  was  just  one 
bidder  decreased  from  33%  in  2022  to  32%  in 
2023 but is stillabove the EU average (27%) (117). 
The  commitments  Hungary  has  undertaken  under 
its  Recovery  and  Resilience  Plan  (RRP) aim  to 
improve  the transparency and  efficiency  of  public 
procurement  and 
lack  of 
competition  in  the  short,  medium  and  long  term. 
Hungary  has  reported  to have  set  up  a  single  bid 
reporting 
tool,  a  performance  measurement 
framework, developed a publicly available function 
allowing  the  structured  search  and  bulk  export  of 
contract award notice data, and adopted an action 
plan  on  public  procurement.  In  March  2022, 
guidance was published on best practices to avoid 
single bid public procurements.  

to  address 

the 

the 

The  gathering  of  data  by  the  newly  created 
reporting 
Integrity  Authority  and 
obligation  on  market  concentration  in  public 
procurement  can  help 
identify  the  root 
causes behind the lack of competition on the 
recently 
public  procurement  market.  The 
adopted Construction Law raises concerns in terms 
of  public  procurement  procedures  in  the  sector. 
The  scope  and  practical  implementation  of  its 
provisions  are  unclear,  and  the  application  of  the 
law could disconnect the project from local needs. 
This  may  cause  bottlenecks  in  the  procurement 
process, resulting in project implementation delays 
and  affecting  both  the  RRP  and  cohesion  policy. 
The  government  promotes  the  use  of  public 

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

(117) The Single Market and Competitiveness Scoreboard | Single 

Transformation. 

Market Scoreboard (europa.eu) 

(116) Single Market Scoreboard 2023. 

62 

 
 
 
procurement  as  a  strategic  tool  to  achieve 
sustainable  goals,  and  the  Hungarian  regulatory 
framework for public procurement provides a good 
foundation  for  this.  However,  the  uptake  of 
sustainable procurement by contracting authorities 
is moderate. Further operational support is needed 
to  help 
implement  green,  social  and 
innovative  public  procurement.  A  green  public 
procurement  strategy  was  adopted  in  December 
the  development  and 
2022, 
dissemination  of  methodologies  and  tools  that 
support contracting authorities with the uptake of 
strategic  public  procurement.  However,  it  has  not 
yet been adopted.  

focusing  on 

them 

stage 

implementing 

Implementing  the  Single  Digital  Gateway 
Regulation  will  improve  online  access  to 
information,  administrative  procedures  and 
assistance  within  the  EU.  Hungary  is  in  the 
intermediate 
the 
components needed to connect to the  Once-
Only’ Technical System (OOTS). The system will 
enable  the  automated  cross-border  exchange  of 
authorities, 
evidence 
improving 
information, 
access 
administrative  procedures  and  assistance  within 
the EU. The onboarding of Hungarian authorities is 
crucial for the system to function smoothly and to 
reduce  administrative  burden.  Hungary  lacks  a 
pre-notified or notified eIDAS eID scheme. 

competent 
to 

between 
online 

63 

 
 
Table A12.1:Industry and the Single Market 

Source: (1) AMECO, (2) Eurostat, (3) Single Market Scoreboard, (4) OECD, (5) ECFIN BCS, (6) COMEXT and Commission 
calculations, (7) EIB Investment Survey, (8) Intrum Payment Report, (9) SAFE survey, (10) EIF SME Access to Finance Index.  
* Own Commission calculations for the EU27 average 

64 

POLICY AREAINDICATOR NAME20192020202120222023EU27 average*Net Private investment, level of private capital stock, net of depreciation, % GDP18.66.77.58.56.43.8Net Public investment, level of public capital stock, net of depreciation, % GDP12.62.42.21.10.51.2Real labour productivity per person in industry (% yoy)22.3-3.94.20.5-5.1-1.24Cost competitivenessNominal unit labour cost in industry (% yoy)22.9-0.52.32.826.79.83Single Market integrationEU Trade integration, % (Average intra-EU imports + average intra EU exports)/GDP259.557.558.066.856.542.9Transposition deficit, % of all directives not transposed30.510.71.50.20.7Conformity deficit, % of all directives transposed incorrectly31.51.61.81.92.31.1SOLVIT, % resolution rate per country389.395.091.293.575.088.3Number of pending infringement proceedings3293632304125.9RestrictionsEEA Services Trade Restrictiveness Index40.050.050.050.050.050.05Single bids, % of total contractors3403940333228.6Direct Awards, %3665548.1Material Shortage (industry), firms facing constraints, %59.38.823.422.210.817.2Labour Shortage using survey data (industry), firms facing constraints, %558.524.438.539.028.623.3Vacancy rate, % of vacant posts to all available ones (vacant + occupied)22.451.82.32.72.32.5Concentration in selected raw materials, Import concentration index based on a basket of critical raw materials60.180.20.20.210.210.22Installed renewables electricity capacity, % of total electricity produced20.00.00.20.350Investment obstaclesImpact of regulation on long-term investment, % of firms reporting business regulation as major obstacle79.210.87.67.011.022.2Bankruptcies, Index (2015=100)2--43.981.2209.8105.6Business registrations, Index (2015=100)2--166.7165.2145.0120.2Payment gap - corporates B2B, difference in days between offered and actual payment8-1812111515Payment gap - public sector, difference in days between offered and actual payment8-199141416Share of SMEs experiencing late payments in past 6 months, %950.943.934.640.643.648.7EIF Access to finance index - Loan, Composite: SME external financing over last 6 months, index values between 0 and 1100.310.280.130.27-0.49EIF Access to finance index - Equity, Composite: VC/GDP, IPO/GDP, SMEs using equity, index values between 0 and 110 0.120.130.060.08-0.17ShortagesStrategic dependenciesEconomic StructureCompliancePublic procurement Business demographyLate paymentsAccess to financeHungaryHEADLINE INDICATORSSINGLE MARKETECONOMIC STRUCTUREBUSINESS ENVIRONMENT - SMEs 
 
 
   
 
particularly  in  terms  of  ex post  evaluation  of 
macroeconomic forecasts (Graph A13.2). 

Graph A13.1: Share of women and men in 
management positions 

ANNEX 13: PUBLIC ADMINISTRATION 

Hungary’s  public  administration  is  essential 
for  the  economy’s  competitiveness  by,  in 
particular,  shaping  the  conditions  for  the 
twin  transitions  and  creating  a  favourable 
business environment. Overall, the perception of 
government  effectiveness 
in  Hungary  has 
improved;  however,  it  remains  below  the  EU 
average (118).  Coordination 
is 
characterised  by  strong  centralisation  around  the 
Prime Minister, particularly in decision-making and 
policy implementation. The recovery and resilience 
plan  (RRP)  aims  to  improve  judicial  independence 
and  the  quality  of  legislation  through  stakeholder 
engagement  and  consultation.  However, 
the 
extensive  use  of  emergency  procedures  in  law-
making limits the potential of public consultations. 

in  government 

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  with  higher 
education  is  relatively  low  unlike  the  participation 
of  civil  servants  in  adult  learning  (Table  A13.1). 
Gender parity in senior civil service positions is the 
lowest  in the  EU (Graph  A13.1).  Civil  service  rules 
are rather fragmented, with an increasing number 
of  sectors  operating  under  their  own  separate 
frameworks. 
human 
Recruitment  rules  are  opaque,  and  there  were 
arbitrary 
the  public 
in  2023 
administration (119).  There  was  action  taken  in 
2023 aimed at reducing the political, financial and 
administrative autonomy of local government (120). 

regulatory 

resource 

layoffs 

in 

Source: European Institute for Gender Equality (2023 data) 

Graph A13.2: Scope index of independent fiscal 
institutions 

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  below 
the EU average. This is partly because the targets 
set  in  the  medium-term  budget  plans  can  be 
revised  quite  often,  and  the  reduced  role  of  the 
Parliament and of the fiscal council in the adoption 
and preparation of medium-term plans. Moreover, 
not all fiscal rules have real-time monitoring or set 
measures 
in  case  of  deviation.  Furthermore, 
Hungary’s  independent  fiscal  institution  has  a 
narrower  scope  of  activity  than  that  of  the  EU 
average,  with  room  for  further  development, 

Source: European Commission (2022 data) 

the  standard 

Fast-track  regulatory  governance  processes 
can  reduce  Parliament’s  consultation  with 
stakeholders. Emergency procedures that deviate 
from 
legislative  process  were 
initiated  during  the  COVID-19  pandemic.  They 
were  then  extended  at  the  beginning  of  Russia’s 
full-scale invasion of Ukraine and further extended 
in  2023 (121).  Emergency procedures  eliminate  the 
possibility  of  having  effective 
stakeholder 
consultation  before  legislation is  voted  on (122).  Ex 

(118) Worldwide Governance Indicators, 2022. 

(119) EUPACK report 2023. 

(120) EUPACK report 2023. 

(121) Government decree 515/2023 (XI. 22.). 

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

65 

0102030405060708090100HUEU-27HUEU-27HUEU-27Level 1administratorsLevel 2administratorsSenioradministratorsMenWomen4850525456586005101520253035MonitoringcomplianceMacro forecastBudget forecastSustainabilityassessmentFiscaltransparencyNormativeassessmentsTotalSubcomponentsTotal(rhs)HUEU-27 
 
 
  
 
  
 
 
Table A13.1:Public administration indicators 

(1) High values denote a good performance, except for indicator # 6. (2) 2023 value. If unavailable, the latest value available 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: E-government activities of individuals via websites, 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). 

ante  regulatory  impact  assessments  and  ex  post 
legislative  evaluations  are  also  limited  in  practice 
by the extensive use of the emergency procedures. 
The RRP includes measures to improve the quality 
of  law-making,  including  impact  assessments,  to 
support the effective involvement of stakeholders 
and  make  public  information  more  transparent. 
However, new legislation on the social consultation 
process  significantly  limits  civil  society’s  right  to 
policy consultation (123). 

There is room to improve the digitalisation of 
public services (Table A13.1 and Annex 10). The 
share  of  e-government  users  is  above  the  EU 
average  unlike  the  e-government  benchmark’s 
overall index, which measures the development of 
e-government services. 

the  estimated 

The justice system performs efficiently while 
there  are  concerns  about  the 
level  of 
remuneration  of  judges  and  court  staff (124). 
The estimated time needed to resolve litigious civil 
and commercial cases at first instance is low (134 
days in 2022). Hungary scores the third highest in 
the  EU  on 
time  to  resolve 
administrative  cases  at  first  instance.  The  quality 
of the justice system is good overall. The level  of 
digitalisation is very advanced. However, there are 
concerns  about  the  level  of  remuneration  for 
judges  and  court  staff.  Specific  arrangements  for 
access to justice to people at risk of discrimination, 
older  people  and  victims  of  domestic  violence 
could  also  be 
is 
monitoring  implementation  of  the  recent  reform 
seeking to strengthen judicial independence. 

improved.  The  Commission 

(123) Government decree 146/2023 on the establishment of 

administrative procedural rules regarding the operation of 
organisations during the state of emergency. 

(124) For more details, see the 2024 EU Justice Scoreboard and 
the Commission’s 2024 Rule of Law Report (forthcoming). 

66 

HU20192020202120222023EU-27(2)1n/an/an/a81.082.475.02n/a63.366.268.172.875.830.30.30.60.70.80.8438.841.245.4 (b)46.645.452.9511.010.68.3 (b)20.123.217.9664.263.462.657.462.29.272.42.22.1 (b)2.11.91.580.60.60.60.6n/a0.790.70.70.70.7n/a1.410n/an/a1.28n/an/a1.7Medium-term budgetary framework indexIndicator (1)E-government and open government dataShare of internet users within the last year that used a public authority website or appE-government benchmark overall score (3) Open data and portal maturity indexEducational attainment level, adult learning, gender parity and ageingShare of public administration employees with higher 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 governance 
 
 
 
      
 
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 the EU headline and national targets for 2030 
on employment, skills and poverty reduction. 

Table A14.1:Social Scoreboard for Hungary 

respectively)  than  for  the  general  population.  The 
disability employment gap was among the highest 
in the EU in 2022, at 32.4 percentage points (pps) 
and  remains  high,  at  29.6  pps  in  2023.  Women’s 
labour  market  situation  presents  a  mixed  picture. 
While  the  gender  employment  gap  decreased  to 
9.2 pps in 2023 (vs 10.2 pps in the EU), the gender 
pay gap was among the highest in the EU in 2022 
(at 17.3%).  The combination of the limited  labour 
market  integration  of  various  groups  and  labour 
shortages  (2.4%  vs.  2.7%  in  the  EU)  undermines 
Hungary’s  potential  to 
its  economic 
competitiveness.  Addressing  the  needs  of  these 
groups,  including  through  skills  development  and 
effective  active  labour  market  measures,  will  be 
key to reaching Hungary’s employment rate target 
of 85% by 2030. 

improve 

life 

and 

prospects 

inequalities 

Persistent 
in  education  and 
training  have  a  negative  effect  on  the 
employability  of  disadvantaged  groups.  The 
Hungarian education system is characterised by a 
low  share  of  children  under  3  years  of  age 
participating in formal  childcare (12.9% vs 35.7% 
in the EU in 2022), which later impacts educational 
for  many 
outcomes 
disadvantaged  children.  The  share 
increased 
significantly in 2023 (to 20.3%) but is expected to 
the  EU  average. 
remain  significantly  below 
Hungary also continues to have a high early school 
leaving  rate  (11.6%  vs  9.5%  in  the  EU  in  2023), 
despite a recent decrease. The rate is significantly 
higher among pupils in Northern Hungary and rural 
areas, as well as among those with disabilities, the 
socio-economically  disadvantaged  and  Roma  (see 
Annex 13). Early school leaving is often associated 
with  a  low  level  of  basic  skills,  which  affects 
around a quarter of 15-year-olds in Hungary (PISA 
2022).  Overall,  the  rate  of  young  people  (15-29) 
not  in  employment,  education  or  training  (NEETs) 
hovers around the EU average (10.9% vs 11.2% in 
the  EU  in  2023).  However,  around  one  in  five 
women between the ages of 15 and 29 and with a 
low level of education or living in a rural area, and 
40.4%  of  Roma  (in  2022),  are  NEET.  Hungary 
allocated  EUR  447  million  from  the  European 
Social  Fund  Plus 
the 
(ESF+) 
Reinforced Youth Guarantee, which should make a 
significant contribution to addressing the needs of 
the more vulnerable people. Furthermore, the ESF+ 
supports  measures  to  increase  the  attractiveness 
to  provide 
of 

teaching  profession  and 

implement 

the 

to 

(1) Update of 27 October 2023. Members States are 
categorised based on the Social Scoreboard according to a 
methodology agreed with the EMCO and SPC Committees. 
Please consult the Annex of the Joint Employment Report 
2024 for details on the methodology. 
Source: Eurostat 

labour  market 

performance 
Hungary’s 
continues  to  be  generally  favourable,  but 
some vulnerable groups still face significant 
barriers in an overall tight labour market.  In 
2023, the unemployment rate (aged 15-74) ticked 
up but remained well below the EU average (4.1% 
vs 6.1%). At the same time, the employment rate 
(aged  20-64)  continued  to  increase  to  80.7%  (vs 
75.3%  in  the  EU),  although  with  signs  of  slowing 
down,  as  the  main  labour  reserves  have  been 
gradually  depleting,  leading  to  significant  labour 
shortages.  Some  vulnerable  groups,  such  as  the 
low-skilled,  Roma  and  persons  with  disabilities, 
continue nonetheless to have limited access to the 
labour  market.  Their  unemployment  rates  were 
(11.6%,  20%  and  9.5% 
substantially  higher 

67 

62.211.658.910.99.24.080.74.11.4147.018.418.136.6532.48.112.91.4Critical situationTo watchWeak but improvingGood but to monitorOn averageDynamic labour markets and fair working conditionsEmployment rate(% of the population aged 20-64, 2023)Unemployment rate(% of the active population aged 15-74, 2023)Long term unemployment(% of the active population aged 15-74, 2023)Gross disposable household income (GDHI) per capita growth(index, 2008=100, 2022)Social protection and inclusionAt risk of poverty or social exclusion (AROPE) rate (% of the total population, 2022)At risk of poverty or social exclusion (AROPE) rate for children(% of the population aged 0-17, 2022)Impact of social transfers (other than pensions) on poverty reduction(% reduction of AROP, 2022)Disability employment gap (percentage points, population aged 20-64, 2022)Housing cost overburden (% of the total population, 2022)Children aged less than 3 years in formal childcare (% of the under 3-years-old population, 2022)Self-reported unmet need for medical care (% of the population aged 16+, 2022)Better than averageBest performersPolicy areaHeadline indicatorEqual opportunities and access to the labour marketAdult participation in learning (during the last 12 months, excl. guided on the job training, % of the population aged 25-64, 2022)Early leavers from education and training(% of  the population aged 18-24, 2023)Share of individuals who have basic or above basic overall digital skills(% of the population aged 16-74, 2023)Young people not in employment, education or training(% of the population aged 15-29, 2023)Gender employment gap(percentage points, population aged 20-64, 2023)Income quintile ratio (S80/S20, 2022) 
 
 
 
   
 
 
educational  support  in  schools  and  vocational 
education and training institutions with high drop-
out rates. 

The positive momentum in relation to digital 
skills  should  be  maintained  to  ensure  a  fair 
digital transition. The share of 16-74-year-olds 
with  at  least  basic  digital  skills  significantly 
increased  to  58.9%  in  2023  (vs  49%  in  2021), 
thereby  surpassing  the  EU  average  of  55.5%. 
However,  adults  with  a  low  level  of  education, 
those aged 55 and above, and unemployed people 
are  still  lagging  behind,  and  only  about  a  quarter 
of those who belong at least two of these groups 
have  at  least  basic  digital  skills.  Greater  efforts 
are  needed  to  close  the  digital  skills  gap, 
especially  among  these  vulnerable  groups.  These 
efforts 
include  upskilling  measures  aimed  at 
ensuring  equal  access  to  digital  public  services, 
and  better  opportunities  in  the  labour  market. 
Investments  using  ESF+  funding  to  support  more 
than  150 000  adults  without  or  with  few  digital 
skills,  including  vulnerable  groups,  to  acquire  at 
least  basic  overall  digital  skills  by  2029  are  a 
positive step in this regard.  

Despite  surpassing  the  2030  adult  learning 
target  in  2022,  the  training  programmes 
available  in  Hungary  often  do  not  reach  the 
people who need them most. Adult participation 
in learning in the previous 12 months increased to 
62.2% in 2022, thereby exceeding the EU average 
and  Hungary’s  national  skills  target  of  60%. 
However, people with a low level of education, the 
unemployed  and  those  outside  the  labour  force 
tend  to  participate  in  learning  significantly  less 
than 
(42.3%,  20.7%,  18.6%, 
respectively). (125)  An  overall  strategic  framework 
for adult learning with a stable source of funding 
learning 
(and  up-to-date 
opportunities),  and  upskilling  actions  targeting 
vulnerable groups, including in public employment 
services could help increase the labour supply and 
long-term 
productivity  by 
employability. 

improving  people’s 

information  about 

the  average 

High inflation recently disrupted the positive 
in  poverty,  and 
trend  of  a  reduction 
aggravated  the  situation  of  the  most 
vulnerable people. The share of people at risk of 

(125) Data used here exclude guided on-the-job training (see 
public excel file), except for the unemployed and those 
outside the labour force. 

68 

poverty  or  social  exclusion  (AROPE)  fell  in  2022 
(by 1 pps to 18.4%, vs 21.6% in the EU), as did its 
component  of  severe  material  and  social 
deprivation (SMSD), by 1.1 pps to 9.1% (vs 6.7% in 
the  EU).  However,  2023  data  point  to  a  renewed 
deterioration in the situation, with the AROPE rate 
standing  at  19.7%  and  the  SMSD  rate  at  10.4%. 
The  SMSD  rate  was  particularly  high  among 
children (12.0% vs 8.4% in the EU in 2022, rising 
sharply  to  15.1%  in  2023)  and  Roma  (51.0%  in 
2023).  Persons  with  disabilities  are  particularly 
affected, with a gap in the AROPE rate well above 
the EU average (15.4 pps vs 10.5 pps in 2022) and 
a rising trend in 2023.  

in 

There  are  significant  gaps  in  the  social 
protection system. While inflation fell by the end 
of  2023,  Hungary’s  recent  annual  averages  were 
the  highest  in  the  EU (14.5%  in  2022  and  17.6% 
in 2023). At the same time, the nominal amount of 
the  minimum  income  benefit  has  not  increased 
since  2010.  As  a  result,  its  real  value  has  halved 
since then, and its adequacy was one of the lowest 
in the EU in 2021 (18.9% of the poverty threshold 
the  EU).  Overall,  government 
vs  59% 
expenditure  on  social  protection  was  one  of  the 
lowest in the EU (13.1% of GDP in 2021 vs 20.4% 
in  the  EU).  The  impact  of  social  transfers  on 
poverty  reduction  was  slightly  above  the  EU 
average  (36.7%  vs  35%)  in  2022  and  fell  to 
34.5% in 2023. The housing cost overburden rate 
rose sharply from 2.4% in 2021 to 8.7% in 2023, 
increasing  the  high  cost  of  living  for  many  lower 
income  households.  On  access  to  services,  the 
public long-term care (LTC) system suffers from a 
high  rate  of unmet  needs,  with LTC  spending  and 
the  number  of  formal  LTC  workers  below  the  EU 
average.  Further  social  policy  efforts  are  needed 
for Hungary to meet its national target of reducing 
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.  The  available  quantitative  and 
qualitative  evidence  and  the  policy  response 
undertaken  and  planned  analysed  in  the  second-
stage  analysis  of 
the  Social  Convergence 
Framework of May 2024 (SWD(2024)132) point to 
challenges  mainly  related  to  vulnerable  groups’ 
education, skills and labour market participation as 
well as to the adequacy of social protection but do 
not  point  to  major  social  convergence  challenges 
for  Hungary  overall,  in  light  of  the  positive 
developments  recorded,  especially in  the  areas  of 
employment and skills. 

 
 
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, special extraction excl. guided on-the-job training 
(2) Change in the number of persons 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 EMPL 

69 

IndicatorsLatest dataTrend          (2016-2023)2030 targetEU target 80.7(2023)62.2(2022)-51(2023)Poverty reduction2, 3 (thousands)-292-15 000Employment (%)8578Adult learning1 (%)6060 
 
  
 
ANNEX 15: EDUCATION AND TRAINING 

This  Annex  outlines  the  main  challenges  of 
Hungary’s  education  and  training  system 
based on the 2023 Education and Training Monitor 
and  the  2022  OECD  Programme  for  International 
Student Assessment (PISA) results. 

Basic  skills,  as  measured  by  PISA  2022,  are 
around  the  EU  average,  but  students’  socio-
economic background is a strong predictor of 
their  performance.  Some  3  in  10  Hungarian 
students  in  mathematics,  and  1  in  4  students  in 
reading  and  science,  do  not  meet  the  basic 
proficiency  levels  in  these  areas,  above  the  EU 
target.  The  achievement  gap  by  socio-economic 
status  is  larger  than  in  other  EU  countries.  More 
than half of students (54.9% v EU average 48.0%) 
from  the  bottom  quarter  of  the  socio-economic 
distribution underachieve in mathematics, a share 
that  increased  by  6.7 percentage  points  between 
2018  and  2022  (Graph  A15.1).  From  all  EU 
countries,  disadvantaged  students  are  the  most 
often  separated  from  their  advantaged  peers  in 
Hungary;  and  low-achieving  students  are  the 
second  most  separated  from  their  high-achieving 
peers. The share of top-performing 15-year-olds is 
at  the  EU  average  in  mathematics,  and  close  to 
the EU average in science and reading. Low basic 
skills  among  vocational  education  and  training 
(VET)  pupils  hinders  their  later  employability,  and 
the  participation  of  those  with  a  low  level  of 
education  in  adult  learning  remains  fairly  limited 
(see Annex 14). 

Graph A15.1: Underachievement rates in 
mathematics by socio-economic background, PISA 
2022 

Source: OECD (2023). 

Hungary  faces  increasing  teacher  shortages. 
in  Hungary  are  more 
Teacher 
for 
pronounced 
foreign 
mathematics, 

disadvantaged 
science  subjects  and 

shortages 
in 

areas, 

languages,  and  in  VET (126).  In  a  recent  survey, 
teachers  cited  low  wages,  high  workload,  lack  of 
professional  autonomy,  the  composition  of  the 
curriculum  and  administrative  burden  as  the 
biggest  problems (127).  The  teaching  workforce  is 
ageing: in 2021, 29.5% of teachers were aged 55 
or  older  (EU  average  24.5%).  A  system  for 
forecasting  teacher  supply  and  demand,  which 
could support planning, is lacking.  

The  government  announced  a  major  salary 
reform  with  EU  co-financing.  In  2022,  teacher 
in  Hungary,  as  compared  with  the 
salaries 
earnings  of  other  tertiary-educated  workers,  were 
among  the  lowest  among  the  EU  countries  that 
are  OECD  members.  The  actual  salaries  of  lower 
secondary  teachers  were  equivalent  to  only  60% 
of the salaries  of other tertiary graduates (EU-22 
average:  89%) (128).  In  2023,  the  government 
announced a major salary increase co-financed by 
the European Social Fund Plus (ESF+), as part of a 
programme  to  enhance  the  attractiveness  of  the 
teaching  profession.  A  32.2%  average  increase 
was implemented under this in January 2024. The 
aim is to increase teachers’ salaries to 80% of the 
average wage level of other tertiary graduates by 
January  2025,  with  novice 
teacher  salaries 
increasing even more. Teachers working in schools 
with  a  high  share  of  disadvantaged  pupils  and 
applying inclusive methods should receive a salary 
top-up. 

Participation  in  early  childhood  education 
and  care  (ECEC)  surpasses  the  EU  average 
but  teacher  shortages  affect  quality.  From 
age  3,  93.4%  of  children  participate  in  ECEC  (EU 
target:  96%).  The 
average:  92.5%;  EU-level 
regional  coverage  of  kindergartens 
remains 
unbalanced:  in  2021,  31%  of  settlements  had  no 
kindergarten (129). 
the  government 
In  2020, 
in 
amended 
employment 
the 
kindergartens, 
required 
number  of  qualified teaching  staff.  Since  January 
2024,  VET  graduates  of  kindergarten  education 

conditions 

reducing 

thereby 

the 

(126) Varga, J. (ed) (2022): A közoktatás indikátorrendszere 2021 

(127) Társadalomtudományi Kutatóközpont Politikatudományi 
Intézete: Pedagóguskutatás 2023 - Gyorsjelentés 

(128) OECD Education at a Glance 2022, Table D3.2. 

(129) Varga, J. (ed) (2022). 

70 

0102030405060HUEUHUEUHUEUTotalAdvantagedstudentsDisadvantagedstudents%2030 EU target 
 
  
 
 
Table A15.1:EU-level targets and other contextual indicators under the European Education Area 
strategic framework 

Notes: b = break in time series; d = definition differs; e = estimated; p = provisional; u = low reliability; : = data not available. 
Source: 1,3,4,5,7,8,9,10,12=Eurostat; 11= Eurostat, Adult Education Survey; 2,6=OECD, PISA. 

are allowed to work as ECEC teachers, which was 
earlier only possible with a tertiary diploma (130).  

Early  school  leaving  decreased  in  2023.  The 
rate  of  early  leavers  from  education  and  training 
stood at 11.6%, against an improving EU average 
of  9.5%  and  the  EU-level  target  of less  than  9%. 
The  rate  is  higher  in  the  least-developed  districts 
and  among  Roma  (62.7%  vs  9.9%  among  non-
Roma) (131). Participation data shows that lowering 
the compulsory school age from 18 to 16 in 2012-
2013 had a significant negative impact on  school 
attendance (132).  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. 

(130) Government decree 401/2023. (VIII. 30.). 

(131) Magyar Nemzeti Társadalmi Felzárkózási Stratégia 2030. 

2022 data 

(132) Adamecz-Völgyi, A et al.: The Labor Market and Fertility 
Impacts of Decreasing the Compulsory Schooling Age 

The  number  of  tertiary  graduates  cannot 
meet the growing demand for a highly skilled 
workforce.  At  29.4%,  Hungary  has  one  of  the 
lowest rates of the population aged 25-34 holding 
a  tertiary  degree  in  the  EU.  This  rate  has  even 
decreased  since  2013,  when  it  was  31.2%  (EU 
average:  43.1%;  EU-level  target:  45.0%).  The 
employment  rate  of  recent  tertiary  graduates 
(94.5%)  exceeds 
(86.7%), 
indicating a high demand. 

the  EU  average 

Academic  freedom  has  declined  in  recent 
years. By 2024, all but five state universities were 
restructured  to  come  under  the  control  of  public 
interest  trusts  set  up  by  the  government.  The 
boards  of  the  public  interest  trusts  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.  The 
European  Commission  raised  concerns  about 
academic  freedom  with  regard  to  Hungary’s 
compliance  with  the  enabling  condition  under 
cohesion policy on the EU Charter of Fundamental 
Rights. 

71 

96%88.3%201391.8%201392.2%92.2%93.4%202192.5%2021,dReading< 15%19.7% 18.0%25.3% 22.5%25.9%202226.2%2022Mathematics< 15%28.1% 22.1%25.6%22.9%29.5%202229.5%2022Science< 15%18.0% 16.8%24.1%22.3%22.9%202224.2%2022< 9 %11.8%12.6%12.5%10.5%11.6%9.5%Men12.3%14.5%12.6%12.1%12.8%11.3%Women11.2%10.6%12.3%8.7%10.4%7.7%Cities7.0%b11.2%6.2%9.4%5.1%8.6%Rural areas16.7%b14.0%18.4%11.0%17.1%9.9%5By country of birthNative11.7%11.3%12.6%9.2%11.7%8.2%EU-born:u26.2%:u22.4%:u21.0%Non EU-born:u30.1%:u23.0%:u21.6%6Socio-economic gap (percentage points)42.0:41.329.547.3202237.220227Exposure of VET graduates to work-based learning≥ 60% (2025) ::: :25.9% 64.5%45%30.5%34.1%30.6%38.7%29.4%43.1%Men24.7%29.1%24.9%33.3%23.2%37.6%Women36.5%39.2%36.6%44.2%36.0%48.8%Cities46.2%b43.5%47.2%49.0%51.5%53.3%Rural areas17.0%b24.8%15.7%27.7%14.2%31.7%Native30.4%35.4%30.4%39.7%28.9%44.2%EU-born37.7%29.3%34.4%36.7%44.5%40.2%Non EU-born36.7%u24.2%39.7%u31.0%47.7%37.1%11Participation in adult learning (age 25-64)≥ 47% (2025) ::54.8%201637.4%201662.2%202239.5%202217.7%201322.7%201326.3%23.8%29.5%202124.5%2021Tertiary educational attainment (age 25-34)8Total8By gender9By degree of urbanisation10By country of birth12Share of school teachers (ISCED 1-3) who are 55 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 urbanisation201220182023IndicatorTargetHungaryEU-27HungaryEU-27HungaryEU-27 
 
 
  
 
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. 

circulatory 

In  2022,  life  expectancy  at  birth  increased 
compared  to  2021,  but  remained  among  the 
lowest 
in  the  EU.  Due  to  the  COVID-19 
pandemic,  in  2021  life  expectancy  at  birth  in 
Hungary  was  more  than  2 years  lower  than  in 
2019.  Then,  in  2022,  it  rebounded  almost  to  the 
pre-pandemic  level,  as  mortality  from  COVID-19 
declined (133). In 2021, the leading causes of death 
were  diseases  of 
system 
the 
(‘cardiovascular diseases’) followed by cancer and 
COVID-19.  Lung,  colorectal  and  breast  cancer 
account  for  almost  half  of  all  cancer  deaths  in 
2021.  Mortality  rates  due  to  preventable  and 
treatable  causes  are  nearly  double  the  EU 
averages.  At 
in 
economically active age groups, both as a share of 
total  mortality  and  relative  to  the  workforce  size, 
is  among  the  highest  in  the  EU.  The  suicide  rate 
among  men  in  Hungary  has  been  one  of  the 
highest in the EU. In 2020 it was almost 1.5 times 
the average across the EU. Long waiting lists have 
been  reported  as  the  most  frequent  barrier  to 
accessing mental health services (134). 

time,  mortality 

the  same 

differences  in  purchasing  power)  was  less  than 
half  the  average  across  the  EU.  Spending  per 
capita  is  below  the  respective  EU  averages  for 
outpatient care, inpatient care, disease prevention, 
pharmaceuticals  and  medical  devices.  When 
measured  as  a  share  of  GDP,  health  spending  in 
Hungary remained low at 7.4% in 2021, compared 
to  10.9%  on  average  across  the  EU.  Provisional 
data  suggest  that 
in  2022  total  healthcare 
spending fell back to 6.8% of GDP. Public spending 
on  health  as  a  proportion  of  total  health 
expenditure  (72.5%)  was  also  well  below  the  EU 
average  (81.1%)  in  2021.  Related  to  this,  the 
share  of  household  out-of-pocket  expenditure  for 
healthcare was significantly above the EU average. 
Based  on  the  age  profile  of  the  Hungarian 
population,  public  spending  on  health  is  projected 
to increase by 0.5 percentage points (pps)  of GDP 
by  2070,  compared  to  0.6 pps  for  the  EU  overall 
(see Graph 16.2 and Annex 21). 

Graph A16.2: Projected increase in public 
expenditure on healthcare over 2024-2070 

Graph A16.1: Life expectancy at birth, years 

Source: Eurostat 

Health  expenditure  remains  among  the 
lowest in the EU. Although total health spending 
has  been  increasing  steadily,  in  2021  per  capita 
for 
health  spending 

in  Hungary 

(adjusted 

(133) Based on data provided directly by Member States to the 

European Centre for Disease Prevention and Control, under 
the European Surveillance System. 

(134) https://europa.eu/eurobarometer/surveys/detail/3032 

Baseline scenario 
Source: European Commission / EPC (2024) 

In 2021, spending on prevention amounted to 
7.6%  of  total  spending  on  healthcare, 
compared to 6.0% for the EU overall. Between 
2019  and  2021,  spending  on  preventive  care  in 
Hungary more than doubled, in line with the trend 
across  the  EU.  Proportionally,  budget  shares  for 
prevention  across  the  EU  increased  most  for 
response,  disease  detection  and 
emergency 
immunisation programmes. 

The health system in Hungary suffers from a 
chronic  scarcity  of  medical  professionals. 
With 3.3 practising doctors per 1 000 population in 
2021,  Hungary  has  fewer  doctors  than  the  EU 
average  (4.1  per  1 000  population).  Under  the 
newly  adopted  Eurostat  definition  of  nurses 
(following  the  EU  Directive  2005/36/EC  on  the 
recognition  of  professional  qualifications)  the 
number of nurses per 1 000 population in Hungary 

72 

76.076.276.575.774.376.080.981.081.380.480.180.6201720182019202020212022HungaryEU6.64.30.60.502468EUHungary% of GDP20242070increase 
 
   
 
   
 
Table A16.1:Key health indicators 

Note: The EU average is weighted for all indicators except for doctors and nurses per 1 000 population, for which the EU simple 
average is used. Doctors’ density data refer to practising doctors in all countries except Greece, Portugal (licensed to practise) and 
Slovakia (professionally active). Nurses’ density data refer to practising nurses in all countries except Ireland, France, Portugal, 
Slovakia (professionally active) and Greece (hospital only). 
Source: Eurostat Database; except: * OECD, ** Joint Questionnaire on non-monetary healthcare statistics, *** ECDC, **** Council 
Recommendation on stepping up EU actions to combat antimicrobial resistance in a One Health approach. 

in 

to 

reforms 

range  of 

investments  and 

countries that allocate the largest relative share of 
funding  under  their  recovery  and  resilience  plan 
(RRP) 
the 
healthcare sector (12.5% of the RRP’s total value, 
corresponding to EUR 1.3 billion). Hungary plans to 
make  an  ambitious 
reforms  and 
investments  for  the  development  of  primary 
healthcare,  digitalisation  of  the  healthcare  sector, 
and  strengthening  of  inpatient  care  and  the 
infrastructure  for  it.  Complementary  investments 
are planned  under the EU cohesion policy  funding 
invest 
for  2021-2027.  Hungary 
EUR 154 million in its healthcare system under the 
European Regional Development Fund, with a view 
to 
improving  service  quality  through  modern 
infrastructure development (136). 

is  set 

to 

(3.7)  is  significantly  lower  than  the  EU  average 
(7.9). Workforce shortages are linked to emigration 
to other European countries for higher pay and, to 
some  extent,  the  private  sector (135).  In  2021,  the 
number  of  medical  graduates,  at  around  16  per 
100 000 population, was close to the EU average, 
while  the  respective  rate  for  nursing  graduates 
was  below  the  EU  average.  One  issue  is  whether 
new  medical  graduates  will  opt  to  work  in  the 
public  sector  or  choose  to  practise  in  the  private 
sector  or  abroad.  Hungary  has  had  fewer  staff 
working  in  human  health activities  since  the  start 
of  the  pandemic,  contrary  to  the  overall  trend  in 
the EU. Between the first quarter of 2020 and the 
second quarter of 2023, employment in healthcare 
in  Hungary  dropped  by  5%,  while  it  increased  in 
the  EU  by  9%  on  average.  More  than  40%  of 
doctors  are  aged  55  or  older,  raising  concerns 
long-term  accessibility  of  health 
about 
services.  The  government  has  been  trying  to 
address  challenges  in  health  workforce  retention 
through  significant  wage  increases  for  doctors, 
dentists  and  pharmacists,  implemented  in  stages 
over the last 3 years. However, higher salaries and 
better  working  conditions  abroad  continue  to  be 
incentives for emigration to other countries. 

the 

EU  funds  support  substantial investments  in 
healthcare  in  Hungary.  Historically,  investment 
in 
levels 
in  healthcare  have 
low 
Hungary,  a  fact  also  reflected 
availability  of  key  diagnostic  (medical  imaging) 
is  now  among  the  EU 
technology.  Hungary 

lagged  behind 

in  the 

(135) Gaal P et al. (2021). The 2020 reform of the employment 

status of Hungarian health workers: will it eliminate informal 
payments and separate the public and private sectors from 
each other? Health Policy 125(7): 833-40. 

(136) The EU cohesion policy data reflect the status as of 13 May 

2024. 

73 

20182019202020212022EU average (latest year) Treatable mortality per 100 000 population (mortality avoidable through optimal quality healthcare)176.0173.2179.6188.9NA93.3 (2021)Cancer mortality per 100 000 population335.7327.7320.9309.9NA235.4 (2021)Current expenditure on health, % GDP 6.66.37.37.46.810.9 (2021)Public share of health expenditure, % of current health expenditure69.668.770.872.5NA81.1 (2021)Spending on prevention, % of current health expenditure 3.13.23.77.6NA6.0 (2021)Available hospital beds per 100 000 population695691676679NA525 (2021)Doctors per 1 000 population3.43.53.13.3NA4.1 (2021)*Nurses per 1 000 population4.95.05.03.7NA7.9 (2021)Total consumption of antibacterials for systemic use, daily defined dose per       1 000 inhabitants per day ***14.814.411.211.914.419.4 (2022) 
 
 
 
 
 
  
 
ANNEX 17: ECONOMIC AND SOCIAL PERFORMANCE AT REGIONAL LEVEL 

of the other regions. Even though real productivity 
grew more strongly in the lagging regions than in 
the  more  developed  ones  between  2012  and 
2022,  the  growth  in  productivity  slowed  down 
compared  to the previous  decade.  Several  factors 
can explain these trends.  

limited 

Key assets, such as transport infrastructure, 
least  developed 
in  the 
remains 
counties. Outside the capital region, the share of 
population  living  in  a  radius  that  can  be  reached 
within  90  minutes  by  car  or  train (138)  is  between 
72-77% and 11-13% respectively in Győr-Moson-
Sopron,  Komárom-Esztergom  and  Fejér.  However, 
these percentages drop to as low as 37% and 3% 
in Békés county. 

Investments  in  R&D  are  concentrated  in 
Budapest  (2.8%  of  GDP,  above  the  EU 
average  of  2.3%)  while  in  the  rest  of  the 
country  it  ranges  from  only  0.6%  in  Pest  to 
1.4%  in  Dél-Alföld.  R&D  expenditure  in  the 
business  sector  significantly 
lags  behind  the 
national  average  (1.6%)  in  the  less  developed 
regions, except in Közép--Dunántúl  and Dél-Alföld 
(1.3%  and  1.4%,  respectively).  The  rate  of  SMEs 
introducing  product  or  process  innovation  in  the 
less  developed  regions  (especially  in  Dél-  and 
Észak-Alföld  and  Dél-Dunántúl)  was  well  below 
the performance of the capital.  

lowest  rates  of 
Hungary  has  one  of 
digitalisation  of  businesses,  with  significant 
differences between the capital and the less 
developed  regions.  The  share  of  adults  with  at 
least basic digital skills was above the EU average 
in 2023 (58.9% vs 55.5% in the EU). However, the 
low-skilled and the unemployed  who are found in 
higher concentration in the less developed regions, 
still lag behind in this respect.  

Annex 17 showcases the economic and social 
regional  dynamics  in  Hungary.  It  provides  an 
analysis  of  economic,  social  and 
territorial 
cohesion  in  the  Hungarian  regions  and  assesses 
investment  and  subnational  reform 
emerging 
social 
needs 
development and competitiveness in the country. 

foster  economic  growth, 

to 

of 
Overview 
performance at regional level 

economic 

and 

social 

sustained 

In  the  past  10  years,  economic  growth  has 
significant 
been 
disparities  at  regional  level.  The  process  of 
internal convergence remains slow (Figure 1). 

but  with 

Graph A17.1: GDP per capita (2012) and GDP per 
capita growth (2013-2022) 

Source: DG REGIO calculations based on JRC (ARDECO) and 
Eurostat data 

GDP  per  capita  remains  slightly  above  50% 
as  compared  to  EU  average in  the  4  lagging 
NUTS  2  regions  (Dél-Alföld,  Dél-Dunántúl, 
Észak-Alföld,  Észak-Magyarország).  In  2022, 
GDP  per  capita  in  the  capital  region  of  Budapest 
stood at 158% of the EU average while it was only 
50%  in  Észak-Alföld.  Real  total  GDP  has  been 
driven  by  growth  in  some  of  the  more  developed 
regions  while  out  of  the  lagging  regions  only 
Észak-Magyarország  and  Dél-Alföld  performed 
around  the  national  average  between  2012  and 
2022. Disparities in GDP per capita were reflected 
in  labour  productivity  gaps  between  regions (137). 
Productivity was higher than the national average 
(69,4% of the EU average, 2022) in Budapest, Pest 
(74.2%  and  77.6%  of  the  EU  average)  while  it 
stood  slightly  above  63%  of  EU  average  in  most 

(137) Eurostat. 

(138) The share of population who can reach in 90 minutes any 
destination within a 120 km radius from their residence 

74 

 
 
 
 
 
Table A17.1:Selected indicators at regional level in Hungary 

Source: Eurostat, EDGAR database 

The  share  of  employment  in  the  science  and 
technology sectors is close to the EU average 
(23.4%  of  total  employment)  at  national 
level  (23.2%),  but  significantly  lower  in  the 
less  developed  regions,  except  for  Pest. 
Employment  in  high-technology  sectors  and  in 
knowledge-intensive  services  is  below  the  EU 
average in the 4 less developed regions. 

The 
less  developed  regions  experienced 
significant  depopulation.  Between  2013  and 
2021 (139),  the  population  shrunk  by  8.5%,  in 
Észak-Magyarország  and  by  7%  in  Dél-Dunántúl 
and Dél-Alföld. At the same time, the population in 
Pest  increased  by  more  than  9%  and  by  7.4%  in 
internal  migration 
Győr-Moson-Sopron  due  to 
flows  towards  the  relatively  more  developed 
counties.  

Regional  disparities  remained  significant  in 
2023  in  terms  of  the  level  of  educational 
outcomes. Pupils’ performance in basic skills was 
lower  in  the  least  developed  regions  than  the 
national  average  in  all  grades  tested.  In  addition, 
the  rate  of  early  school  leavers  in  these  regions 
was also higher. Észak-Magyarország (18.5 %) and 
in Észak-Alföld (16.4 %)  faced one of the highest 
early school leaving rates in the EU, in contrast to 
5.8 % in Budapest and 5% in Nyugat-Dunántúl.  

The share of the population aged 25-64 with 
an  education  attainment  below  secondary 
level was also significantly higher in some of 
the 
(Észak-
Magyarország:  20.6%,  Észak-Alföld:  19.2%,  Dél-

developed 

regions 

less 

(139) Central Statistical Office. 

75 

Dunántúl: 17.5%) than the national average (13%) 
and 21.6% in rural areas. In addition, the share of 
low-educated  young  people  among  younger 
cohorts  appears  to  be  increasing  in  all  the  four 
regions.  Tertiary  educational 
least  developed 
attainment  level  (age  class  from  25  to  34  years) 
was  below  the  national  (29.4%)  and  EU  average 
(43.1%),  in  all  less  developed  regions  (between 
16.3% and 30.1%).  

As  a  result  of  these  demographic  developments 
and  the  lagging  levels  of  education  attainment, 
Hungary’s  four  least  developed  regions  and  rural 
areas are in a talent development trap.  

There  are  significant  differences  between 
the regions in terms of young people who are 
neither  in  employment  nor  in  education  and 
training  (NEET).  While  the  national  average 
(10.8%)  is  below  the  EU  average  (11.7%),  in  the 
least  developed  regions,  except  for  Dél-Alföld,  it 
remained between 13.5% and 17.7%. Rural  areas 
also  suffer  significantly  more  than  towns  (15.9% 
vs. 10.5% and 5.4%) and the difference was even 
more striking for women.  

Labour  market  conditions  are  generally 
better or corresponding to the EU average in 
all regions, but certain groups lag behind. The 
employment rate hit another record (80.7%), but a 
gap of 9 pps remains between the best performing 
(84.4%)  and  Észak-
region  of  Budapest 
Magyarország  (75.8%).  However,  the  4 
least 
developed  regions  consistently  underperform  in 
terms  of  employment  and  unemployment  rate  of 
and 
The 
low-skilled 
unemployment  rate  in  Roma  was  47.3%  and 
17.6% respectively, with nearly 80% of the Roma 
population  concentrated  in  the  4  least  developed 

employment 

people. 

GDP per head (PPS)Productivity (GVA (PPS) per person employed)Real productivity growthGDP growthPopulation growthAt-risk-of-poverty or social exclusionEarly school leaversR&D expenditureHouseholds with broadband connectionEU Regional Competitiveness Index 2.0 - 2022 editionIndex, EU27 = 100 (2022)Index, EU27 = 100 (2022)Average % change on the preceding year (2013-2022)Average % change on the preceding year (2013-2022)Average annual change per 1000 residents (2013-2021)% of population (2022)% of population aged 18-24 (2023)% of GDP (2021)% of all households (2021)Index, EU27 = 100European Union (27 MS)1001000.71.61.921.69.52.390100Magyarország7669.41.43.32-2.518.411.61.69183.5Budapest15874.21.13.38-1.913.85.82.896105.5Pest6577.62.14.879.316.110.90.694105.5Közép-Dunántúl7165.91.53.8-1.911.310.61.39282.3Nyugat-Dunántúl6868.41.62.461.514.351.19283.9Dél-Dunántúl5263.41.22.35-7.624.614.10.98969.9Észak-Magyarország5063.51.73.07-8.52518.50.68666Észak-Alföld5063.21.12.73-5.22416.418867.9Dél-Alföld5564.41.73.02-6.719.511.21.48773.3NUTS region name 
 
 
  
 
regions. 55% of all unemployed or inactive people 
with  disabilities  also  lived  in  these  regions.  There 
was  a  spatial  mismatch  in  labour  supply  and 
shortage,  with  vacancy  rates  highest  in  the  more 
developed regions (Közép- and Nyugat-Dunántúl). 

The  decrease  of  poverty  has  slowed  down 
since 2018 and reversed in 2023. The share of 
the  population  being  at-risk-of-poverty  and  social 
exclusion was significantly higher in three lagging 
regions, reaching a high of 31.7% in north Hungary 
as  compared  to  better  performing  regions  (e.g. 
10.9% in Közép-Dunántúl). Poverty was also more 
pronounced  in  rural  areas  with  around  25.6%  of 
the  population  being  at-risk-of-poverty  in  2023 
(+12  pp.  from  2022)  and  especially  in  districts 
(“járás”) with an above-average share of Roma.  

Energy  poverty (140)  is  particularly  prevalent 
in  the  four  least  developed  regions.  This  is 
where  a  significant  part  of  the  population  lives in 
flats in bad condition using unsustainable biomass 
(solid  fuel)  and  individual  heating  solutions  (42% 
Észak-Alföld,  46%  Dél-Dunántúl,  reaching  as  high 
as  65%  of  the  households  in  villages),  which 
contributes  to  air  pollution.  Hungary  records 
persistent  exceedances  in  PM10  levels  in  three 
geographic areas and is harmful for health. These 
conditions  are  more  prevalent  in  the  lowest 
income quintile. 

There  is  considerable  regional  variation  in 
the  carbon  intensity  of  the  economy  in 
Hungary’s  regions,  as  well  as 
in  the 
composition  of 
their  greenhouse  gas 
emissions, being the highest in northern Hungary. 
Buildings added more significantly to regional GHG 
emissions in  the  northern Great  Plain  region,  Pest 
and  Budapest,  while  GHG  emissions  from  energy 
have  been  particularly  pronounced  in  northern 
Hungary. Industry emissions dominated in northern 
Hungary, Budapest, and Central Transdanubia. 

(140) Central Statistical Office. 

76 

Map A17.1:  Regional Competitiveness Index, 2022, 
Hungary 

Source: DG REGIO, JRC 

These factors are reflected in the composite 
indicator  of  the  Regional  Competitiveness 
Index, which stands at 83% of the EU average in 
Hungary, and around 70% in the 4 lagging regions.  

Investment  and  subnational  reform  needs 
ahead 

Hungary  would  benefit  from 
increasing 
investments to combat poverty, especially in 
the most deprived districts of the country. It 
could  better  support 
the  green  and  digital 
transition  at  local  level  with  better  targeted 
facilitating 
integrated 
investments 
technologies 
manufacturing.  Hungary  could  benefit  from  the 
opportunities under the Strategic Technologies for 
Europe  Platform initiative to boost  investments in 
the  critical  technologies  to  support  the  industry 
transformation of industry. 

territorial 
in 

net-zero 

policies, 

Social  inclusion  policies  could  be  reinforced 
in view of the negative trends of poverty and 
its  territorial  concentration.  Hungary’s  main 
response  was 
the  Catching-up  municipalities 
initiative,  which  targets  the  300  most  deprived 
municipalities,  with  EU  cohesion  policy  funding 
from  Cohesion  policy  and  the  Recovery  and 
Resilience  Plan.  Measuring 
results  and 
reviewing  the  initiative,  when  necessary,  could 
ensure its long-term impact. In addition, local level 
interventions 
by 
be 
strengthening  the  inclusiveness  of  mainstream 
education, employment and First policies, by better 
addressing territorial inequalities and diversities.  

complemented 

could 

the 

 
 
 
 
 
 
Underinvestment  in  making  houses  more 
energy  efficient  contributes  to  poverty  and 
environmental  concerns,  which  particularly 
affect those living in bad housing conditions 
that  are  concentrated  in  lagging  and  non-
urban  districts.  Therefore,  providing  non-
repayable  support  to 
low-income  households 
facing  energy  poverty –  focusing  on  the  least 
developed  districts  -  for  investments  in  energy 
efficiency  that  deliver  tangible  benefits  in  the 
long-term  (e.g.  by  deep  renovating  buildings), 
combined  with  investments  in  renewable  energy, 
would contribute to lowering energy costs further, 
reducing emissions and improving air quality.  

- 

in 

technologies 

There is a need to step up investment in the 
including 
digitalisation  of  businesses  – 
advanced 
less 
the 
developed regions, ensuring that the support 
reaches the enterprises in lagging areas. The 
allocation  of  funding  dedicated  to  improving  the 
digital  skills of people  with low digital  skills could 
better  take into  account  the  territorial  distribution 
least 
of  the  target  group,  focusing  on  the 
developed  districts.  The  take-up  of  smart  city 
solutions  by  municipalities  has  been  slow  in  the 
current programmes. Therefore, launching specific 
measures appears to be necessary. 

of 

lagging 

the 
regions, 

performance 
and 

The  weaker  research,  development  and 
innovation 
less 
the 
developed 
differences in the endowments and economic 
for  a  more 
call 
profile  of 
smart 
approach 
differentiated 
specialisation  (S3)  and  for  a  strengthened 
governance 
innovation 
ecosystems. 

regional 

regions 

of 

in 

Fairness  and  inclusion  in  education  also  has 
a  strong  regional  dimension,  therefore  a 
mapping  of  the  school  network,  a  review  of 
educational funding and governance, and targeted 
comprehensive  measures  to  strengthen  access  to 
quality mainstream education and lifelong learning 
in  the  most  affected  settlements  could  help 
the  most 
retain 
nurture  and 
disadvantaged regions. 

talent 

in 

Labour  market  challenges  mainly  concern  a 
few  well-defined  vulnerable  groups,  such  as 
low-skilled people, NEETs, Roma, people with 
disabilities,  women,  especially  young  people 
responsibilities, 
and 

those  with 

care 

concentrating  mostly  in  the  least  developed 
regions.  Mapping  these  groups,  assessing  their 
needs  and  addressing  them  with  more  targeted 
action could contribute to easing labour shortages. 

The low level of administrative capacities of 
municipalities in the least developed districts 
tends  to  limit  their  access  to  EU  cohesion 
policy funding. At the same time, the integrated 
territorial  development  programmes  of  counties 
failed  to  sufficiently  address  the  complexity  of 
development 
least 
challenges  which 
developed  districts  face.  The  multiple  challenges 
affecting  the  least  developed  districts  could  be 
better  addressed  through  integrated  territorial 
strategies  that  consider  the  use  of  functional 
areas to deliver basic public services. 

their 

In  addition,  local  development  projects  did 
not effectively capitalise on the resources of 
local  stakeholders,  except  for  the  pilot 
community-led  local  development  projects 
with  a 
limited  thematic  scope. Therefore, 
Hungary  would  benefit  from  re-introducing  the 
instrument of community-led local development in 
order to involve local stakeholders in the co-design 
and  delivery  of  local  investments,  making  use  of 
local resources and solutions. 

in 

for 

least 

financing  of 

The 
local  municipalities' 
mandatory  tasks  is  characterised  by  a  lack 
of  funding  for  operational  tasks (141),  a 
funding 
below-average 
capital 
expenditure 
developed 
the 
municipalities  and  a  restricted  access  to 
market  funding,  which  may  affect  the 
durability  of 
investments  and  services 
financed  by  EU  funds.  An  increasing  share  of 
public  services  and  decisions  concerning  local 
communities  have  been  transferred  to  central 
government and as a result, the overall autonomy, 
including  fiscal  autonomy,  of  local  authorities  in 
Hungary  is  also  among  the  lowest  in  the  EU (142). 
The  recently  adopted  Construction  Law  reinforces 
this  trend  as  it  disconnects  municipality  projects 
from  the  local  needs.  A  higher  level  of  local 

(141) https://szentendre.hu/az-onkormanyzati-finanszirozasi-

rendszer-kiskorunak-tekinti-az-embereket/ and 
https://hang.hu/belfold/elodazhatatlan-az-onkormanyzati-
finanszirozasi-rendszer-megujitasa-152998  

(142)https://ec.europa.eu/regional_policy/sources/policy/analysis/K

N-07-22-144-EN-N.pdf  

77 

 
 
there  are 

autonomy  could  have  a  positive 
impact  on 
people's  satisfaction  with  services  as  well  as  on 
their political  trust,  including  by  better  addressing 
local  needs  through  the  use  of  EU  funds.  This 
would  mean  that  finances  are  adjusted  to  cover 
the real costs of mandatory municipality tasks and 
that 
transparent  and  normative 
conditions applicable for all local municipalities as 
for  the  access  to  loans  and  other  financial 
instruments. In addition, to better implement their 
integrated strategies, local municipalities could be 
supported  to  strengthen  their  human  capital  and 
expertise,  possibly  as  shared  capacity  and  by 
making use of technical assistance resources. 

78 

 
 
 
MACROECONOMIC STABILITY 
ANNEX 18: KEY FINANCIAL SECTOR DEVELOPMENTS 

Hungary  has  a  predominantly  bank-based 
financial  sector.  Total  banking-sector  assets 
were equivalent to 99.9% of GDP in Q3-2023. The 
domestic  ownership  of  local  lenders  accounts  for 
62.9%  of  total  banking-sector  assets,  while  the 
five largest banks in the system hold around 56% 
of total banking-sector assets.  

and 

resilient. 

The Hungarian banking sector remains highly 
profitable 
Banking-sector 
profitability  reached  historically  high  levels  with 
return  on  equity  of  24.8%  in  Q3-2023  (EU 
average: 9.9%), mainly driven by an increase in net 
interest  income.  Other  factors  that  have  had  a 
more negative impact on bank profitability include 
the extra profit tax, an increase in operating costs, 
and  the  interest-rate  cap (143).  The  cost-to-income 
ratio decreased to 51.8% in Q3-2023 (EU average: 
52.8%) from 55.6% in 2022. The banking capital-
adequacy  ratio  remained  stable  at  19.4%  in  Q3-
2023 
the 
(EU  average:  19.6%),  signalling 
robustness of the banking sector. Hungarian banks 
remain well capitalised, with a common equity tier 
1 ratio of 16.8% in Q3-2023 (EU average: 16.1%). 
The 
liquidity  reserve  of  the  banking  system 
remains  high.  To  further  strengthen  the  resilience 
of credit institutions, Hungary’s central bank (MNB) 
decided  to  increase  the  countercyclical  capital 
buffer rate to 0.5% from 1 July 2024 after having 
postponed  in  June  2023  the  activation  of  the 
countercyclical capital buffer by one year (initially 
planned  from  1  July  2023). (144)  The  MNB  also 
announced  the  reactivation  of  the  systemic  risk 
buffer  from  1 July 2024  due  to  risks  in  the 
commercial real-estate market. 

The  non-performing  loan  (NPL)  ratio  has 
remained  rather  stable  but  risks  to  the 
quality of portfolios remain. The NPL ratio was 
2.7%  in  Q3-2023  (EU  average:  1.8%),  the  lowest 
level  since  2017.  Similarly,  the  coverage  ratio  of 
in  Q3-2023, 
NPLs  remained  high  at  54.2% 
showing banks’ ability to absorb any future losses 
(EU  average:  43.7%).  Compared  to  Q3-2022,  the 
corporate  NPL  ratio  remained  unchanged  in  Q3-
2023,  while  the  household  NPL  ratio  declined. 

According to the MNB, government measures (e.g. 
family  housing  subsidies,  mortgage  interest  rate 
caps)  may  have  helped  to  keep  NPL  ratios  low  in 
the  household  sector.  In  the  corporate  sector, 
strong  liquidity  and  caps  on  the  interest  paid  by 
SMEs  may  have  played  an  important  role  in 
keeping  corporate  NPL  ratios 
low.  However, 
increasing  risks  in  the  commercial  real-estate 
segment and the phasing out of interest-rate caps 
pose risks to the NPL ratio (145). 

to 

Lending 

Lending activity slowed in the second half of 
2023. 
non-financial 
growth 
corporations declined to around 6.2% in December 
2023,  which  indicates  a  slowdown  compared  to 
15.1%  in  December  2022.  Growth  in  lending  to 
households 
(comprising  consumer  credit  and 
mortgages)  also  declined  to  2.7%  in  December 
2023  compared  to  8%  in  December  2022  (more 
specifically,  lending  growth  for  house  purchases 
fell  to  1.3%  in  December  2023).  This  is  a 
significant  decrease  from  the  previous  year  and 
was mainly due to a decline in demand for credit 
and the uncertain economic outlook. 

In  December  2021,  the  European  Systemic 
Risk  Board  (ESRB) (146)  issued  a  warning  to 
Hungary  on  medium-term  vulnerabilities  in 
the residential real-estate market as being a 
potential  risk  to  the  country’s  financial 
stability.  The  ESRB  considered 
the  main 
vulnerabilities  to  be:  (i)  signs  of  house-price 
overvaluation;  (ii)  strong  house-price  growth;  (iii) 
high  rates  of  growth  in  mortgage  credit;  and  (iv) 
rapid  growth 
In 
February  2024,  the  ESRB  assessed  the  current 
national  macroprudential  policy  measures  as 
these 
appropriate  and  sufficient 
risks (147). 

in  household 

indebtedness. 

to  address 

(145) Magyar Nemzeti Bank, November 2023, Financial Stability 

Report, MNB.hu 

(143) Magyar Nemzeti Bank, November 2023, Financial Stability 

(146) European Systemic Risk Board, February 2022, 

Report, MNB.hu 

ESRB.europa.eu 

(144) Magyar Nemzeti Bank, December 2023, MNB does not 
change Countercyclical Capital Buffer rate, MNB.hu 

(147) European Systemic Risk Board, February 2024, 

ESRB.europa.eu 

. 

79 

 
 
 
 
 
 
 
 
 
Table A18.1:Financial Soundness Indicators 

(1) Last data: Q3 2023.  
(2) Data is annualized.  
(3) Data available for EA countries only, EU average refers to EA area. 
Source: ECB, Eurostat. 

The housing market in Hungary has been on a 
downward  trend  since  mid-2022,  with  a 
decline  in  housing  prices  and  a  drop  in  the 
number of sales transactions. According to the 
MNB, house prices fell by 0.8% in Q2-2023 (year- 
on-year),  marking  the  first  time  that  a  year-on-
year  decline  in  prices  was  seen  since  2014.  The 
number of housing-market sales transactions also 
fell, dropping by 11% in Q3-2023 in year-on-year 
terms,  consistent  with  the  drop  in  mortgage 
lending.  Asking  prices  are  adjusting  to 
low 
demand (148). 

Household indebtedness has continued to rise 
but is expected to fall in the coming months 
and  remains  relatively  low  compared  with 
the EU average. According to Eurostat, household 
debt  decreased  from  20.8%  of  GDP  in  2020  to 
18.6%  of  GDP  in  2022 (149).  Rising  interest  rates 
and  economic  uncertainty  have  dampened 
demand  for  mortgages,  and  ended  the  recent 
pattern  of  sharp  growth  in  property  prices,  thus 
mitigating 
rising 
terms  of  borrower-based 
indebtedness. 
measures  to  reduce 
indebtedness,  the  MNB 
announced:  (i)  an  increase  in  the  threshold  value 
of 
for 
1 July 2023;  and 
introduction  of  a 
preferential loan-to-value limit for first-time home 

debt-service-to-income 
the 

risks  associated  with 

limits 

the 

(ii) 

as 

In 

(148) Magyar Nemzeti Bank, November 2023, Housing Market 

Report, MNB.hu 

(149) Eurostat 

80 

buyers as of 1 January 2024 (150). Furthermore, the 
share  of  variable-interest-rate  loans,  which  are 
exposed  to  interest  rate  risk,  has  significantly 
decreased since 2022. 

Hungary’s  insurance  sector  is  rather  small 
and  highly  concentrated.  The  top  five  market 
participants  account  for  around  60%  of  all 
premium  revenue.  The  total  assets  of  all  insurers 
were equivalent to 4.5% of GDP in 2022, which is 
relatively  low  (EU  average:  56.1%).  In  2022,  the 
insurers’  solvency  ratio  was  173.3%,  above  the 
regulatory  minimum,  but  below  the  EU  average 
(258.9%).  In  Q3-2023,  there  were  33  insurance 
companies  operating  in  the  Hungarian  market, 
while the breakdown of insurance activities was as 
follows: 30% life insurance, 6% non-life insurance, 
and 60% composite. 

Capital  markets  play  a  less  significant  role 
than  banks 
in  financing  the  economy. 
Hungary’s  stock-market  capitalisation  remained 
rather low at 12.9% of GDP in 2022 (EU average: 
65.6%).  The  MNB  continues  to  support  the 
development of the green bond and credit markets 
through  its  green  corporate,  municipal  and  retail 
preferential-capital-requirements 
programmes. 
The  MNB  has  also  set  up  an  innovation  hub  in 
order  to  provide  quick  responses  to  regulatory 
questions  related  to  Fintech  innovative  solutions 
(e.g.  payment  services,  crowdfunding),  and  a 

(150) Magyar Nemzeti Bank, Borrower-Based Measuers, MNB.hu 

2017201820192020202120222023EUMedianTotal assets of the banking sector (% of GDP)95,492,690,9107,4109,7108,499,9257,0184,6Share (total assets) of the five largest banks (%)49,650,052,750,151,655,7--69,6Share (total assets) of domestic credit institutions (%)153,752,857,157,858,660,062,9-62,9NFC credit growth (year-on-year % change)10,213,614,18,910,715,26,2-2,4HH credit growth (year-on-year % change)2,67,316,614,315,18,02,7-1,4Financial soundness indicators:1        - non-performing loans (% of total loans)8,45,44,23,63,23,12,71,81,8- capital adequacy ratio (%)16,218,518,018,319,718,919,419,620,1- return on equity (%)214,514,714,37,612,712,124,89,913,2Cost-to-income ratio (%)164,463,964,761,058,455,651,852,844,9Loan-to-deposit ratio (%)171,872,776,074,475,570,370,093,380,2Central bank liquidity as % of liabilities4,02,93,79,610,48,87,0-0,7Private sector debt (% of GDP)69,968,767,477,080,978,8-133,0118,4Long-term interest rate spread versus Bund (basis points)264,5266,2271,8273,6343,5642,6507,9107,7104,2Market funding ratio (%)35,233,132,535,740,139,8-50,839,8Green bonds outstanding to all bonds (%)3-------4,02,71-34-1011-1718-2424-27Colours indicate performance ranking among 27 EU Member States. 
 
 
 
  
 
regulatory sandbox where Fintech innovations can 
be tested. 

81 

 
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  as  a  percentage  of 
its GDP are lower than the EU aggregate for 
all  tax  types  except  consumption  taxes. 
Table A19.1  shows  that  Hungary’s  annual  tax 
revenues  as  a  percentage  of  GDP  increased  from 
33.9%  in  2021  to  35.1%  in  2022  but  remained 
below the EU aggregate of 40.2%. Labour taxation 
(14.6% of GDP in 2022) is the most important tax 
base,  although  its  relative  importance  has  been 
decreasing  in  recent  years.  The  tax  system  also 
relies  heavily  on  consumption  taxes  (13.9%  of 
GDP  in  2022,  above  the  EU  average  of  11.0%). 
Capital  taxation  in  relation  to  GDP  was  6.6%  in 
2022 (against an EU average of 8.9%). Hungary’s 
9%  corporate  tax  rate  is  the  lowest  in  the  EU. 
Revenues  from  property  taxes  were  relatively  low 
as  a  percentage  of  both  GDP  and  total  tax 
revenues.  Pollution  and  resources  taxes  account 
for 10.2% of environmental taxes, which is one of 
the highest shares in the EU. However, there could 
be  potential  to  strengthen  the  application  of  the 
‘polluter pays’ principle. Hungary has implemented 

three  of  the  six  main  types  of  pollution  and 
resources  taxes  (i.e. taxes  on  waste  landfilling, 
discharge  of  waste 
into  water,  and  plastic 
products).  There  remains  scope  to  expand  waste 
disposal 
incineration)  and 
implement the three other types (i.e. taxes on NOx 
emissions, fertilisers and pesticides). 

(including 

taxes 

introduce 

incentives, 

Plan 
RRP 

Resilience 
Hungary’s 

Hungary has made a commitment to simplify 
the  tax  system  within  the  framework  of  its 
(RRP) 
Recovery 
and 
implementation. 
includes 
tax  simplification 
to 
commitments 
reduce 
measures 
tax-related 
to 
in  order 
improve  voluntary 
administrative  costs  and 
compliance 
a 
contribution  to  a  more  competitive  and  fairer 
economy  and  a  better  business  environment.  One 
of  the  deliverables  of  the  RRP  is  the  phasing-out 
of  six  temporary  sectoral  tax  measures,  including 
the  surtax  on  the  retail  sector.  However,  Hungary 
has  so  far  kept  these  tax  measures  in  place  for 
2024  with  a  decree  published  on  31  May  2023. 
The  RRP  also  contains  dedicated  measures  to 
tackle aggressive tax planning. 

thereby  making 

Hungary’s  labour  tax  burden  is  significantly 
higher  than  the  EU  average  for  low  wage-
earners. Graph A19.1 shows that Hungary’s total 
labour  tax  wedge  (at  41.2%)  was  much  higher  in 
2023  than  the  EU  average  (31.7%)  for  single 
people  earning  50%  of  the  average  wage  but 

Table A19.1:Taxation indicators (to be updated once new data are available) 

(1) Forward-looking effective tax rate (OECD). 
(2) A higher value indicates a stronger redistributive impact of taxation. 
(*) EU-27 simple average. 
(**) Forecast value for 2022, if available. For more details on the VAT gap, see European Commission, Directorate-General for 
Taxation and Customs Union, 2023, VAT gap in the EU, https://data.europa.eu/doi/10.2778/911698. 
For more data on tax revenues as well as the methodology applied, see the Data on Taxation webpage, 
https://ec.europa.eu/taxation_customs/taxation-1/economic-analysis-taxation/data-taxation_en. 
Source: European Commission and OECD 

82 

HU2010202020212022202320102020202120222023Total taxes (including compulsory actual social contributions) (% of GDP)36.836.033.935.137.940.040.440.2Labour taxes (as % of GDP)17.316.214.514.620.021.320.720.3Consumption taxes (as % of GDP)12.313.913.713.910.810.711.211.0Capital taxes (as % of GDP)7.25.95.66.67.18.08.68.9Of which, on income of corporations (as % of GDP)2.93.02.93.02.42.53.03.4Total property taxes (as % of GDP)1.11.10.91.01.92.32.22.1Recurrent taxes on immovable property (as % of GDP)0.30.40.40.31.11.21.11.0Environmental taxes as % of GDP2.62.22.01.92.42.22.32.0Tax wedge at 50% of average wage (Single person) (*)41.043.643.241.241.233.931.732.131.831.7Tax wedge at 100% of average wage (Single person) (*)46.643.643.241.241.241.040.139.940.040.2Corporate income tax - effective average tax rates (1) (*)10.310.310.319.519.019.0Difference in Gini coefficient before and after taxes and cash social transfers (pensions excluded from social transfers) (2) (*)12.67.64.65.68.68.18.27.9Outstanding tax arrears: total year-end tax debt (including debt considered not collectable) / total revenue (in %) (*)12.012.040.935.5VAT Gap (% of VAT total tax liability, VTTL)(**)22.37.14.45.89.75.4Tax structureProgressivity & fairnessTax administration & complianceHungaryEU-27 
 
 
 
       
 
close  to  the  EU’s  figure  for  people  earning  the 
average  wage  and  above.  The  ability  of  the  tax 
and benefit system to reduce inequality (measured 
by  its  ability  to  reduce  the  GINI  coefficient)  has 
decreased  since  2010  and  fallen  significantly 
below the EU average (see Table A19.1).  

Graph A19.1: Tax wedge for single and second 
earners, % of total labour costs, 2023 

vein,  the  ‘eVAT’  platform,  which  was  launched  on 
all  VAT-registered 
1 January 2024, 
taxpayers in Hungary to access their pre-filled VAT 
returns.  

enables 

Tackling  aggressive  tax  planning  remains  a 
challenge.  High  foreign  direct  investment  (FDI) 
flows as a percentage of GDP and the high share 
of FDI stocks held through special purpose entities 
suggest that Hungary’s tax structure is being used 
for  aggressive 
tax  planning.  Hungary’s  RRP 
includes  a  commitment  to  strengthen  the  tax 
system against the risk of aggressive tax planning 
by  introducing  minimum  substance  requirements 
for  corporate  income  tax  for  shell  companies, 
strengthening  transfer  pricing  regulations  and 
broadening  the  scope  of  non-deductibility  for 
outbound 
supporting 
measures aim to enhance the effectiveness of tax 
avoidance rules. 

payments. 

Additional 

The second earner tax wedge assumes a first earner at 100% 
of the average wage and no children. For the methodology of 
the tax wedge for second earners, see OECD, 2016, Taxing 
Wages 2014-2015. 
Source: European Commission 

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 2022 

Source: European Commission 

Hungary  performs  relatively  well  on  tax 
compliance  and  tax  administration.  Tax 
arrears  for  2021  amounted  (as  in  2020)  to  12% 
of  total  net  revenue.  This  was  significantly  below 
the  EU  average  of  35.5%,  although  that  average 
was  distorted  by  very  large  values  in  a  few 
Member  States.  The  VAT  gap  (the  gap  between 
revenues actually collected and the theoretical tax 
liability)  amounted  to  4.1%  of  the  VAT  total  tax 
liability in 2021, which was still below the EU-wide 
gap of 5.4%. As part of its efforts to increase VAT 
compliance,  Hungary  has  implemented  multiple 
instruments  to  combat  the  missing  trader  intra-
community (MTIC) fraud (151) as well as one of the 
most 
for 
monitoring  taxpayers.  The  VAT  compliance  gap  in 
Hungary  has  steadily  and  steeply  declined, 
although the latest decrease in 2021 may also be 
due to COVID-19 effects. However, flash estimates 
show  that  the  gap  might  increase  in  2022. (152) 
RRP measures on the digital transformation of tax 
tax 
the 
compliance  procedures,  as  part  of 
simplification  measures, 
achieve 
to 
streamlined  digital  platforms  and  services.  In  this 

far-reaching 

electronic 

systems 

aim 

(151) This highly complex form of tax fraud relies on the abuse of 

the VAT rules for cross-border transactions in the EU. 

(152) EU VAT Gap report, 2023, p.99. 

83 

41.241.241.241.241.22025303540455050100150Tax 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 = €414Bn)EU27 (total = €22,660Bn)Hungary (total = €59Bn)EU27 (total = €20,123Bn)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) NIIP excluding direct investment and portfolio equity shares. 
Source: Eurostat and ECB as of 2024-5-17, where available; European Commission for forecast figures (Spring forecast 2024). 

84 

2004-072008-122013-2020212022202320242025Real GDP (y-o-y)3.4-0.82.87.14.6-0.92.43.5Potential growth (y-o-y).0.42.83.33.12.12.22.5Private consumption (y-o-y)1.9-2.23.54.67.1-2.04.04.1Public consumption (y-o-y)0.10.52.61.82.91.20.81.5Gross fixed capital formation (y-o-y)4.2-4.46.35.71.4-7.41.68.2Exports of goods and services (y-o-y)16.62.14.38.311.40.93.05.3Imports of goods and services (y-o-y) 13.80.15.67.310.8-4.33.56.9Contribution to GDP growth:Domestic demand (y-o-y)2.0-2.03.74.24.4-2.82.64.4Inventories (y-o-y)0.0-0.4-0.22.0-0.3-3.00.00.0Net exports (y-o-y)1.31.6-0.70.90.54.9-0.2-0.9Contribution to potential GDP growth:Total Labour (hours) (y-o-y).-0.20.80.20.30.10.20.3Capital accumulation (y-o-y).0.61.21.51.41.00.91.1Total factor productivity (y-o-y).0.10.81.61.31.11.11.1Output gap2.3-3.70.90.11.6-1.4-1.2-0.2Unemployment rate6.99.94.94.13.64.14.54.0GDP deflator (y-o-y)4.23.34.06.414.214.75.33.8Harmonised index of consumer prices (HICP, y-o-y)5.54.91.85.215.317.04.13.7HICP excluding energy and unprocessed food (y-o-y)4.54.12.34.514.216.84.74.3Nominal compensation per employee (y-o-y)7.92.54.18.217.014.011.77.7Labour productivity (real, hours worked, y-o-y)4.80.41.43.82.40.21.32.8Unit labour costs (ULC, whole economy, y-o-y)4.02.63.32.313.715.29.24.8Real unit labour costs (y-o-y)-0.2-0.6-0.6-3.9-0.50.43.70.9Real effective exchange rate (ULC, y-o-y)2.8-2.3-1.10.00.29.61.21.8Real effective exchange rate (HICP, y-o-y)3.4-0.4-1.40.4-3.813.3..Net savings rate of households (net saving as percentage of net disposable income)6.45.38.912.69.9...Private credit flow, consolidated (% of GDP)13.00.81.612.99.2...Private sector debt, consolidated (% of GDP)82.0110.576.480.979.0...of which household debt, consolidated (% of GDP)24.936.520.421.118.7...of which non-financial corporate debt, consolidated (% of GDP)57.174.056.159.860.3...Gross non-performing debt (% of total debt instruments and total loans and advances) (1).9.8.2.42.6...Corporations, net lending (+) or net borrowing (-) (% of GDP)-3.41.51.0-0.6-4.4-0.80.1-0.2Corporations, gross operating surplus (% of GDP)22.523.124.725.324.424.024.324.6Households, net lending (+) or net borrowing (-) (% of GDP)1.92.95.06.24.38.07.25.3Deflated house price index (y-o-y).-6.78.59.65.2-7.7..Residential investment (% of GDP)4.43.12.83.94.74.2..Current account balance (% of GDP), balance of payments-7.7-1.11.2-4.1-8.40.30.0-1.5Trade balance (% of GDP), balance of payments-1.24.55.50.2-4.45.1..Terms of trade of goods and services (y-o-y)-0.7-0.50.4-3.1-5.46.2-0.30.0Capital account balance (% of GDP)0.51.92.22.52.00.9..Net international investment position (% of GDP)-92.1-102.9-59.1-53.6-52.1-46.6..NENDI - NIIP excluding non-defaultable instruments (% of GDP) (2)-30.9-48.3-11.1-1.8-5.5-7.5..IIP liabilities excluding non-defaultable instruments (% of GDP) (2)75.2111.667.968.473.868.5..Export performance vs. advanced countries (% change over 5 years)..0.11.3-1.35.0..Export market share, goods and services (y-o-y)4.9-5.21.6-6.1-0.4-0.1-0.51.6Net FDI flows (% of GDP)-2.4-1.7-1.9-2.5-2.9-1.7..General government balance (% of GDP)-7.2-4.1-3.0-7.2-6.2-6.7-5.4-4.5Structural budget balance (% of GDP)..-3.4-7.1-7.0-6.0-4.9-4.4General government gross debt (% of GDP)62.377.773.376.774.173.574.373.8forecast 
 
 
 
  
 
 
 
ANNEX 21: DEBT SUSTAINABILITY ANALYSIS 

This  annex  assesses  fiscal  sustainability 
risks for Hungary over the short, medium and 
long  term. 
It  follows  the  multi-dimensional 
approach  of  the  European  Commission’s  2023 
Debt Sustainability Monitor, updated based on the 
Commission 2024 spring forecast. 

1  –  Short-term  risks  to  fiscal  sustainability 
low.  The  Commission’s  early-detection 
are 
indicator  (S0)  does  not  point  to  any  major  short-
term  fiscal  risks  (Table A21.2) (153).  Government 
gross financing needs are expected to decrease to 
around  13%  of  GDP  on  average  over  2024-2025 
(Table A21.1, Table 1).  Hungary’s  credit 
rating 
remains at the lower end of the investment grade.  

2  –  Medium-term  fiscal  sustainability  risks 
appear medium.   

The DSA baseline shows that the government 
debt  ratio  is  expected  to  remain  broadly 
stable  at  a  relatively  high  level  in  the 
medium  term  (at  around  78%  of  GDP  in 
2034) (Graph 1,  Table  1) (154).  The  debt  dynamics 
are  supported  by  the  assumed  neutral  structural 
primary  balance  (excluding  changes  in  cost  of 
ageing)  as  of  2024.  Compared  to  historical  data, 
this  appears  plausible,  as  more  than  half  of  past 
fiscal  positions  were  more  stringent  than  the  one 
assumed  in  the  baseline  (Table  A21.2) (155).  The 

(153) The S0 is a composite indicator of short-term risk of fiscal 
stress. It is based on a wide range of fiscal and financial-
competitiveness indicators that have proven to be a good 
predictor of emerging fiscal stress in the past.  

(154) The assumptions underlying the Commission’s ‘no-fiscal 

policy change’ baseline include in particular: (i) a structural 
primary balance, before changes in ageing costs, of 0.0% of 
GDP from 2024 onwards; (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 ahead); (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; (iv) real GDP growth rates 
from the Commission 2024 spring forecast, followed by the 
EPC/OGWG ‘T+10 methodology projections between T+3 and 
T+10 (average of 2.2%); (v) ageing costs in line with the 
2024 Ageing Report (European Commission, Institutional 
Paper 279, April 2024). For information on the methodology, 
see the 2023 Debt Sustainability Monitor (European 
Commission, Institutional Paper 271, March 2024). 

(155) This assessment is based on the fiscal consolidation space 

indicator, which measures the frequency with which a tighter 
fiscal position than assumed in a given scenario has been 
observed in the past. Technically, this consists in looking at 
the percentile rank of the projected SPB within the 

increase 

debt 
is  particularly  driven  by  an 
unfavourable  and  increasing  snowball  effect  of 
0.6%  of  GDP  annually  on  average  over 
2027-2034, mainly linked to projected increases in 
interest expenditure. 

four 

The  baseline  projections  are  stress-tested 
against 
deterministic 
alternative 
scenarios to assess the impact of changes in 
key  assumptions  relative  to  the  baseline 
(Graph 1).  Under  the  historical  structural  primary 
balance  (SPB)  scenario  (i.e.  the  SPB  returns  to  its 
historical  15-year  average  of  -0.1%  of  GDP)  the 
debt ratio would be higher than under the baseline 
by  about  1 pp.  in  2034.  Under  the  adverse 
interest-growth  rate  differential  scenario  (i.e.  the 
interest-growth  rate  differential  deteriorates  by 
1 pp.  compared  with  the  baseline),  the  debt  ratio 
would be higher than under the baseline by around 
7 pps. in 2034. Under the financial stress scenario 
(i.e.  interest  rates  temporarily  increase  by  1  pp. 
compared with the baseline) the government debt 
ratio  would  be  higher  by  about  1 pp.  in  2034. 
Finally, under the lower structural primary balance 
cumulative 
scenario 
improvement  in  the  SPB  over  2023-2024  is 
halved) the debt ratio would be higher than under 
the baseline by around 7 pps. in 2034. 

projected 

(i.e. 

the 

The  stochastic  projections  indicate  medium 
risk,  pointing  to  the  moderate  sensitivity  of 
these  projections  to  plausible  unforeseen 
events (156). These stochastic simulations indicate 
a 49% probability that the debt ratio will be higher 
in 2028 than in 2023, implying medium risks given 
the  current  relatively  high  debt  level.  In  addition, 
the  uncertainty  surrounding  the  baseline  debt 
projections 
the  difference 
between  the  10th  and  90th  debt  distribution 
percentiles)  is  high,  reaching  around  42  pps.  of 
GDP in five years’ time) (Graph 2).  

(as  measured  by 

3  –  Long-term  fiscal  sustainability  risks 
appear  overall  medium.  This  assessment  is 
based  on  the  combination  of  two  fiscal  gap 
indicators,  capturing  the  required  fiscal  effort  to 

distribution of SPBs observed in the past in the country, 
taking into account all available data from 1980 to 2023. 

(156) The stochastic projections show the joint impact on debt of 

10,000 different shocks affecting the government’s 
budgetary position, economic growth, interest rates and 
exchange rates. This covers 80% of all the simulated debt 
paths and therefore excludes tail events. 

85 

 
 
 
 
 
 
 
risks.  For 

stemming  from  the  high  level  of  government 
guarantees,  as  well  as  Hungary’s  negative  net 
international  investment  position,  pose  additional 
fiscal 
the  debt 
management  agency  has  maintained  favourable 
conditions for redeeming retail government bonds 
(amounting  to  some  20%  of  public  debt)  before 
maturity, which risks raising gross financing needs 
in times of financial stress. 

several  years 

stabilise  debt  (S2  indicator)  and  bring  to  60%  of 
GDP  (S1  indicator)  over  the  long  term (157).  This 
assessment  is  mainly  driven  by  the  projected 
increase in ageing costs and, to a lesser extent, the 
unfavourable initial budgetary position. 

The  S2  indicator  points  to  medium  fiscal 
sustainability  risks.  The  indicator  shows  that, 
relative  to  the  baseline,  the  SPB  would  need  to 
improve by 4.9 pps. of GDP in 2025 to ensure debt 
stabilisation  over  the  long  term.  This  result  is 
underpinned  by  the  projected  increase  in  ageing-
related  costs  (contribution  of  4.3 pps.)  and  an 
unfavourable  initial  budgetary  position  (0.6 pp.). 
Ageing costs’ developments are primarily driven by 
a projected increase in public pension expenditure 
(3.5 pps.),  followed  by  both  health  care  (0.4 pp.) 
and 
pp.) 
(Table A21.1,  Table 2).  As  reforms  in  the  RRP  are 
meant  to 
improve  the  sustainability  of  the 
Hungarian  pension  system,  it  will  be  important  to 
carefully monitor their implementation. 

long-term 

spending 

care 

(0.3 

The  S1  indicator  points  to  medium  fiscal 
sustainability risks. The indicator shows that the 
country  would  need  to  further  improve  its  fiscal 
position  by  3.3  pps.  of  GDP  in  2025  to  reduce  its 
debt to 60% of GDP by 2070. This result is mainly 
driven  by  the  projected  increase  in  age-related 
public  spending  (contribution  of  2.5  pps.)  and  the 
unfavourable  initial  budgetary  position  (0.6  pp.). 
The current distance of the Hungarian government 
debt  ratio  from  the  60%  reference  value  further 
slightly increases the need for fiscal consolidation 
(0.3 pp.) (Table A21.1, Table 2).  

4  -  Finally,  several  additional  risk  factors 
need  to  be  considered  in  the  assessment. 
Risk-increasing  factors  are  mainly  related  to  the 
significant  share  of  government  debt  held  in 
foreign  currency.  Some  contingent  liability  risks 

(157)The S2 fiscal sustainability indicator measures the 

permanent SPB adjustment in 2025 that would be required 
to stabilise public debt in the long term. It is complemented 
by the S1 indicator, which measures the permanent SPB 
adjustment in 2025 to bring the debt ratio to 60% 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 % of GDP, ‘medium risk’ 
if it is between 2% and 6% of GDP, and ‘low risk’ if the effort 
is negative or below 2% of GDP. The overall long-term risk 
classification combines the risk categories derived from S1 
and S2. S1 may notch up the risk category derived from S2 if 
it signals a higher risk than S2. See the 2023 Debt 
Sustainability Monitor for further details. 

86 

 
 
Table A21.1:Debt sustainability analysis - Hungary 

Source: Commission services. 

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

Source: Commission services. 

87 

Table 1. Baseline debt projections20212022202320242025202620272028202920302031203220332034Gross debt ratio (% of GDP)74.472.569.268.166.766.166.366.767.268.069.070.271.773.5Changes in the ratio-5.2-1.9-3.3-1.1-1.4-0.60.10.40.50.81.01.21.51.8of whichPrimary deficit3.31.91.21.41.31.21.61.92.12.32.42.62.82.9Snowball effect-6.7-5.1-5.7-2.3-2.5-1.8-1.5-1.5-1.6-1.5-1.4-1.3-1.3-1.1Stock-flow adjustments-1.81.31.2-0.2-0.20.00.00.00.00.00.00.00.00.0Gross financing needs (% of GDP)10.48.26.97.47.37.47.98.48.79.19.49.810.310.7S1S2Overall index  (pps. of GDP)4.76.3of which Initial budgetary position0.91.6Debt requirement0.2Ageing costs3.74.7of which    Pensions2.53.1     Health care0.70.9     Long-term care0.60.9Education-0.2-0.2Table 2. Breakdown of the S1 and S2 sustainability gap indicators3040506070809020212022202320242025202620272028202920302031203220332034Graph 1. Deterministic debt projections Historical SPB scenarioLower SPB scenarioFinancial stress scenarioAdverse 'r-g' scenarioBaseline% of GDPp10p20p40p60p80p904045505560657075808520212022202320242025202620272028% of GDPGraph 2. Stochastic debt projections 2024-2028MedianBaselineBaselineHistorical SPBLower SPBAdverse 'r-g'Financial stressOverallMEDIUMMEDIUMMEDIUMMEDIUMMEDIUMMEDIUMDebt level (2034), % GDP73.574.374.978.473.8Debt peak year20342034203420342034Fiscal consolidation space56%61%62%56%56%Probability of debt ratio exceeding in 2028 its 2023 level42%Difference between 90th and 10th percentiles (pps. GDP)29.3Short termMedium term - Debt sustainability analysis (DSA)Long termOverall                               (S0)Overall Deterministic scenariosStochastic projectionsS2S1Overall(S1 + S2)(1)Debtlevelin2034.Green:below60%ofGDP.Yellow:between60%and90%.Red:above90%.(2)Thedebtpeakyearindicateswhetherdebtisprojectedtoincreaseoveralloverthenextdecade.Green:debtpeaksearly.Yellow:peaktowardsthemiddleoftheprojectionperiod.Red:latepeak.(3)Fiscalconsolidationspacemeasurestheshareofpastfiscalpositionsinthecountrythatweremorestringentthantheoneassumedinthebaseline.Green:highvalue,i.e.theassumedfiscalpositionisplausiblebyhistoricalstandardsandleavesroomforcorrectivemeasuresifneeded.Yellow:intermediate.Red:low.(4)Probabilityofdebtratioexceedingin2028its2023level.Green:lowprobability.Yellow:intermediate.Red:high(alsoreflectingtheinitialdebtlevel).(5)thedifferencebetweenthe90thand10thpercentilesmeasuresuncertainty,basedonthedebtdistributionunder10000differentshocks.Green,yellowandredcellsindicateincreasinguncertainty.(Forfurtherdetailson the Commission's multidimensional approach, see the 2023 Debt Sustainability Monitor)LOWMEDIUMHIGHMEDIUMHIGH