COMMISSION STAFF WORKING DOCUMENT 2025 Country Report - Hungary Accompanying the document Recommendation for a COUNCIL RECOMMENDATION on the economic, social, employment, structural and budgetary policies of Hungary
Date: 2025-06-04
Institutions: European Commission, Reform and Investment Task Force
Subjects: Hungary, budget policy, economic policy, economic recovery, economic reform, employment policy, energy policy, labour market, social policy, stability pact

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 4.6.2025  SWD(2025) 217 final  COMMISSION STAFF WORKING DOCUMENT 2025 Country Report - Hungary Accompanying the document Recommendation for a COUNCIL RECOMMENDATION on the economic, social, employment, structural and budgetary policies of Hungary {COM(2025) 217 final}  
 
 
 
 
 
 
 
 
 
 
 
ECONOMIC DEVELOPMENTS AND KEY POLICY 
CHALLENGES 

of earlier energy and food price increases and 
supply  chain  bottlenecks  dissipated.  However, 
inflation  excluding  food,  energy,  alcohol  and 
tobacco remained high at 5.9% in 2024, while 
inflation picked up in the first quarter of 2025. 
Domestic  demand  and  rising  food  prices  are 
expected  to  keep  inflation  elevated  in  2025. 
Inflation  expectations  also  remained  high, 
partly  because  Hungary  went  through  the 
highest  consumer  price  increase  in  the  EU 
(Graph 1.1). 

Graph 1.2: Price index of construction 
investment, 2015=100 

Growth is projected to rebound 
slowly in a context of high 
inflation 

Economic  growth  was  subdued  in  2024. 
GDP grew by 0.5% in 2024 after a contraction 
of  0.8%  in  2023.  The  sluggish GDP  growth  in 
2024 was driven by weak external demand, a 
deterioration  in  business  sentiment  and  lower 
investment.  GDP  growth  is  forecast  to  reach 
0.8% in 2025 and to pick up to 2.5% in 2026, 
driven  by 
improving  demand  and  new 
capacities  in  manufacturing,  notably  in  the 
electric  vehicle  industry.  However,  Hungary’s 
economic  outlook  remains  highly  uncertain 
over  the  prospect  of  tariffs  due  to  its  high 
level of integration in global value chains. 

Graph 1.1: Harmonised Index of Consumer 
Prices, 2015=100 

Source: Eurostat 

Investment  dropped  from  a  high  level. 
Investment  decreased  by  7.7%  and  11.1%  in 
2023  and  2024  respectively,  the  largest  drop 
in  the  EU,  while  in  2024  the  investment-to-
GDP  ratio  was  23%.  At  the  same  time, 
Hungary  registered  the  highest  increase  in 
construction  prices  in  the  EU  (Graph  1.2).  A 
combination of high construction costs and an 
uncertain  economic  environment  for  firms 
have  contributed  to  the  recent  investment 
underperformance.  The  decline  in  investment 
poses 
growth 
risks 
perspectives. 

to  medium-term 

Source: Eurostat 

Inflation  picked  up  in  early  2025  due  to 
elevated  underlying  price  pressures. 
Inflation  declined  significantly  from  a peak  of 
17.0% in 2023 to 3.7% in 2024, as the impact 

2 

10011012013014015016017018020152016201720182019202020212022202320242025HungaryEU27951151351551751952152352552015201620172018201920202021202220232024EU27Hungary2nd highestlowest 
 
       
   
Economic vulnerabilities remain 

limit  the  effectiveness  of  the  central  bank’s 
policy to control interest rates. 

high, 

bonds 

remain 

With  debt  forecasted  to  remain  high, 
debt-servicing  costs  and  risks  over  the 
sustainability of government finances are 
elevated. Public debt rose slightly in 2024, to 
73.5%  of  GDP,  and  is  expected  to  decrease 
only gradually. At 7%, yields on Hungarian 10-
year 
reflecting 
expectations  of  persistent  inflation.  Hungary’s 
debt-servicing  costs  are  projected  to  remain 
among the highest in the EU, with the implicit 
interest rate on government debt close to 6% 
in  2025.  Risks  over  the  sustainability  of 
government finances are low in the short term, 
but  high  in  the  medium  term  and  medium  in 
the  long  term,  according  to  the  Commission’s 
debt  sustainability  framework  (see  more  in 
Annex 1). 

Hungary’s  achievement  of  budgetary 
targets  is  at  risk.  In  2024,  the  government 
deficit  decreased  to  4.9%  of  GDP,  from  6.7% 
the year before, on the back of temporary cuts 
in  public  investment,  revenue  from  taxes 
levied  on  companies  in  the  energy,  financial 
and retail sectors, and lower energy subsidies. 
However, 
the  absence  of  additional 
consolidation, the budgetary deficits are set to 
remain elevated, at 4.6% of GDP in 2025 and 
4.7%  in  2026,  according  to  the  Commission 
2025  Spring  Forecast.  The  2026  budget  law, 
submitted  to  Parliament  on  6  May  2025,  has 
revised  the  2026  deficit  target  from  2.9%  to 
3.7% of GDP. 

in 

Net expenditure is set to grow strongly in 
2025  but  remain  below  the  cumulative 
limit  for  2024  and  2025  combined.  In 
2024,  net  expenditure(2)  in  Hungary  grew  by 
2.3% (see Annex 1). This increase was mainly 
in 
driven  by 
nationally-financed  primary  expenditure,  as 

lower-than-expected  growth 

(2)  Net expenditure is defined in Article 2(2) of Regulation 
(EU) 2024/1263 as government expenditure net of (i) 
interest expenditure, (ii) discretionary revenue 
measures, (iii) expenditure on programmes of the Union 
fully matched by revenue from Union funds, (iv) 
national expenditure on co-financing of programmes 
funded by the Union, (v) cyclical elements of 
unemployment benefit expenditure, and (vi) one-off 
and other temporary measures. 

debt. 

Hungary continues to face vulnerabilities, 
competitiveness  and 
primarily  over 
government financing needs. Policy action 
to  tackle  them  has  been  limited.  This 
finding was highlighted in the in-depth review 
that  was  part  of 
the  macroeconomic 
imbalance  procedure  Hungary  underwent 
earlier this year (1). First, public debt increased 
in  2024,  with  debt-servicing  costs  and  gross 
financing  needs  remaining  at  high  levels.  At 
the  same  time,  the  risk  related  to  the  high 
share  of  government  bonds  in  banks’  total 
assets has deepened due to tax incentives for 
in  return  for  purchasing 
domestic  banks 
government 
inflationary 
pressures  have  remained  persistent,  while 
cost 
rising 
competitiveness.  Third,  the  economic  recovery 
is slow and can be even slower as challenging 
external  conditions  and  domestic  policy 
uncertainty  have  continued  to  weigh  on 
exports  and  investment.  Fourth,  while  the 
trade  balance  improved  in  2024,  policies 
aimed  at  boosting  domestic  demand  and 
substantial  energy  imports  pose  risks  on  the 
sustainability  of 
financial 
position  vis-a-vis  other  countries.  Finally,  the 
in-depth  review  of  Hungary  highlighted  that 
house  prices  accelerated  in  2024.  This  was 
driven  by  strong  demand,  fuelled  by  easier 
financing conditions, generous housing policies 
and restricted supply. 

costs  have  eroded 

the  country's 

Second, 

labour 

Some  government 
interventions  are 
distorting the functioning of the financial 
market. As a way to boost domestic demand, 
Hungary  makes  widespread  use  of  poorly 
targeted  subsidised  loans  to  households  and 
corporations,  as  well  as  administratively 
controlled  mortgage  rates.  The  proportion  of 
subsidised  loans  remains  high  compared  to 
the  pre-COVID  level.  These  schemes  can  lead 
to capital being allocated in a suboptimal way, 
by  financing  projects  with  low  returns  and 
limited  productivity  gains.  Such  practices  also 

(1)  SWD(2025) 127 final. 

3 

 
 
 
spending  reviews  on  healthcare  and  housing- 
and  family-related  support  were  conducted  in 
these  have  not  been 
2023-2024,  but 
published  and  are  not  reflected 
the 
budgetary  planning  so  far.  The  mandate  and 
operational  capacities  of  the  Hungarian  Fiscal 
Council remain limited. 

in 

bodies 

research. 

Budgetary  oversight  may  be  weakened 
further  by  new  public  fund  management 
structures.  In  recent  years,  Hungary  has  set 
up  an  increasing  number  of  funds  (public 
interest  trusts,  central  bank  foundations,  etc.) 
to  carry  out  public  duties  such  as  education 
and 
received 
These 
substantial  public  assets  and/or  annual 
funding from the budget. However, they seem 
to  operate  without  effective  oversight  and 
control  mechanisms.  Board  members  are 
nominated  without  transparent  and  objective 
selection  criteria  and  without  any  need  to 
demonstrate  asset  management  experience. 
Moreover,  they  have  significant  discretion  in 
investment decisions.  As  these  funds  are  part 
of 
the  general  government  sector,  any 
management  errors  may  impact  government 
finances. 

The 
impact  of  population  ageing  on 
government  finances  continues  to  be  a 
challenge.  The  ratio  of  potential  workers  per 
person  aged  65  or  older  is  projected  to  drop 
from  2.9  in  2023  to  1.8  by  2070.  Population 
ageing  means  Hungary’s  public  spending-to-
GDP  ratio  for  pensions  is  facing  one  of  the 
largest increases in the EU, set to rise 4.3 pps 
between  2022  and  2070  (see  Annex  1). 
According  to  the  Commission’s  projections, 
Hungary’s public debt will also start to rise in a 
decade  if  ageing-related  spending  remains 
unaddressed.  The  design  of  the  pension 
system  also  generates  equity  issues.  These 
include large pension gaps between pensioners 
from  different  age  cohorts  and  increasing 
expenditure  on  pensions  for  high-income 
individuals.  As  part  of  the  reform  roadmap 
included  in  Hungary’s  recovery  and  resilience 
plan,  in  July  2024  the  OECD  published  a 
report,  at  the  request  of  the  Hungarian 
government,  assessing  the  challenges  and 
opportunities  of  the  current  pension  system, 

in 

nationally-financed 

well  as  the  partial  phaseout  of  the  windfall 
profit  tax  on  the  banking  sector  and  special 
taxes  on  energy  sector. 
In  2025,  net 
expenditure  is  forecast  by  the  Commission  to 
grow  by  6.1%,  which  is  above  the  maximum 
growth  rate  recommended  by  the  Council(3). 
This  increase  is  driven  by  the  projected  rapid 
growth 
primary 
expenditure, in particular on public wages and 
operating  expenditure.  The  cumulative  growth 
rate  of  net  expenditure  in  2024  and  2025 
taken  together  is  projected  at  8.6%,  which  is 
below the maximum rate recommended by the 
Council.  The  projected  deviation  is  allowed 
under  the  conditions  of  the  national  escape 
clause  on  current  projections  for  defence 
spending.  

reduce  budget 

A  realistic  and  stable  medium-term 
budgetary 
framework  would  make 
Hungary’s fiscal policy more credible and 
effective. As discussed in the 2023 and 2024 
in-depth 
European 
reviews  and  2024 
Semester  country  report,  Hungary’s  fiscal 
framework  suffers  from  several  weaknesses 
which 
transparency  while 
exacerbating  the  expansionary  bias  (4).  The 
continued practice of adopting budgets early in 
the  year  (with  one  exception  in  2024)  and 
frequent  revisions  of  the  budgetary  targets 
reduce  reliability.  In  turn,  this  limits  policy 
predictability  and  proper  accountability.  The 
introduction  of  the  ‘state  of  danger’,  in  force 
since 2020 and extended repeatedly, lifted the 
requirement  to  publish  a  three-year  budget 
in 
plan,  and 
implementing  annual  budgets. 
Frequent 
changes  to  the  annual  budget  law  decrease 
predictability. 
medium-term 
Hungary‘s 
lacks  multiannual 
budgetary 
spending ceilings that would make it easier for 
it  to  meet  the  requirements  of  the  reformed 
EU  economic  governance  framework.  Two 

the  discretion 

increased 

planning 

(3)  Council Recommendation with a view to bringing an end 

to the situation of an excessive deficit in Hungary 
(C/2025/5896) and Council Recommendation of 18 
February 2025 endorsing the medium-term fiscal-
structural plan of Hungary (OJ C, C/2025/1707, 
18.3.2025, ELI: http://data.europa.eu/eli/C/2025/1707/oj 

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

4 

 
 
Graph 1.3: Labour productivity per person 
employed, EU-27=100 

and  identifying  policy  options (5).  However, 
Hungary’s  medium-term  fiscal-structural  plan 
states that the government does not plan any 
changes  to  the  pension  scheme  in  the  near 
future. 

Structural reforms are key to 
continuing income convergence 

increase 

than  an 

Labour  productivity  is  one  of  the  lowest 
in the EU and is at the same level as 15 
years  ago.  This  is  in  contrast  with  EU 
countries  with  similar  income  levels,  whose 
productivity  increased  by  10 pps  during  the 
same  period  (Graph  1.3).  While  the  income 
level  has  increased  steadily,  this  has  been 
driven by a significant increase in employment 
in  skills  and 
rather 
productivity  levels.  In  2024,  the  employment 
rate in the 20 to 64 age cohort was 81.1%, up 
19 pps  since  2010  (see  Social  Scoreboard  in 
Annex  13).  As  a  result,  720 000  more  people 
are employed in 2025 than 15 years ago. The 
significant  increase  in  employment  largely 
came from low-skilled people entering the jobs 
market,  which  impacted  average  productivity. 
Further impetus to growth would need to come 
from  innovation  and  investment in  high  value 
added  activities,  also  taking  into  account 
regions’  competitive  advantages.  However, 
future  productivity  growth  may  be  held  back 
by 
education, 
quality 
comparatively  low  levels  of  skills  and  lack  of 
predictability in the business environment. 

the  weak 

of 

(1) Peer countries: BG, EE, HR, LT, LV, PL, RO and SK 
Source: Eurostat 

tertiary 

Hungary’s 

A  shortage  of  skilled labour  continues to 
hamper  growth  prospects.  As  a  result  of 
strong  employment  performances  in  recent 
years, the issue of labour and skills shortages 
is becoming ever more pressing. The education 
system  is  not  producing  enough  highly  skilled 
workers to meet growing demand on the jobs 
market. 
education 
attainment  rate  has  not  improved  in  the  last 
decade and is now one of the lowest in the EU. 
Weak  basic  and  digital  skills  among  the 
disadvantaged  and  high  early  leaving  from 
education  limit  employment  prospects  and 
skills development opportunities later in life. In 
addition, many highly skilled Hungarians leave 
the country, as the weak business environment 
fails  to  attract  high  value  added  investments. 
These factors hinder the establishment of high 
value added firms in Hungary. 

regulatory 

The  business  environment  remains  a 
innovation.  Surveys 
major  barrier  to 
as 
obstacles 
highlight 
regularly 
an 
unpredictable 
overwhelming  presence  of 
in 
transactions,  hostility 
domestic  business 
in 
(foreign-owned 
firms 
towards  certain 
particular),  limited  government  effectiveness, 
high 
and  weak 
perceived 
competition in key sectors. 

such 
changes, 
the  State 

corruption 

(5)  OECD (2024) Strengthening-the-Hungarian-Pension-

System.pdf 

Energy  import  dependence  continues  to 
weigh  on  the  trade  balance.  Net  energy 

5 

65676971737577792011201220132014201520162017201820192020202120222023HungaryPeer average 
 
   
imports decreased from 4.7% of GDP in 2023 
to  3.4%  of  GDP  in  2024,  mainly  due  to  a 
decrease  in  oil  and  gas  prices.  Net  electricity 
imports as a percentage of domestic electricity 
supply  also  decreased,  driven  by  increasing 
solar  power  generation.  The  national  energy 
and  climate  plan  sets  a  target  to  reduce  the 
net  import  share  of  electricity  to  20%  by 
2030;  progress  has  been  made  towards  this 
target. Nevertheless, to minimise the country’s 
exposure  to  energy  price  shocks,  more  action 
is needed. 

The  benefits  of  economic  growth  have 
not  been  equally  distributed.  While  the 
overall poverty  indicators perform better  than 
the  EU  average,  poverty  outcomes  remained 
worse than the EU average among children in 
large  families, 
low-skilled  workers,  older 
people, persons with a disability and the Roma 
population. The situation is relatively worse for 
the poorest parts of the population due to the 
low  progressivity  of  the  tax  system,  the 
decreasing  impact  of  social  benefits,  unequal 
access  to  basic  and  social  services  and  the 
poorly  targeted  tax,  housing  and  energy 
subsidy  schemes.  By  contrast,  the  highest 
from  generous 
income  groups  benefit 
transfers. In addition, the benefits of economic 
growth  are  not  evenly  distributed  across  the 
regions,  while  the  country’s  least  developed 
districts  continue  to  face  multiple  barriers  to 
economic and social convergence. 

6 

 
Box 1: 

Barriers to private and public investment 

Private  investments  in  Hungary  are  supported  by  developed  transport  infrastructure,  low 
corporate  income  tax,  lax  employment  protection  legislation,  low  labour  costs  and  generous 
state subsidies. However, obstacles exist, in particular in the services sector: 

• 

Frequent  regulatory  changes  and  discretionary  state  intervention  make 
investment  decisions  less  predictable.  This  impedes  the  growth  of  firms,  in 
particular  innovative  and  fast-growing  ones.  The  high  number  of  incorrectly 
transposed  single  market  directives  hinders  the  effective  functioning  of  product 
markets. 

•  Businesses  face  high  costs  on  energy  and  banking,  sector-specific  taxes  and 
high interest rates. Access to finance is underdeveloped and firms heavily rely on 
state subsidies to make investments. 

•  A  shortage  of  skilled  workers,  resulting  from  below-average  performance  in 
skills and education as well as a low tertiary graduation rate, acts as a barrier to 
high value added investments. 

Public investment is facilitated by shorter authorisation and permitting procedures invoking the 
national interest. However, there are factors which hinder public investments: 

•  Access to EU support is limited mainly by the lack of effective mechanisms to 

protect the EU’s financial interests. 

• 

Persistent problems related to the anti-corruption framework, weaknesses in 
control  procedures,  and  competition  in  public  procurement  (e.g.  limited  by 
framework agreements) result in ineffective allocation of public resources, higher 
prices and longer implementation timespans for investments. 

•  Budget  constraints  cause  a  lack  of  clarity  in  investment  objectives,  which 

results in uncertainty and delays in the implementation of investments. 

The  implementation  of  Hungary’s RRP  faces  considerable  challenges.  At  present, Hungary  has 
fulfilled  0%  of  the  milestones  and  targets  in  its  RRP.  It  remains  important  to  accelerate  the 
implementation  of  cohesion  policy  programmes.  The  mid-term  review  offers  opportunities  to 
speed  up  progress  and  better  address  EU  strategic  priorities  related  to  competitiveness, 
defence,  housing,  water  resilience  and  the  energy  transition.  While  Hungary  has  signalled 
interest  in  leveraging  the  Strategic  Technologies  for  Europe  Platform  under  cohesion  policy, 
Hungary can further support the development or manufacturing of critical technologies in the 
areas of digital and deep tech, clean and resource efficient technologies, and biotechnologies.  

7 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Box 2: 

UN Sustainable Development Goals (SDGs) 

Despite making progress on most of the SDGs, including all SDGs related to competitiveness 
(SDGs 4, 8 and 9), Hungary remains below the EU average on all SDGs apart from SDGs 1 
(No  poverty),  11  (Sustainable  cities  and  communities)  and  15  (Life  on  land).  Moreover, 
Hungary is moving away from several SDGs on sustainability (2, 11, and 12). 

Hungary  is  improving  on  most  SDGs  related  to  fairness  (SDGs  1,  3,  4,  5,  7  and  8),  but  is 
moving away from SDG 10 (Reduced inequalities). 

8 

 
 
 
 
 
 
 
 
 
  
 
INNOVATION, BUSINESS ENVIRONMENT AND 
PRODUCTIVITY 

Ineffective competition and high 
costs hamper innovation 

to  legal  monitoring  and  adaptation.  For  small 
and  medium-sized  enterprises  this  is  even 
more burdensome. 

Graph 2.1: Legislation in force in Hungary 

legislation, 

for  manufacturing. 

The  business  environment  in  Hungary 
poses  challenges  for  most  companies. 
Several  features  of  the  business  environment 
create  an  attractive  location  for  investments, 
mainly 
In  particular, 
Hungary  has  a  central  geographical  location, 
developed  transport  infrastructure,  the  lowest 
corporate  income  tax  in  the  EU  (9%),  lax 
employment  protection 
loose 
enforcement  of  environment  protection  rules 
and  generous  state  subsidies.  However,  many 
industries  face  obstacles  and  the  overall 
perception  of  the  business  environment  is 
rather negative. According to the International 
for  Management  Development’s 
Institute 
World  Competitiveness  Yearbook,  Hungary 
ranked among the last in the EU in 2024. The 
2024  European  Investment  Bank  Investment 
Survey 
frequently 
that 
found 
mentioned  barriers 
investment  are 
uncertainty  about  the  future  (72%),  energy 
costs (60%) and the availability of skilled staff 
(51%). 
the 
unpredictable  and  quickly  changing  regulatory 
environment, high inflation, tax rates, complex 
administrative procedures and corruption. 

the  most 
to 

surveys  mention 

Other 

(Graph  2.1).  The 

Businesses face a high level of regulatory 
volatility.  Over  the  past  two  decades,  the 
proportion  of  decrees  compared  to  laws  has 
surged 
frequency  of 
legislative  amendments  increased  as  well, 
which  makes  long-term  business  planning 
increasingly difficult. While the volume of new 
legislation 
stable, 
amendments  doubled  between  2004  and 
2024  due  to  the 
increasing  number  of 
omnibus  bills,  including  several  draft  laws  on 
diverse  subjects.  This  regulatory 
inflation 
forces  businesses  to  dedicate  more  resources 

remained 

relatively 

9 

Source: njt.hu 

to 

by 

limited 

is  further 
Regulatory  unpredictability 
stakeholder 
aggravated 
involvement.  According 
the  OECD 
indicators of regulatory policy and governance, 
Hungary underperforms on public consultation 
and the evaluation of existing legislation. Since 
end-2022,  public  consultations  on  draft 
legislation  have  become  regular,  although 
is  no 
there 
reported 
stakeholders 
meaningful  feedback.  The  public 
is  not 
consulted on important draft laws, as they are 
often  tabled 
individual 
members  instead  of  the  government,  thus 
circumventing  the  need  to  conduct  a  public 
consultation. In January 2025, the government 
impact 
introduced  a  new 
assessments.  Summary  impact  assessment 
sheets are published for most draft legislation, 
but there is room to improve their quality and 
information content. 

in  Parliament  by 

format 

that 

for 

0%20%40%60%80%100%01000200030004000500060007000Share of laws (R)Share of decrees (R)Number of laws (L)Number of decrees (L) 
 
      
The  government  continues  to  widely  use 
emergency  decrees  to  regulate.  The  ‘state 
of  danger’,  which  has  been  continuously 
extended  for  the  last  five  years  for  various 
reasons,  allows  the  government  to  amend 
bypasses 
decrees. 
laws 
parliamentary 
public 
oversight 
consultation,  introducing  sudden,  often  major, 
policy  shifts  potentially  disrupting  normal 
business operations.  

through 

This 

and 

These 

include: 

remains  an  obstacle 

The ineffectiveness of the anti-corruption 
to 
framework 
business.  A 
far  higher  percentage  of 
companies  than  the  EU  average  consider 
corruption  to  be  widespread  and  a  problem 
when  doing  business.  The  Hungarian  recovery 
and  resilience  plan  includes  several  measures 
targeted  at  strengthening  the  anti-corruption 
the 
(i) 
framework. 
establishment  and  operation  of  a 
truly 
independent  and  effective  integrity  authority; 
(ii) the adoption and implementation of a new 
medium-term national anti-corruption strategy 
and  action  plan;  (iii)  the  strengthening  of  the 
rules  on  conflict  of 
interest  and  asset 
declaration;  and  (iv)  the  possibility  for  judicial 
review  of  decisions  of  the  prosecution  service 
or  investigating  authority  to  dismiss  a  crime 
report  or  terminate  criminal  proceedings.  It 
remains  vital  to  ensure  that  these  measures 
are  timely  and  effectively  applied  in  practice 
and  in  particular  that  the  integrity  authority 
can carry out its tasks effectively. 

The lack of equal treatment of companies 
limits  competition.  According  to  the  World 
Bank’s  Business  Ready  report (6),  the  market 
structure is concentrated and only a few firms 
compete  in  specific  markets.  Several  services 
are  entrusted  to  state-owned  or  private  firms 
which  operate  without  competition.  Such 
services  include  textbook  publishing,  waste 
management,  mobile  payments,  the  cash-in-
transit  market,  tobacco  wholesale  and  retail 
trade,  gambling,  motorway  construction  and, 
The 
cybersecurity 
from  2025, 
government  discretionarily  exempts  mergers 
and 
from 
administrative procedures, creating an unequal 

investment  projects 

specific 

audits. 

playing  field  for  firms  and  increasing  the 
importance  of  connections  with  the  state 
apparatus.  The  large-scale  use  of  framework 
agreements  in  public  procurement  procedures 
also  limits  competition  by  locking  in  certain 
firms  and  helping  them  acquire  a  dominant 
market  position.  The  number  and  value  of 
framework  agreements  has  increased  sharply 
in  recent  years.  In  2023,  they  exceeded  the 
value of all other tenders and around 70% of 
them were concluded with a single tenderer. 

in  Budapest  airport 

in  business 
is  active 
The  State 
transactions  and  crowds  out  private 
actors.  In  recent  years,  the  State  purchased 
an  80%  share 
(the 
transaction  costs  amounted  to  2.5%  of  GDP) 
and  a  wide  range  of  office  buildings  (1%  of 
GDP).  It  also  facilitated  the  purchase  of 
several  large  companies  such  as  the  third 
largest telecommunications company (1.2% of 
GDP)  and  the  creation  of  the  second  largest 
bank  with  subsidised  financing.  Various  state 
interventions have been used to force – mostly 
foreign – owners to sell their firms, facilitating 
the  creation  of  public  or  government-
connected national champions.  

The increasing presence of private equity 
funds creates new challenges. The number 
and  size  of  private  equity  funds  have 
increased  significantly  in  recent  years  and 
reached more than 2.5% of GDP in 2024. This 
company  structure  is  used  in  particular  by 
individuals  with  links  to  the  government  as  it 
to  offshore 
ensures  anonymity,  similar 
(7).  Private  equity  funds  are 
companies 
increasingly  behind  companies  winning  public 
procurements  and 
securing  high  value 
concessions,  and  have  a  strong  presence  in 
business  transactions  with  the  State. 
In 
addition,  many  private  equity  funds  received 
public 
national 
through 
promotional  bank.  Currently,  the  Hungarian 
beneficial ownership register does not contain 
complete  and  accurate  information  on  the 
ultimate  beneficial  owners  of  private  equity 
funds.  Banks  and  the  Supervisory  authority 
cannot  rely  on  a  verified  central  registry  of 
ownership data to comply with prudential rules 

support 

the 

(6)  Business Ready. 

(7)  See infringement case INFR(2023)2098. 

10 

 
 
 
on loans to owners of the bank and company 
group  loans  if  the  borrower  company  or  the 
bank  is  owned  by  a  private  equity  fund.   In 
the 
November  2024,  Hungary  amended 
to 
funds 
legislation  on  private  equity 
complement 
the  database  on  ownership. 
However,  the  database  will  contain  data  for 
already  established  funds  only  as  of  July 
2026.  Moreover,  the  tax  authority  cannot 
verify 
the  data,  and  non-governmental 
organisations and investigative journalists with 
a legitimate interest do not have access to it. 

Taxes  targeting  specific  sectors  increase 
the prices of services and goods. The cost 
of banking and energy for firms is one of the 
highest in the EU. Money transfers, except low 
value  transactions,  are  taxed  at  a  rate  of 
0.45% (up from 0.3% in August 2024). In the 
euro  area,  such  transfers  are  free  of  charge. 
Banks can also pass on to customers the cost 
of  the  bank  levy.  These  two  taxes  increased 
banking  costs  for  households  and  businesses 
in  2024.  Hungarian 
by  0.9%  of  GDP 
households  spend  3%  of  their  consumption 
expenditure  on  banking,  compared  with  0.8% 
in  the  euro  area.  A  surtax  amounting to  0.1% 
imposed  on  mobile 
of  GDP  has  been 
telecommunication,  which  contributes  to  the 
relatively  high  cost  of  mobile  telephone 
services in Hungary. From 2025, medium-sized 
and  large  firms  in  the  services  sector  also 
have to pay a cybersecurity fee. 

The  retail  sector  operates in an  unstable 
business  environment.  The  tax  burden  in 
this  sector  disproportionately  impacts  larger, 
often foreign-owned companies. Conditions for 
opening  and  making  changes  to  stores  larger 
than  400 m²  lack  transparency.  Retailers  are 
also  affected  by  administrative  interventions 
in price setting, such as retail price caps, limits 
on sales margins and mandatory discounts. In 
September  2024,  the  European  Court  of 
Justice  ruled that  in  2022  and  2023  Hungary 
had  breached  single  market  rules  by  fixing  a 
maximum  price  for  the  sale  of  certain 
in  the  country  and 
agricultural  products 
imposing  an  obligation  to  offer  a  specific 
quantity  of  such  products  for  sale.  In  March 
2025,  the  government  introduced  a  10% 
retailer profit margin cap for 30 food products 
to  fight  against  inflation.  A  similar  15% 
margin  cap  was  introduced  in  May  2025  for 

30  personal  hygiene  and  household  cleaning 
products. Legislation on combating food waste 
contains a prohibits retailers from selling food 
products  48  hours  before  their  expiry  date, 
effective 
potentially 
management  of  inventories.  The  mandatory 
online  price  reporting  affecting  food  retailers 
(essentially  the  foreign-owned  ones)  imposes 
an additional administrative burden. 

disrupting 

the 

Measures  and  high  taxes  in  the  retail 
sector  decreased  their  competitiveness. 
After  the  highest  food  inflation  in  the  last 
decade,  the  price  of  food  almost  reached  the 
EU  average  in  2023.  Country-specific  factors 
accounting  for  high  prices 
large 
administrative burdens, the highest VAT rate in 
the  EU  (27%),  a  local  business  tax  (1-2%  of 
the retail  margin)  and  a retail  tax (amounting 
to  4.5%  on  turnover  in  2024).  The  high  tax 
in 
burden 
particular  for  retail  companies  operating  with 
low  margins,  such  as  food  retail,  fuel  and  e-
commerce firms. 

is  a  competitive  disadvantage, 

include 

Inefficient R&D spending and 
limited access to finance hold back 
innovation 

investment  hinders 
Stagnating  R&D 
Hungary’s 
innovation 
scientific  and 
performance. The 2024 European Innovation 
that  while  Hungary’s 
Scoreboard  shows 
innovation performance has improved over the 
years  it  is  still  performing  poorly  compared 
with  the  EU  average.  R&D  intensity  increased 
only  marginally  over  the  past  decade  and 
remains  well  below  the  EU  average  (1.4%,  vs 
2.2% of GDP in 2023).  The main obstacles to 
innovation  are  the  unstable  public  funding 
framework, 
business 
environment,  high  interest  rates,  insufficient 
access  to  market-based  financing,  the  low 
low 
level  of  high-skilled  workers  and 
entrepreneurial skills among managers. 

unpredictable 

the 

Low  public  R&D  spending  decreases 
fundamental 
Hungary’s  capacity 
research.  Public  R&D  spending,  including  in 
universities,  is  one  of  the  lowest  in  the  EU 

for 

11 

 
not yet reaping all the benefits of these digital 
technologies.  The  proportion  of  small  and 
medium-sized enterprises with at least a basic 
level  of digital intensity is  still  lower than the 
EU  average  (53.2%  vs  57.7%).  As  for  digital 
public  services  for  businesses,  Hungary  has 
not  yet  set  up  and  notified  eID  schemes  for 
legal  entities.  This  means  businesses  cannot 
authenticate  themselves  to  access  public 
services provided by other countries. 

small 
and 

The  market-based  financing  of  fast-
and  medium-sized 
growing 
enterprises 
remains 
start-ups 
limited.  Venture  capital  funding  amounted  to 
0.05% of GDP in 2023, below the EU average 
of  0.1%.  40%  of  venture  capital  investments 
came  from  state-owned  funds  drawing  on 
national  and  EU  funds.  This  is  the  highest 
proportion  among  EU  countries  in  the  OECD. 
While  these  programmes  may  temporarily 
boost  venture  capital  financing,  they  cannot 
contribute  to  long-term  market  development. 
Moreover,  high  interest  rates  coupled  with  a 
frequently  changing  regulatory  environment 
hinder  the  financing  of  innovative  start-ups. 
Recent  measures  such  as  simplified  approval 
procedures  for  lending  by  wealthy  individuals 
who  invest  in  early-stage  companies  and  the 
use of convertible loans by start-ups may help 
make the market more dynamic. 

to 

rising 

rates, 

interest 

financing  distorts 

The  significant  involvement  of  the  State 
in  business 
the 
efficient  functioning  of  the  markets.  In 
the 
response 
government  has  expanded  subsidised  lending 
schemes  for  firms.  On  average,  the  share  of 
subsidised  loans  amounted  to  38.5%  of  new 
loans for small and medium-sized enterprises 
in  2022-2024  (Graph  2.2).  However,  the 
effectiveness 
is 
questionable, as they have not necessarily led 
increased  productivity (8)  among 
to 
loan 
recipients  and  create  a  cost  to  taxpayers.  The 
overall  state  subsidies,  including  grants,  to 
in  the  EU, 
firms  are  also  the  highest 
amounting to an average of 2.6% of GDP per 

schemes 

these 

of 

(8)  Telegdy, Á. and G. Tóth (2024), A támogatott hitelezés 

hatásvizsgálata Magyarországon, Közgazdasági Szemle 
71:113-130 (in Hungarian). 

contribute 

investment  holds  back 

(0.4%,  vs  the  EU  average  of  0.7%).  The  low 
public 
scientific 
excellence.  The  ongoing  reorganisation  of 
research institutes, as well as unclear internal 
to 
evaluation  mechanisms, 
uncertain  working  conditions  for  researchers. 
Technology 
transfer  offices  are  not  yet 
sufficiently  embedded  in  and  accepted  by 
academic  circles,  and  spin-off  channels  are 
not  yet  well  developed.    As  a  response,  the 
John  von  Neumann  Program  launched  the 
renewal  of  the  university  technology  transfer 
procedures.  Cooperation  between  academia 
and businesses is mainly limited to incumbent 
firms  with 
to  universities.  While 
cooperation  between  innovative  small  and 
medium-sized enterprises has improved due to 
support  programmes,  in  2024  it  was  well 
below the EU average. 

links 

Business  R&D  benefits  from  generous 
government subsidies. Hungary provides the 
most  generous  subsidies  to  business  R&D 
activity  (0.3%  of  GDP  in  2021)  in  the  EU, 
through  direct  grants  and  tax  allowances. 
However,  the  R&D  spending  of  businesses 
decreased to 1% in 2023 from 1.2% in 2021. 
Moreover, design and patent applications as a 
share of GDP are one of the lowest in the EU 
and  Hungary  does  not  participate  in  the 
unitary  patent  system.  Only  a  few,  mainly 
large,  companies  innovate  and  benefit  from 
the various subsidies. This is due to the heavy 
administrative  burden  and  not  always  clear 
eligibility rules on innovation expenditure.  

is 

of 

entrepreneurship 

Entrepreneurship  education 
limited. 
There  are  several  initiatives  supporting  the 
development 
skills. 
However,  entrepreneurship  education  is  used 
in  a  narrow  sense  in  the  national  school 
curriculum,  being  limited  to  economic  and 
financial 
literacy  According  to  the  Global 
low 
Entrepreneurship  Monitor, 
proportion  of  respondents  feel  they  have  the 
skills and knowledge to start a business. 

only 

a 

businesses. 

There is potential for better use of digital 
by 
solutions 
Digital 
infrastructure 
is  well  developed,  enabling 
better  connectivity  than  the  EU  average. 
Despite the significant increase in the take-up 
of advanced technologies, most businesses, in 
particular  small  and  medium-sized  ones,  are 

12 

 
 
year  between  2017  and  2022  (EU  average: 
1.4%). 

Graph 2.2: New loans for small and medium-
sized enterprises 

Source: MNB, Hungarian Central Statistical Office 

towards 

Incentives  skewed 
low-risk 
investments  hamper  the  development  of 
capital markets. Capital markets as channels 
for  financing  start-ups  and  highly  innovative 
small  and  medium-sized  enterprises  are 
underdeveloped in Hungary. In 2023, the stock 
market  capitalisation  stood  at  17.6%  of  GDP 
(EU  average:  68%).  Recent  policy  measures 
have  further  obstructed  the  development  of 
capital  markets.  In  2022,  the  government 
began  issuing  tax-free  long-term  bonds  for 
retail 
the 
withholding  tax  on  interest  income  from  15% 
to  28%  (effective  July  2023).  Tax  incentives 
on  housing  investment  also  allocate  savings 
away from the capital market. 

investors,  while 

increasing 

Complex administrative 
procedures and distortive sectoral 
taxes are further constraints 

The regulatory burden imposed by certain 
impacts  firms’ 
procedures  negatively 
investment 
instance, 
decisions. 
administrative  procedures  for  starting  new 
businesses  are  complex  and  the  minimum 
capital  requirement  can  be  an  additional 

For 

obstacle  to  start  a  business.  Moreover,  the 
World Bank’s B-READY indicators suggest that 
there  is  potential  to  reduce  the  time  required 
to  obtain  a  property  transfer,  a  construction-
related  permit,  energy  system  connection  and 
environmental  licence.  The  requirement  to 
register  and  pay  fees  to  the  Chamber  of 
Commerce  can  also  be  burdensome  for  firms 
and could be made optional. At the same time, 
regularly 
the 
simplifies 
government 
tax  procedures.  For 
administrative  and 
example,  from  2025 
the  minimum  net 
turnover  threshold  for  audit  purposes  was 
raised  from  HUF 300  million  to  HUF 600 
million,  easing  the  requirements  for  smaller 
firms.  The  government  is  working  with  the 
Hungarian  Chamber  of  Commerce  and 
Industry 
reduce 
explore  ways 
bureaucratic  burdens,  particularly  regarding 
legal,  tax  and  data  reporting  obligations  for 
firms.  Under  the  recovery  and  resilience  plan, 
the  government  committed  to  reducing  the 
number of taxes by 10% compared to 2023. 

to 

to 

impacts 

construction  materials, 

increasing  use  of  sector-specific 
The 
taxes  complicates  the  tax  system  and 
disproportionately 
non-
Hungarian  firms.  In  2023,  revenues  from 
sector-specific  taxes  accounted  for  2.7%  of 
GDP.  This  represents  twice  the  revenue  from 
corporate  income  taxation,  despite  the  much 
narrower tax base of sector-specific taxes. The 
sectors most affected include banking, energy, 
retail, 
insurance, 
telecommunication  and  utilities.  These  sector-
specific taxes are often not levied on earnings 
and 
industries  with 
target 
significant foreign ownership (9) such as retail, 
cement,  construction  and  ceramic  materials. 
This  leads  to  an  uneven  playing  field  that 
disrupts  the  functioning  of  the  single  market. 
In  some  instances,  this  additional  tax  burden 
contributed  to  foreign  companies  divesting 
their  Hungarian  subsidiaries.  In  a  positive 
development, from 2025 some sector-specific 
taxes 
on 
telecommunication and air travel were phased 
out.  However,  this  does  not  significantly 

frequently 

surtaxes 

such 

the 

as 

(9)  See infringement cases on retail tax (INFR(2024)4022) 

and on building materials (INFR(2022)4009). 

13 

0.0%0.5%1.0%1.5%2.0%2.5%3.0%3.5%4.0%4.5%5.0%05001,0001,5002,0002,5002018201920202021202220232024subdidised (HUF bn)non-subsidised (HUF bn)New SME loan % of GDP (right axis) 
      
 
reduce the overall distortive impact of sectoral 
taxes. 

14 

 
DECARBONISATION, ENERGY AFFORDABILITY AND 
SUSTAINABILITY 

A well-functioning energy market 
is key for competitiveness 

High  dependence  on  Russian  fossil  fuel 
poses  a  security-of-supply  risk.  Hungary 
continues  to  heavily  rely  on  Russia  for  fossil 
fuels (in 2024 more than 70% of natural gas 
and  more  than  80%  of  crude  oil  consumed 
was of Russian origin) and for nuclear energy, 
although  some  steps  have  been  taken  to 
diversify  supply.  As  Hungary  is  a  land-locked 
country,  gas  and  crude  oil  arrive  through 
pipelines.  However,  sanctions  and  interrupted 
commercial relationships between Ukraine and 
Russia  and  damage  to  infrastructure  may 
make Russian fossil fuel products inaccessible. 
Despite  these  risks,  Hungary’s  efforts  to  shift 
away  from  Russian  dependence  are  slow. 
Hungary  acquires  significant  quantities  of 
natural gas from Russia, amounting to about 7 
billion  cubic  metres  in  2024,  of  which  about 
4.5 billion cubic metres under a long-term gas 
contract. 

Without  more  system  flexibility,  fast 
deployment of renewables fails to reduce 
reliance  on  electricity  imports.  Domestic 
electricity generation by solar power increased 
from  0.2%  to  25%  in  electricity  production 
between 2014 and 2024, which is the highest 
share in the EU. This increased  exports during 
sunny  hours  but  cannot  replace  import  needs 
during  peak  consumption  periods.  As  a  result, 
the  energy  balance  has  improved  in  the  last 
decade,  but  gross  imported  electricity  did  not 
decrease  (Graph  3.1).  Moreover,  the  tax  on 
energy  producers  makes  import  prices  more 
competitive. 

Generous  subsidies  were  key 
in  the 
expansion  of  solar  energy  generation. 
Solar  energy  generation  capacity  expanded 
due  to:  (i)  the  net  accounting  of  residential 

solar energy generation and the electricity use 
of the same household; (ii) guaranteed feed-in 
tariffs for commercial solar power plants (KÁT 
and  METAR);  (iii)  100%  grant  support  under 
the recovery and resilience plan for residential 
solar  panels;  and  (iv)  other  subsidy  schemes. 
The  subsidised  household  energy  prices 
(electricity is less than 10 eurocent/KWh, vs an 
EU average of 32 eurocent/KWh in 2024), and 
electricity  feed-in  tariffs  (1.2  eurocent/KWh) 
are  low.  This  makes  households’  renewable 
and  energy-efficiency  projects 
financially 
unattractive without generous subsidies. 

Graph 3.1: Electricity imports, exports and 
solar production in Hungary, in GWh 

Source: Eurostat 

The  extreme  volatility  of  the  wholesale 
electricity  price  over  the  course  of 
individual  days  points  to  a  need  for 
improved grid infrastructure, storage and 
flexibility  solutions.  There  are  more  and 
more  hours  with  negative  prices  during  solar 
peaks  and  high  prices  at  solar  off-peaks, 
resulting  in  extreme  price  volatility  over  the 
course of individual days. The fast deployment 
of  solar  power  plants  was  not  supported  by 
the necessary flexibility solutions.  

15 

05000100001500020000250002014201520162017201820192020202120222023ExportsImportsSolar 
 
     
Currently  the  electricity  grid  network 
lacks  ample  classic  and  smart  grids,  and 
storage  infrastructure.  The  RRP  and  other 
EU  programs 
include  measures  on  grid 
development and storage, the implementation 
of which are crucial. The time taken to connect 
a utility-scale renewable energy source to the 
grid  is  six  years  on  average,  which  is  higher 
than the EU average of four years. The use of 
wind  energy  in  electricity  production  is  well 
below  the  EU  average  and  is  unable  to 
adequately 
the  electricity 
system’s  balance.  Household  consumers  have 
limited access to dynamic pricing, and the roll-
out  of smart meters is low (below 10%), also 
impeding flexibility. The implementation of the 
reform  on  dynamic  pricing  and  the  measures 
increasing the use of smart meters included in 
the 
resilience  plan  should 
contribute  to  more  flexibility.  Decarbonisation 
measures  and  an  expansion  of  electricity-
based  manufacturing  (in  particular  batteries) 
are expected to massively drive up demand for 
electricity. 

recovery  and 

contribute 

to 

Graph 3.2: Electricity price for firms, EUR per 
KWh 

balancing  market,  they  sell  the  energy  they 
produce  at  a  much  higher  price  than  before. 
Hungary  is  missing  out  on  the  benefits  of 
cross-border  balancing  as 
it  has  delayed 
joining the European PICASSO platform. 

The persistence of high energy prices for 
companies  hinders  their  competitiveness. 
The  energy price  for  businesses  in  Hungary  is 
one of the highest in the EU (Graph 3.2) due to 
low  competition,  burdensome  regulations  and 
taxes,  and  protracted  investments  in  the  last 
decade.  In  addition,  the  regulated  low  energy 
prices  for  households  also  put  an  indirect 
burden  on  energy  prices  for  businesses.  The 
current  system  of  guaranteed  fixed  feed-in 
tariffs  (‘KÁT’)  for  a  large  part  of  industrial 
renewable 
creates 
significant  extra  costs  that  are  passed  on  to 
business  consumers  (0.2%  of  GDP  in  2024) 
through  the  network  transmission  fee  (Graph 
3.3). The high energy windfall tax (‘Robin Hood 
tax’)  drives  up  energy  prices  for  businesses 
and hinders energy companies’ investments in 
new  energy  generation  infrastructure.  It  also 
reduces 
incentives  for  setting  up  power 
purchase agreements, whose penetration is at 
this  stage  very  limited.  The  high  electricity 
price compared to gas acts as a disincentive to 
decarbonisation. 

producers 

energy 

Graph 3.3: Network transmission cost for 
firms, EUR per KWh in 2023 

(1) Excluding taxes and levies, in purchasing power 
standard (PPS), consumption from 500 MWh to 1999 
MWh 
Source: Eurostat 

The  balancing  energy  market  in  Hungary 
relies  heavily  on  gas-fired  power  plants. 
These companies need to cover their costs and 
earn  their  profit  in  a  shorter  period  of  time. 
the  Hungarian 
With 

low  competition  on 

(1) In purchasing power standard (PPS), consumption 
from 500 MWh to 1 999 MWh 
Source: Eurostat 

Hungary has one of the highest figures in 
the  EU  for  fossil  fuel  subsidies.  These 

16 

0.000.050.100.150.200.250.300.350.400.450.502015201620172018201920202021202220232024HungaryEU270.000.020.040.060.080.100.120.140.160.180.20SwedenAustriaCzechiaNetherlandsRomaniaLuxembourgGermanySlovakiaSpainFinlandEstoniaDenmarkPortugalLatviaPolandFranceSloveniaGreeceCyprusBulgariaBelgiumLithuaniaIrelandItalyCroatiaHungary 
     
   
subsidies,  which  Hungary  is  not  planning  to 
phase  out  before  2030,  amount  to  1.01%  of 
GDP.  Scaling  down  and  phasing  out  these 
subsidies  is  in  line  with  EU  commitments  and 
can  help  Hungary  to  control  government 
spending.  Fossil  fuel  subsidies  which  do  not 
target  energy  poverty  nor  genuine  energy 
security 
hinder 
electrification and are not crucial for industrial 
competitiveness  include:  (i)  the  utility  cost 
reduction  programme;  (ii)  a  VAT  reduction  for 
district  heating  using  natural  gas;  and  (iii) 
excise tax refunds for agricultural use of diesel 
(see also Annex 8). 

and  which 

concerns 

The path to a green economy is 
facing significant obstacles 

Hungary  faces  challenges  over  water 
resilience,  droughts  and  flash  floods. 
Hungary  is  increasingly  affected  by  climate 
risks, evidenced by the droughts it experienced 
in  2022  in  particular  but  also  in  2024,  which 
led  to  significant  losses  in  the  agricultural 
sector.  Moreover,  water  quality  is  poor  due  to 
pollution from agriculture, industry and human 
settlements,  with  only  11.3%  of  surface 
waters  in  good  ecological  status  (EU  average: 
treatment 
37.3%).  Hungary’s  wastewater 
remains  a  major 
concern,  with  poor 
compliance  with  EU  standards,  declining 
treatment  capacity  and  significant  pollution 
risks. The situation is expected to worsen with 
illegal  water  extraction  from  natural  sources 
(such  as  rivers,  lakes  and  groundwater)  and 
the  expected  increasing  demand  for  water 
from  industry,  which  takes  up  82%  of  total 
surface  water  abstraction.  Hungary’s  water 
strategy  focuses  on  providing  more  water  to 
industry  and  agriculture,  relying  mainly  on 
‘grey’  infrastructure  such  as  land  drainage, 
water  reservoirs  and  irrigation  canals,  with 
only a few measures promoting natural water 
retention.  The  low  administrative  price  of 
utility 
drinking  water 
companies  from  investing  in  infrastructure 
maintenance.  2024  saw  improvements  to  the 
governance  structure  of  water  management 
of 
due 
responsibility  under  the  Ministry  of  Energy, 

prevents  water 

centralisation 

increased 

to 

although  some  responsibilities  still  remain 
under other ministries. 

lately 

progress 

the  EU  average 

Progress is slow in embracing the circular 
economy.  According  to  2023  data,  Hungary’s 
resource  productivity  of  1.33  euro/kg  and 
circular  material  use  rate  of  5.9%  are 
substantially  below  the  EU  average  (2.74 
euro/kg  and  11.8%)  and  no  convergence  can 
be observed. Hungary is generating less waste 
than 
(429 kg/capita  vs 
511 kg/capita,  in  2023),  but  has  made  no 
on  waste 
significant 
management.  While  the  recycling  rate  for 
municipal  waste  gradually 
improved  until 
2018,  this  positive  trend  came  to  a  halt 
afterwards,  standing  at  33.4%  in  2023  (EU 
average:  48.9%).  The 
rate  for 
packaging and for construction and demolition 
waste remained well below the EU average. All 
linked  to  scarce  resource 
this  could  be 
allocation,  insufficient  treatment  capacities 
and  gradually  decreasing  competition  in  the 
waste  management  sector.  In  2023,  Hungary 
introduced a single 35-year concession system 
for  waste  management,  aiming  to  provide 
increased  efficiency  and  stability  in  waste 
management. Hungary also extended producer 
responsibility  the  same  year.  A  national 
circular economy strategy is under preparation 
to address remaining issues. 

recycling 

and 

ineffective 

Hungary’s  industrial  policy  has  potential 
to  focus  more  comprehensively  on  net-
zero  industry  while  decreasing  industrial 
emissions to the atmosphere. Hungary has 
emerged as a leader in electric vehicle battery 
manufacturing, but development of other net-
zero  technologies  remains  modest.  Labour 
retraining 
shortages 
programmes  limit  the  potential  growth  of  the 
battery value chain. Moreover, action is lacking 
to  ensure  a 
regulatory 
framework  on  net-zero  technologies  e.g.  on 
permitting,  public  procurement  and 
the 
development  of  industrial  clusters  promoting 
industrial 
innovation.  At 
emissions  into  the  atmosphere  in  Hungary 
caused more damage to the environment than 
on  average  in  the  EU,  while  the  number  of 
deaths attributable to air pollution was one of 
the  highest  in  the  EU.  These  two  statistics 
highlight  the  importance  of  Hungary  taking 

the  same  time, 

comprehensive 

17 

 
action to ensure compliance with legislation on 
air  quality  and  industrial  emissions  and  to 
tackle pollution from all sources. 

18 

 
SKILLS, QUALITY JOBS AND SOCIAL FAIRNESS 

Expanding 

progression. 

These  schools  also  face  severe 
teacher 
shortages,  lowering  educational  quality.  Over 
10% of secondary students enrol in three-year 
vocational education and training programmes 
that  do  not  provide  direct  access  to  higher 
levels  of  education,  limiting  upskilling  and 
career 
general 
education  content  in  these  schools  could 
improve  the  system’s  permeability  (smooth 
the  entire 
transition  of 
education  and  training  system,  horizontally 
and  vertically),  resulting  in  more  graduates 
continuing 
their  studies  and  successfully 
passing  the  upper  secondary  school  leaving 
examination  (matura).  Additional  resources  to 
disadvantaged  schools  could  help  reduce 
performance gaps and segregation. 

learners  within 

The  government  has  taken  several  steps 
to  make  the  teaching  profession  more 
attractive. In Hungary, teacher shortages are 
a  pressing  concern,  especially 
in  most 
disadvantaged regions and rural areas. This is 
mainly  due  to  an  ageing  teacher  workforce 
and  insufficient  number  of    highly  qualified 
candidates. 
started 
implementing  a  major  reform  of  teachers’ 
salaries,  co-financed  by  the  European  Social 
Fund  Plus.  Continuing  this  reform,  together 
with  greater  teacher  autonomy  and  a  teacher 
assessment  system  that  rewards  innovative 
and  inclusive  teaching  approaches,  could  help 
attract  high-achieving  candidates  and  keep 
young teachers in the profession. 

In  2024,  Hungary 

Despite  increasing  demand  for  a  highly 
tertiary  education 
skilled  workforce, 
attainment  remains  low.  The  employment 
rate  of  recent  tertiary  graduates  (93.ö%) 
exceeds  the  EU  average  (86.6%),  indicating 
high  demand.  However,  tertiary  education 
attainment rates among 25-34 year-olds have 
been  decreasing  in  the  past  decade.  In  2024 
the  figure  had  reached  32.3%,  one  of  the 
lowest  in  the  EU  (Graph  4.1).  Innovation 
potential  is  further  constrained  by  the  low 

Education and skills are not 
keeping pace with the needs of the 
economy 

for 

shortages 

hinder 
innovation 

Hungary’s 
Skills 
and 
potential 
competitiveness. Skills shortages in Hungary 
are  mainly driven  by  weak  basic  skills  among 
disadvantaged  and  vocational  education  and 
tertiary  education 
low 
training  students, 
attainment,  and 
limited  upskilling  and 
reskilling for vulnerable groups. Despite recent 
increase  in  unemployment  to  4.5%  in  2024, 
the  employment  rate  remained  high.  There  is 
room  to  involve  more  people  in  the  jobs 
market,  in  particular  young  and  low-skilled 
workers,  but  Hungary  also  relies  on  foreign 
workers (ca. 80 000 in 2025). 

Stronger basic skills are key if Hungary is 
to  expand  its  productive  workforce.  Early 
school leaving remains above the EU average, 
particularly among persons with disabilities, in 
the least developed regions and in rural areas, 
and  among  the  Roma  community  (see  Annex 
10).  The  2022  PISA  (10)  survey  shows  one  of 
the 
average  maths 
performance  between  general  and  vocational 
programmes  in  the  EU,  largely  due  to  socio-
economic  disparities.  Without  stronger  basic 
skills, half of disadvantaged students struggle 
to access the jobs market. 

largest 

gaps 

in 

Disadvantaged 

Structural  inefficiencies  in  the  education 
system  make  these  challenges  harder  to 
address. 
are 
concentrated  in  some  schools  already  from 
primary  level,  with  particular  issues  in  three-
year secondary vocational schools, resulting in 
one  of  EU’s  highest  levels  of  segregation. 

students 

(10)  OECD Programme for International Student Assessment. 

19 

 
 
 
number  of  science,  technology,  engineering 
and  mathematics  graduates,  except 
in 
information  and  communications  technology 
fields,  reducing  the  country’s  ability  to  attract 
low 
investment 
participation  of  disadvantaged  students  in 
tertiary  education  is  a  missed  opportunity  to 
expand Hungary’s high-skilled workforce. 

in  high-tech  sectors.  The 

Graph 4.1: Tertiary educational attainment 
level (%) 

(1) Share of the population aged 25-34 who have 
successfully completed tertiary studies 
Source: Eurostat 

those 

Low  basic  skills  and  limited  lifelong 
learning  among  vulnerable  adults  hinder 
labour  mobilisation.  The  OECD  Programme 
for  the  International  Assessment  of  Adult 
Competencies (PIAAC) 2022 survey shows that 
Hungarian  adults  (including  16-24  years  old), 
especially 
disadvantaged 
backgrounds,  perform  below  the  EU  average 
(the 
on  basic  skills.  Vulnerable  groups 
unemployed,  low-educated  adults  and  people 
aged  55  or  older)  also  lag  behind  in  basic 
digital  skills  and  participation 
lifelong 
learning (see Annex 10). While the government 
has 
‘micro-
credential’(11) 
learning 

initiatives  such  as 
training, 

individual 

launched 

from 

in 

(11)  According to the Council Recommendation of 16 June 
2022 on a European approach to micro-credentials for 
lifelong learning and employability, micro-credential 
means the record of the learning outcomes that a 
learner has acquired following a small volume of 
learning.  

20 

accounts  and  an  adult  training  fund,  and  has 
expanded  measures  to  help  the  jobless  find 
work,  access  for  vulnerable  groups  remains 
limited. 

and 

measures 

reskilling 

development 

Effective 
upskilling 
opportunities,  and  appropriate  support 
services  are  lacking.  Measures  to  help  the 
jobless  find  work  are  in  place,  but  the  2021 
legislation  on  public  employment  service 
further  reduced  access  to  upskilling  and 
reskilling.  The  2024  amendment  now  enables 
public  employment  service  to  play  more 
prominent  role  in  the  provision  of  labour 
market trainings. Limited availability of quality 
training might appear as a challenge. Targeted 
and 
skills 
comprehensive  support  services  are  crucial  if 
in  the  long  term  these  groups  are  to  become 
employable  and  enter  the  jobs  market.  The 
three-month  unemployment  benefit  limits  the 
time  for  finding  suitable  employment  or 
adequate 
and 
increases  risks  of  low-quality  jobs,  long-term 
unemployment 
cover 
Hungary’s labour force needs, the government 
set  rules  to  allow  non-EU  nationals 
to 
temporarily  work  in  Hungary.  As  of  2025  the 
number  of  countries  from  where  foreign 
workers  could  come  has  been  narrowed  to 
only three, which makes measures to help the 
jobless  find  work  all  the  more  important.  The 
2024  job  trial  pilot  programme  offers  some 
support,  but  more  targeted  measures  are 
needed.  Hungary  has  developed 
skills 
forecasting  tools  to  better  inform  its  skills 
remain 
development  policies,  but 
fragmented,  not 
is 
unavailable to the public. 

interlinked  and  data 

opportunities 

upskilling 

poverty. 

these 

and 

To 

Social  dialogue  between  employers  and 
trade  unions  remains  weak,  especially  in 
the public sector. Although the private sector 
tripartite  forum  received  a  legal  mandate  for 
minimum  wage  negotiations  in  2024,  major 
economic policies proposed in 2024 and 2025 
were  adopted  without  consulting  relevant 
employers and trade unions. The public sector 
forum  has  not  met  in  recent  years,  and  the 
introduction  of  separate  employment  status 
for  some  public  employees  (in  healthcare, 
education, the cultural sector, etc.) has further 
voiding 
weakened 

bargaining, 

collective 

32.132.32025303540455020142015201620172018201920202021202220232024EU27Hungary2030 target 
   
 
agreements for some groups. Recent skills and 
social  policy  initiatives  were  also  developed 
without  consulting  employers  and 
trade 
unions. 

Poverty has started to rise, testing 
social policy 

target 

attainment 

Educational 

its  national  poverty 

Poverty  and  social  exclusion  are  on  the 
long-standing  positive 
rise,  reversing 
trends.  The  rate  of  people  at  risk  of  poverty 
or  social  exclusion  increased  in  2023  and 
2024,  while  still  remaining  below  the  EU 
average.  This  puts  at  risk  Hungary’s  progress 
for 
towards 
2030(12). 
and 
employment  status  play  an  important  role  in 
determining  poverty  risks.  The  effects  were 
significantly more pronounced for people with 
disabilities  and  people 
the  Roma 
community,  who  often  have  a  low  level  of 
education  and  are  under-represented  on  the 
jobs market. There are also signs of increasing 
poverty  among  the  elderly.  An  EU-funded 
programme supporting housing, social services 
and education in the 300 most disadvantaged 
municipalities  is  a  major  step  forward.  This 
could  benefit  from  further  measures 
to 
improve  access  to  mainstream  social  and 
basic services. 

from 

Poverty  increased  significantly  among 
children.  Despite  Hungary’s  focus  on  family-
friendly policies, more than one in five children 
and  28%  of  families  with  three  or  more 
children  were  at  risk  of  poverty  or  social 
exclusion. Almost  7 out of 10 children whose 
parents  have  low  levels  of  education    are 
affected.  Children  also  experienced  an  
increase  in  the  depth  of  their  poverty.  Free 
school  meals  and  affordable  transport  for 
children help address some aspects of poverty, 
but  further  efforts  to  make  it  easier  for 
children at risk of poverty and social exclusion 

(12)  HU expresses its national poverty reduction target as a 
reduction in the material and social deprivation rate for 
families with children (to 13% by 2030) that can be 
translated into a reduction by 292 000 of people at risk 
of poverty or social exclusion by 2030. 

to  access  quality  early  childhood  education 
and care would aid their early development. 

Income 

improve 
Redistribution  policies  hardly 
inequality 
inequalities. 
income 
(measured  by  the  ratio  of  total 
income 
between  the  lowest  and  highest  quintiles) 
stagnated in the last decade, against a higher 
but  gradually  improving  EU  average.  Wealth 
inequality increased significantly and is among 
the highest in the EU,  with the top  1% of the 
population holding 33% of the total wealth in 
2023 (13).  The  tax  and  social  benefit  system 
provides  significantly  more  monetary  support 
to high-income households than it does to the 
lower 
income  groups.  The  average  social 
income  per  person  among  the  top  income 
group  was  almost  3  times  that  of  the  lowest 
income group in 2023 (Graph 4.2). 

Graph 4.2: Distribution of incomes among 
quintiles, 2023, annual income in HUF 1 000 

Source: Hungarian Central Statistical Office 

tax 

system 

The 
disproportionately 
burdens  lower-paid  workers  through  the 
income  tax  rate  and  high  consumption 
taxes.  Due  to  the  flat  personal  income  tax, 
the  taxation  of  earnings  from 
is 
relatively  high  for  low-income  earners,  and 
relatively low for high-income earners. Most of 
the  social  support  is  through  tax  credits,  as  a 
result  of  which  high-income  households  get 
higher  benefits  than  low-income  groups.  The 

labour 

(13)  World - WID - World Inequality Database. 

21 

01,0002,0003,0004,0005,0006,0007,0008,00012345other incomesocial incomelabour income 
 
      
 
tax  exemption  on  holding  government  bonds 
alone  provides  a  transfer  amounting  to  0.4% 
of  GDP  to  high-income  households  in  2025. 
The  income  tax  exemption  for  mothers  with 
two  or  more  children  announced  in  February 
2025  will  result  in  higher  household  income 
among high earners,  while the income among 
families  with  the  lowest  levels  of  income  will 
provide  only  limited  relief  for  families’  living 
conditions.  This  also  needs  to  be  seen  in  the 
context  of  the  continued  high  food  and 
housing  prices  and  limited  access  to  quality 
public  services  locally.  From  2025,  pensioners 
will receive VAT refunds on certain food items, 
including fruit and vegetables. While this may 
improve  the  income  situation  of  low-income 
pensioners,  the  measure  is  not  targeted  to 
them.  

The adequacy of social protection further 
deteriorated.  The  impact  of  social  benefits 
has declined significantly since 2021 in terms 
of  reducing  poverty  (especially  for  children) 
and remained low in terms of reducing income 
inequality.  The  major  sources  of  income  for 
low-income households have not kept up with 
the  cost  of  living  in  the  last  decade.  The 
income 
nominal  value  of 
(‘foglalkoztatást  helyettesítő  támogatás’)  has 
not  increased  since  2012,  while  consumer 
prices  have  increased  by  75%  since  then. 
Consequently,  the  adequacy  of  minimum 
income benefits is one of the lowest in the EU. 
Pegging  the  minimum  income  to  the  inflation 
rate  or  the  minimum  wage  could  somewhat 
improve its adequacy. 

the  minimum 

The 

proportion 

standards. 

High  housing  costs  negatively  impact 
living 
of 
households  who  spend  over  40%  of  their 
household  income  on  housing  costs  increased 
between  2021  and    2024.  The  figure  is 
particularly  high  among  people  living  below 
threshold,  especially  among 
the  poverty 
children.  House  prices  increased  by  230% 
between 2010 and 2024, the most in the EU, 
making  home  ownership  less  affordable  in 
spite of the significant rise in wages. There are 
significant regional differences in house prices, 
with the price level in rural areas only 13% of 
prices in the capital in 2024. The price rise was 
amplified  by  government  measures  targeting 
the  demand  side  of  the  market  and  the 
regulatory  environment  (notably  no  heritage 

and  gift  tax,  and  a  very  low  property  tax  and 
transaction fee). In parallel, rents increased by 
108%,  putting  a  large  proportion  of  tenants 
under  financial  pressure.  On  housing  quality, 
poor  housing  conditions  are  widespread 
among marginalised communities. 

to 

tends 

exclude 

Low-income  households  have 
limited 
access to housing support. Various types of 
subsidised  lending  schemes  have  provided 
incentives for people to buy a home, especially 
for  higher-income  households.  Most  of  these 
require  own  resources  and  taking  out  loans, 
which 
low-income 
households.  Government  support  for  home 
rental  is  available  for  young  employees,  but 
larger-scale  means-tested 
there  are  no 
measures  for  people  renting.  The  rental 
market 
regulated,  which  creates 
uncertainties  both  for  tenants  and  landlords, 
and  results  in  higher  prices  and  lower  supply. 
The  social  housing  stock 
is  small  and 
decreasing,  due  to  the 
lack  of  a  clear 
government  policy  and  a  lack  of  resources  in 
local  authorities.  The  government  announced 
that  a  housing  capital  programme  would  be 
launched  in  2025  to  expand  housing  market 
supply  and  make  homeownership  more 
accessible for people. 

is  not 

Low  healthcare  spending  impacts  health 
outcomes.  Hungary’s  healthcare  spending 
amounted to 4.1% of GDP in 2023, among the 
lowest in the EU. Chronic underfunding results, 
among  others,  in  low  availability  of  key 
diagnostic  technology.  Hungarians  pay  more 
on  healthcare  from  their  own  pocket  than 
people  in  other  EU  countries,  particularly  on 
pharmaceuticals. 

The  health  system  is  hospital  centric.  A 
large  proportion  of  health  expenditure 
is 
allocated  to  hospital  services,  with  high 
number of hospital beds and a low proportion 
of  general  practitioners  among  doctors.  To 
improve  accessibility,  primary  and  ambulatory 
care  needs  strengthening.  Hungary  faces 
persistent  shortages  of  health  professionals, 
having  one  of  the  lowest  numbers  in  the  EU. 
The  uneven  geographical  distribution  of 
doctors is a major barrier to accessing care in 
outlying 
the  country.  Policy 
measures to address these challenges remain 

regions  of 

22 

 
limited,  despite  some  commitments  in  the 
recovery and resilience plan. 

Poor  health  outcomes  negatively  impact 
Hungary’s  workforce.  Life  expectancy  at 
birth is among the lowest in the EU. This is due 
to the limited focus on disease prevention and 
limited  accessibility  of  the  health  system. 
Premature  mortality  due  to  cardiovascular 
diseases  and  cancer  is  among  the  highest  in 
the  EU.  Behavioural  risk  factors  are  a  key 
driver  of  mortality,  including  above  average 
low 
alcohol 
consumption  of  fruit  and  vegetables  and  low 
levels of physical activity outside working time. 
Air  pollution  causes  more  deaths  in  Hungary 
than the EU average. 

consumption  and 

smoking, 

There  are  significant  regional  disparities 
in  education,  social  protection,  housing 
and  healthcare,  and  in  measures  to  help 
the  jobless  find  work.  Four  regions  are 
particularly  affected  by  high  poverty  and 
social  exclusion  and  income  inequalities.  This 
is  related  to  the  high  rates  of  early  school 
leaving,  large  numbers  of  people  not 
in 
education,  employment  or  training  and  adults 
with low educational attainment. There is also 
higher 
South 
Transdanubia, North Hungary and North Great 
Plain regions. In these regions, the poorest part 
lacks  access  to  basic 
of  the  population 
services  such  as  education,  healthcare,  social 
services,  housing  and  a  sufficient  level  of 
services to help the jobless find work. 

unemployment 

the 

in 

These  findings  are  consistent  with  the 
second-stage  analysis  in  line  with  the 
Social  Convergence  Framework. 
The 
the 
to  challenges  over 
analysis  points 
increasing share of people at risk of poverty or 
social  exclusion  and  to  weak  education  and 
jobs  market  outcomes  for  vulnerable  groups. 
However,  it  does  not  point  to  overall  social 
convergence  challenges  for  Hungary,  also  in 
light of the measures implemented or planned 
(14). 

(14)  European Commission, SWD(2025)95. The analysis 

relies on all the available quantitative and qualitative 
evidence and the policy response undertaken and 
planned. 

23 

 
 
KEY FINDINGS 

To  foster  competitiveness,  sustainability  and 
social fairness, Hungary would benefit from:  

•  urgently 

accelerating 

the 
implementation  of  the  recovery  and 
resilience  plan,  including  the  REPowerEU 
chapter;  

•  swiftly  implementing  cohesion  policy, 
taking  advantage  of  the  opportunities 
under  the  mid-term  review  and  making 
optimal  use  of  EU 
instruments, 
including InvestEU and STEP, to improve 
competitiveness;  

the 

sustainability 

•  pursuing  effective  policy  coordination 
improving  economic  policy  to 
and 
ensure 
of 
government finances and foreign trade  
including  by  strengthening  the  medium-
term  budgetary  framework  and  annual 
budgeting, avoiding the tendency to expand 
government 
removing 
distortive  government  interventions  on  the 
credit and product markets; 

spending 

and 

•  reforming  the  pension  system 
medium 

to 
long-term 
improve 
sustainability of government finances while 
making sure pensions remain sufficient for 
people to live on in particular by addressing 
income inequalities; 

and 

• 

• 

improving  the  effectiveness  of  the 
anti-corruption  framework  by  tackling 
delays  in  implementing  measures  in  the 
recovery  and  resilience  plan  and  ensuring 
they are effectively applied in practice; 

improving  the  quality  of  the  business 
environment  by  ensuring  a  predictable 
regulatory  framework,  a  level  playing  field 
consistent 
for 
application of single market rules, including 
avoiding  arbitrary  action  by  administrative 
state-
authorities, 

market-distorting 

companies, 

the 

all 

systematically 

supported  transactions  and  the  use  of 
distortive  legislation,  applying  competition 
scrutiny 
business 
transactions  and  reducing  the  use  of 
emergency  legislation  to  what  is  strictly 
necessary, in line with the principles of the 
single market and the rule of law; 

to 

•  reducing  costs  for  companies  by 
phasing  out  distortive  taxes  imposed  on 
specific 
the 
administrative  procedures,  in  particular  in 
the retail sector; 

sectors  and 

simplifying 

• 

to 

finance 

improving  access 
for 
innovative and fast-growing small and 
medium-sized  enterprises  by ensuring  a 
level  playing  field  for  capital  market 
development  through  regulatory  measures 
and improving the effectiveness of existing 
support measures; 

•  fostering 

innovation 

through  more 
predictable  and  efficient  public  R&D 
spending  and  a  stronger  involvement  of 
small  and  medium-sized  enterprises  in 
knowledge 
transfer 
channels; 

technology 

and 

•  accelerating 

the  green 

transition 
further  by  phasing  out  dependence  on 
Russian  fossil  fuels  and  taking  concrete 
steps  to  phase  out  fossil  fuel  subsidies  in 
particular those related to excise duties on 
diesel and those hindering electrification in 
the residential sector; 

• 

improving  flexibility  and  competition 
in the electricity sector by strengthening 
the balancing market, improving smart grid, 
storage  and  smart  meters  infrastructure, 
expanding  solutions  to  manage  energy 
demand,  boosting  cross-border  electricity 
trading and reducing regulatory burden and 
taxes, while adjusting the current system of 
regulated energy prices; 

24 

 
 
increasing  access  to  housing  through 
more  targeted  housing  subsidies,  and  by 
regulating 
and 
introducing  measures  to  increase  housing 
supply including for social housing; 

rental  market 

the 

improving access to quality preventive 
and  primary  care  services  by  allocating 
more  resources  to  preventive  care  and 
addressing shortages of healthcare staff. 

• 

in 

sustainable  water 
investing 
management  and  climate  adaptation 
including increased  natural  water  retention 
and    through  strengthened  administrative 
capacities as well as further improvements 
to  circularity  by  strengthening  waste 
treatment capacities; 

• 

• 

•  making 

further 

progress 

to 
decarbonise  by  supporting  further 
expansion  of  the  net-zero  technology 
sector  with  a  comprehensive  regulatory 
framework 
labour 
shortages; 

addressing 

and 

•  to support upward social convergence, 
improving the participation on the jobs 
market  of  vulnerable  groups,  including 
Roma  and  persons  with  disabilities  by 
reskilling  and  upskilling  and  strengthening 
the  capacity  of  the  public  employment 
service 
and 
provide 
comprehensive support services; 

training 

to 

•  ensuring  effective  social  dialogue 
between  employers  and  trade  unions 
particularly 
the  public  sector,  and 
engaging  effectively  with  employers  and 
trade unions; 

in 

• 

by 

potential 

the  attractiveness  of 

improving  educational  performance  to 
labour  productivity  and 
strengthen 
further 
innovation 
increasing 
the 
teaching profession and tertiary attainment 
rate, focusing on the development of basic 
skills,  making 
educational 
programmes  available  up  to  the  highest 
education  level  and  making  it  easier  to 
transition  between  them  and  increasing 
participation; 

different 

• 

increasing  the  proportion  of  upper-
secondary  graduates  passing 
the 
matura  school  leaving  exam  as  well  as 
of  those  holding  a  tertiary  diploma  in 
tertiary education; 

•  providing  more 

effective 

social 
assistance  by  improving  the  adequacy  of 
the  minimum  income  and  social  benefits, 
including unemployment benefit; 

25 

 
 
 
ANNEXES 

 
 
 
 
LIST OF ANNEXES 

Fiscal 

A1.  Fiscal surveillance and debt sustainability 

A2.  Taxation 

Productivity 

A3. 

Innovation to business 

A4.  Making business easier 

A5.  Capital markets, financial stability and access to finance 

A6.  Effective institutional framework 

Sustainability 

A7.  Clean industry and climate mitigation 

A8.  Affordable energy transition 

A9.  Climate adaptation, preparedness and environment 

Fairness 

A10.  Labour market 

A11.  Social policies 

A12.  Education and skills 

A13.  Social Scoreboard 

A14.  Health and health systems 

Horizontal 

A15.  Sustainable development goals 

A16.  CSR progress and EU funds implementation 

A17.  Competitive regions 

LIST OF TABLES 

General government balance and debt 
Net expenditure growth 
Net expenditure (outturn and forecasts), annual and accumulated deviations vis-à-vis the recommendation 
Defence expenditure and the national escape clause 

A1.1. 
A1.2. 
A1.3. 
A1.4. 
A1.5.  Macroeconomic developments and forecasts 
A1.6. 
A1.7. 
A1.8. 
A1.9. 

General government budgetary position 
Debt developments 
RRF – Grants 
RRF - Loans 

29 

32 

32 

39 

43 

43 

48 

53 

61 

66 

66 

73 

80 

87 

87 

92 

97 

101 

102 

105 

105 

107 

114 

33 
33 
34 
34 
35 
35 
36 
36 
37 

 
 
 
A1.10.  Projected change in age-related expenditure in 2024-2040 and 2024-2070 
A1.11.  Fiscal Governance Database Indicators 
A2.1. 
Taxation indicators 
A3.1. 
Key innovation indicators 
A4.1.  Making Business Easier: indicators. 
A5.1. 
A6.1. 
A6.2. 
A7.1. 
A8.1. 
A9.1. 
A13.1.  Social Scoreboard for Hungary 
A14.1.  Key health indicators 
A16.1.  Selected EU funds with adopted allocations - summary data (million EUR) 
A16.2.  Summary table on 2019-2024 CSRs 
A17.1.  Selected indicators at regional level in Hungary 

Financial indicators 
Hungary. Selected indicators on administrative burden reduction and simplification 
Digital Decade targets monitored through the Digital Economy and Society Index 
Key clean industry and climate mitigation indicators: Hungary 
Key Energy Indicators 
Key indicators for progress on climate adaptation, preparedness and environment 

LIST OF GRAPHS 

Greenhouse gas emissions from the effort sharing sectors, 2005 and 2023 

GHG emission intensity of manu-facturing and energy-intensive sectors, 2022 

Tax revenue shares in 2023 
Tax wedge for single and second earners, % of total labour costs, 2024 
FDI and use of SPEs in Hungary and the rest of the EU* as % of GDP, 2023 
Public expenditure on R&D (GOVERD + HERD) as a percentage of GDP in 2023 
Patent applications to the EPO by country of applicants and inventors in 2023 

A2.1. 
A2.2. 
A2.3. 
A3.1. 
A3.2. 
A4.1.  Making Business Easier: selected indicators. 
A5.1. 
Net savings-investment balance in Hungary 
A5.2. 
International investment position of Hungary 
A5.3. 
Capital markets and financial intermediaries in Hungary 
A5.4. 
Composition of NFC funding as % of GDP 
A5.5. 
Composition of household financial assets per capita and as % of GDP 
A6.1. 
Trust in justice, regional / local authorities and in government 
A6.2. 
Indicators of Regulatory Policy and Governance (iREG) 
A6.3.  Median time for law adoption in Parliament (days) 
A7.1. 
A7.2.  Manufacturing industry production: total and selected sectors, index (2021 = 100), 2017-2023 
A7.3. 
A7.4.  Municipal waste treatment 
A8.1. 
A8.2.  Monthly average day-ahead wholesale electricity prices and European benchmark natural gas prices (Dutch TTF) 
A8.3. 
A9.1. 
A9.2. 
A10.1.  Unemployment rates (%) 
A10.2.  Labour market slack 
A10.3.  Unit labour costs and productivity 
A11.1.  At-risk-of-poverty-or-social-exclusion rate and its component rates 
A11.2. 
A12.1.  Underachievement in mathematics, reading and science by students' socio-economic background (%) 
A12.2.  Adult learning participation and digital skills of some vulnerable groups 
A14.1.  Life expectancy at birth, years 
A14.2.  Treatable mortality 
A15.1.  Progress towards the SDGs in Hungary 
A16.1.  Distribution of RRF funding in Hungary by policy field 
A16.2.  Distribution of cohesion policy funding across policy objectives in Hungary 
A17.1.  Labour productivity per hour worked 

Hungary's installed renewable capacity (left) and electricity generation mix (right) 
Direct dependency(1) on ecosystem services(2) of the gross value added generated by economic sector in 2022 
Investment needs and gaps in EUR million, in 2022 constant prices 

Retail energy price components for household and non-household consumers, 2024 

Impact of social transfers on poverty reduction (%) 

30 

37 
38 
39 
47 
52 
59 
62 
63 
72 
79 
86 
101 
103 
110 
111 
115 

40 
40 
42 
43 
45 
49 
53 
53 
54 
56 
57 
61 
62 
62 
68 
68 
69 
70 
73 
74 
76 
83 
84 
87 
88 
90 
92 
94 
98 
100 
102 
102 
105 
108 
108 
114 

 
 
 
LIST OF MAPS 

A17.1.  Regional Competitiveness Index 2.0, 2022 edition 

116 

31 

 
 
 
 
FISCAL 
ANNEX 1: FISCAL SURVEILLANCE AND DEBT SUSTAINABILITY 

This  Annex  contains  a  series  of  tables  relevant  for  the  assessment  of  the  fiscal  situation  in  Hungary, 
including  how  Hungary  is  responding  to  Council  recommendations  issued  under  the  reformed  Economic 
Governance Framework. 

The  reformed  framework,  which  entered  into  force  on  30  April  2024(15),  aims  to  strengthen  debt 
sustainability  and  promote  sustainable  and  inclusive  growth  through  growth-enhancing  reforms  and 
priority investments. The medium-term fiscal-structural plans (hereinafter, MTPs or plans) constitute the 
cornerstone  of  the  framework,  setting  the  budgetary  commitment  of  Member  States  over  the  medium 
term. The latter is defined in terms of net expenditure growth, which is the single operational indicator for 
fiscal surveillance.  

Hungary submitted its plan on 4 November 2024 and subsequently submitted an addendum to the plan 
on 20 December 2024 reflecting more recent data. The plan covers the period until  2028, presenting a 
fiscal  adjustment  over  four  years.  On  18  February  2025,  the  Council  adopted  the  Recommendation 
endorsing  Hungary’s  plan.(16)  On  18  February  2025,  the  Council  also  adopted  a  Recommendation  under 
Article  126(7)  TFEU  to  correct  the  excessive  deficit  in  Hungary17.  The  corrective  net  expenditure  path 
recommended by the Council under the excessive deficit procedure is consistent with the path set out in 
the plan.  

The  assessment  of  the  implementation  of  the  Council  Recommendation  endorsing  Hungary’s  plan  is 
carried out on the basis of outturn data from Eurostat and the Commission’s Spring 2025 Forecast, and 
taking  into  account  the  Annual  Progress  Report  (APR)  that  Hungary  submitted  on  30  April  2025. 
Furthermore,  given  Hungary’s  request  to  activate  the  National  Escape  Clause  (18)  following  the 
Commission  Communication  of  19  March  2025(19),  the  assessment  also  considers,  as  appropriate,  the 
projected increase in defence expenditure based on the Commission Spring 2025 Forecast.  

The Annex is organised as follows. First, developments in government deficit and debt are presented 
based  on  the  figures  reported  in  Table  A1.1.  Then,  the  assessment  of  the  implementation  of  the 
Council Recommendation to correct the excessive deficit and of the Council Recommendation 
endorsing  the  plan  follows,  based  on  the  relevant  figures  presented  in  Tables  A1.2  to  A1.9,  including 
data on defence expenditure.  

The Annex also provides information on the cost of ageing and the national fiscal framework. Fiscal 
sustainability risks are discussed in the Debt Sustainability Monitor 2024.(20) 

(15)  Regulation (EU) 2024/1263 of the European Parliament and of the Council (EU) on the effective coordination of economic policies 
and on multilateral budgetary surveillance, together with the amended Regulation (EC) No 1467/97 on the implementation of the 
excessive deficit procedure, and the amended Council Directive 2011/85/EU on the budgetary frameworks of Member States are the 
core elements of the reformed EU economic governance framework. 

(16)  OJ C, C/2025/1707, 18.03.2025, ELI: http://data.europa.eu/eli/C/2025/1707/oj. 

(17) Council Recommendation with a view to bringing an end to the situation of an excessive deficit in Hungary, C/2025/5896. 

(18)  On 30 April 2025, Hungary requested to the Commission and to the Council the activation of the National Escape Clause. On this 
basis, the Commission adopted a Recommendation for a Council Recommendation allowing Hungary to deviate from, and exceed, 
the net expenditure path set by the Council, COM/2025/608. 

(19)  Communication  from  the  Commission  accommodating  increased  defence  expenditure  within  the  Stability  and  Growth  Pact of  19 

March 2025, C(2025) 2000 final. 

(20)  European Commission (2025) ‘Debt Sustainability Monitor 2024,’ European Economy-Institutional Papers 306. 

32 

 
 
 
 
 
 
Developments in government deficit and debt  

Hungary’s government deficit amounted to 4.9% of GDP in 2024. Based on the Commission’s Spring 2025 
Forecast, it is projected to decrease to 4.6% of GDP in 2025. The government debt-to-GDP ratio amounted 
to 73.5% at the end of 2024 and, according to the Commission, is projected to increase to 74.5% at end-
2025,  reflecting  a  high  general  government  deficit  and  a  positive  stock-flow  adjustment  due  to  large 
interest payments in cash terms accrued in the previous year. In the absence of additional discretionary 
measures  and  given  the  muted  macroeconomic  outlook  that  is  dampening  growth  in  tax  revenues,  the 
reduction of the deficit is forecast to stall in 2025 and 2026. The Commission forecast projects a higher 
deficit in 2025 than Hungary’s Annual Progress Report due to significantly lower revenue from production 
and income taxes in line with a lower level of nominal GDP. 

Table A1.1:  General government balance and debt 

Source: Commission Spring 2025 Forecast (COM), Annual Progress Report (APR) 

Developments in net expenditure  

The  net  expenditure(21)  growth  of  Hungary  in  2025  is  forecast  by  the  Commission(22)  to  be  above  the 
recommended  maximum,  corresponding  to  a  deviation  of  0.7%  of  GDP.  Considering  2024  and  2025 
together, the cumulative growth rate of net expenditure is projected below the recommended maximum 
cumulative  growth  rate.  The  Commission  forecast  projects  lower  net  expenditure  growth  in  2025  than 
Hungary’s Annual Progress Report due to differences in the projections of nationally-financed expenditure. 

Table A1.2:  Net expenditure growth 

* The cumulative growth rates are calculated by reference to the base year of 2023. 
Source: Council Recommendation to correct the excessive deficit in Hungary, Annual Progress Report (APR) and Commission’s 
calculation based on Commission Spring 2025 Forecast (COM). 

Source:  

The assessment of the net expenditure growth and in particular the comparison with the recommended 
net expenditure path considers that Hungary has requested the activation of the national escape clause to 

(21)  Net expenditure is defined in Article 2(2) of Regulation (EU) 2024/1263 as government expenditure net of (i) interest expenditure, 
(ii) discretionary revenue measures, (iii) expenditure on programmes of the Union fully matched by revenue from Union funds,  (iv) 
national  expenditure  on  co-financing  of  programmes  funded  by  the  Union,  (v)  cyclical  elements  of  unemployment  benefit 
expenditure, and (vi) one-off and other temporary measures.  

(22)  Commission Spring 2025 Forecast European Economy-Institutional paper 318, May 2025. 

33 

2024OutturnAPRCOMAPRCOM1General government balance% GDP-4.9-4.1-4.6n.a.-4.72General government gross debt% GDP73.573.174.5n.a.74.3Variables20252026RECAPRCOMRECAPRCOM2024n.a.2.3%2.3%n.a.n.a.n.a.20254.3%7.4%6.1%9.1%9.8%8.6%20264.0%n.a.6.0%13.5%n.a.15.1%AnnualCumulative*Growth rates 
 
                          
 
 
                          
 
 
 
facilitate transitioning to a higher level of defence expenditure. General government defence expenditure 
in  Hungary  amounted  to  1.1%  of  GDP  in  2021,  1.4%  of  GDP  in  2022  and  1.9%  of  GDP  in  2023(23). 
According to the Commission 2025 Spring Forecast, expenditure on defence is projected at 2.0% of GDP in 
both 2024 and 2025. Based on current projections for defence spending, the deviation that  is projected 
for Hungary is within the flexibility provided by the national escape clause. 

Table A1.3:  Net expenditure (outturn and forecast), annual and accumulated deviations vis-à-vis the 
recommendation 

*  The growth rate for 2024 is not a recommendation but serves to anchor the base, as the latest year with outturn data when 
setting the net expenditure path is year 2023.  
Source: Commission Spring 2025 Forecast and Commission’s calculation  

Table A1.4:  Defence expenditure and the national escape clause 

Source:  Eurostat (COFOG), Commission Spring 2025 Forecast and Commission’s calculation 

(23) Eurostat, government expenditure by classification of functions of government (COFOG).  

34 

2023202420252026OutturnOutturnCOMCOM1Total expenditurebn NAC37145.138209.940603.242859.82Interest expenditurebn NAC3533.94039.93644.43658.83Cyclical unemployment expenditurebn NAC-55.6-44.9-48.6-48.34Expenditure funded by transfers from the EUbn NAC582.9489.21020.91524.55National co-financing of EU programmesbn NAC193.4193.8419.3694.96One-off expenditure (levels, excl. EU funded)bn NAC0.00.00.00.07=1-2-3-4-5-6Net nationally financed primary expenditure (before discretionary revenue measures, DRM)bn NAC32890.533532.035567.337029.98Change in net nationally financed primary expenditure (before DRM)bn NAC641.42035.31462.69DRM (excl. one-off revenue, incremental impact)bn NAC-116.6-19.9-665.010=8-9Change in net nationally financed primary expenditure (after DRM) bn NAC758.02055.22127.611Outturn / forecast net expenditure growth% change2.30%6.1%6.0%12Recommended net expenditure growth*% change4.6%4.3%4.0%13=(11-12) x 7Annual deviationbn NAC-754.9613.3704.914 (cumulated from 13)Cumulated deviationbn NAC-754.9-141.6563.315=13/17Annual balance% GDP-0.90.70.816=14/17Cumulated balance% GDP-0.9-0.20.617p.m. Nominal GDP  bn NAC75568.981514.286207.191529.7Variables2021202220232024202520261Total defence expenditure% GDP1.11.41.92.02.02.22of which: gross fixed capital formation% GDP0.20.30.61.01.01.03Flexibility from increases in defence expenditure% GDP0.91.14Cumulated balance after flexibility% GDP-1.0-0.5 
 
                          
 
 
 
        
 
 
 
Table A1.5:  Macroeconomic developments and forecasts 

Source: Commission Spring 2025 Forecast (COM), Annual Progress Report (APR)  

Table A1.6:  General government budgetary position 

Source: Commission Spring 2025 Forecast (COM), Annual Progress Report (APR)  

35 

2024OutturnAPRCOMAPRCOM1=7+8+9Real GDP% change0.52.50.8n.a.2.52Private consumption% change5.13.53.4n.a.3.23Government consumption expenditure% change-4.60.40.3n.a.1.54Gross fixed capital formation% change-11.12.3-1.5n.a.4.05Exports of goods and services% change-3.03.00.2n.a.2.86Imports of goods and services% change-4.03.61.1n.a.3.5Contributions to real GDP growth 7- Final domestic demandpps-1.22.71.4n.a.2.98- Change in inventoriespps1.20.00.0n.a.0.09- Net exportspps0.6-0.3-0.6n.a.-0.410Output gap% pot GDP-1.0-3.8-1.2n.a.0.011Employment % change0.10.10.1n.a.0.312Unemployment rate%4.54.34.4n.a.4.313Labour productivity% change0.42.40.8n.a.2.214HICP % change3.74.54.1n.a.3.315GDP deflator% change7.35.24.9n.a.3.616Compensation of employees per head% change12.67.88.7n.a.7.817Net lending/borrowing vis-à-vis the rest of the world% GDP2.8n.a.2.6n.a.2.420252026Variables2024OutturnAPRCOMAPRCOM1=2+3+4+5Revenue42.042.742.5n.a.42.1of which:2- Taxes on production and imports17.117.217.2n.a.16.83- Current taxes on income, wealth, etc.7.67.67.5n.a.6.84- Social contributions10.410.510.7n.a.10.95- Other (residual)6.97.47.2n.a.7.58=9+16Expenditure 46.946.847.1n.a.46.8of which:9- Primary expenditure41.942.942.9n.a.42.8of which:10- Compensation of employees 10.310.410.8n.a.11.111- Intermediate consumption8.28.68.4n.a.8.412- Social payments12.011.911.9n.a.11.613- Subsidies2.11.91.7n.a.1.714- Gross fixed capital formation4.23.94.2n.a.4.215- Other5.16.25.9n.a.5.916- Interest expenditure5.03.94.2n.a.4.018=1-8General government balance-4.9-4.1-4.6n.a.-4.719=1-9Primary balance0.0-0.2-0.4n.a.-0.720Cyclically adjusted balance-4.5n.a.-4.0n.a.-4.721One-offs0.00.00.0n.a.0.022=20-21Structural balance-4.5-2.4-4.0n.a.-4.723=22+16Structural primary balance0.51.50.2n.a.-0.7Variables (% GDP)20252026 
 
                          
 
 
 
                          
 
 
 
Table A1.7:  Debt developments 

* End of period.  
** The 'snow-ball' effect captures the impact of interest expenditure on accumulated general government debt, as well as the 
impact of real GDP growth and inflation on the general government debt-to-GDP ratio (through the denominator). The stock-flow 
adjustment includes differences in cash and accrual accounting (including leads and lags in Recovery and Resilience Facility grant 
disbursements), accumulation of financial assets, and valuation and other residual effects. 
Source: Commission Spring 2025 Forecast and Commission’s calculation (COM), Annual Progress Report (APR)  

Table A1.8:  RRF – Grants 

Source: Annual Progress Report 

36 

2024OutturnAPRCOMAPRCOM1Gross debt ratio* (% of GDP)73.573.174.5n.a.74.32=3+4+8Change in the ratio (pps. of GDP)0.5-0.31.0n.a.-0.2Contributions**3Primary balance0.00.20.4n.a.0.74≈5+6+7'Snow-ball' effect-0.4-1.40.2n.a.-0.3of which:5- Interest expenditure5.03.94.2n.a.4.06- Real growth effect-0.3-1.7-0.6n.a.-1.87- Inflation effect-5.0-3.6-3.4n.a.-2.68'Stock-flow' adjustment0.90.90.4n.a.-0.620252026VariablesRevenue from RRF grants (% of GDP)20202021202220232024202520261RRF grants as included in the revenue projectionsn.a.0.00.20.30.20.4n.a.2Cash disbursements of RRF grants from EUn.a.0.00.00.00.10.0n.a.20202021202220232024202520263Total current expenditure0.00.00.00.00.00.0n.a.4Gross fixed capital formation0.00.00.10.10.10.2n.a.5Capital transfers0.00.00.20.20.10.2n.a.6=4+5Total capital expenditure0.00.00.20.30.20.3n.a.20202021202220232024202520267Reduction in tax revenue0.00.00.00.00.00.0n.a.8Other costs with impact on revenue0.00.00.00.00.00.0n.a.9Financial transactions0.00.00.00.00.00.0n.a.Expenditure financed by RRF grants (% of GDP)Other costs financed by RRF grants (% of GDP) 
 
                          
 
 
 
                          
 
 
Table A1.9:  RRF - Loans 

Source: Annual Progress Report 

Cost of ageing  

Total age-related spending in Hungary is projected to rise from about 16% of GDP in 2024 to 
about 18% in 2040 and 21% in 2070 (see Table A1.10).  The overall increase is driven mainly by the 
projected  rise  in  pension  spending  with  a  lower  impact  from  rising  healthcare,  long-term  care  and 
education expenditure. 

Public  pension  spending  is  projected  to  increase  continuously  over  the  next  decades.  The 
pension expenditure-to-GDP ratio would rise by 4.1 pps by 2070, the third highest projected increase of all 
EU Member States for 2024-2070. 1.2 pps of this increase is expected to occur by 2040.  

Public healthcare (24) expenditure is projected at 4.3% of GDP in 2024 (below the EU average 
of 6.6%) and is expected to increase by 0.3 pps by 2040 and by a further 0.2 pps by 2070. 

Public  expenditure on  long-term  care (25)  is  projected at 0.6% of  GDP  in  2024  (below  the  EU 
average  of  1.7%)  and  is  expected  to  increase  by  0.1 pp  of  GDP  by  2040  and  by  a  further 
0.2 pps of GDP by 2070.  

Table A1.10:Projected change in age-related expenditure in 2024-2040 and 2024-2070 

Source: 2024 Ageing Report (EC/EPC). 

(24)  Key performance characteristics, recent reforms and investments are discussed in Annex 11 ‘Health and health systems’.   

(25)  The quality and the accessibility of the long-term care system are covered in Annex 9 ‘Social policies’. 

37 

Cash flow from RRF loans projected in the Plan (% of GDP)20202021202220232024202520261Disbursements of RRF loans from EUn.a.0.00.00.40.00.0n.a.2Repayments of RRF loans to EUn.a.0.00.00.00.00.0n.a.20202021202220232024202520263Total current expenditure0.00.00.00.00.00.0n.a.4Gross fixed capital formation0.00.00.00.00.00.0n.a.5Capital transfers0.00.00.00.00.00.0n.a.6=4+5Total capital expenditure0.00.00.00.00.00.0n.a.20202021202220232024202520267Reduction in tax revenue0.00.00.00.00.00.0n.a.8Other costs with impact on revenue0.00.00.00.00.00.0n.a.9Financial transactions0.00.00.00.00.00.1n.a.Expenditure financed by RRF loans (% of GDP)Other costs financed by RRF loans (% of GDP)HU16.11.20.30.10.01.617.7HUEU24.30.50.30.4-0.30.925.2EUHU16.14.10.50.30.25.121.3HUEU24.30.20.60.8-0.41.325.6EUage-related expenditure 2024 (% GDP)change in 2024-2040 (pps GDP) due to:age-related expenditure 2040 (%GDP)pensionshealthcarelong-term careeducationtotalage-related expenditure 2024 (% GDP)change in 2024-2070 (pps GDP) due to:age-related expenditure 2070 (%GDP)pensionshealthcarelong-term careeducationtotal 
 
                          
 
 
  
 
 
National fiscal framework 

The  relatively  small  Hungarian  Fiscal  Council  (HFC)  has  a  narrow  mandate  and  relies  on 
support from other institutions. Two of three Board members head other institutions in parallel (the 
Central Bank and the Audit Office), which could affect the Council’s independence, especially since it also 
draws on analytical support from these institutions. Members are also required  to be Hungarian citizens, 
which limits the recruitment pool. While the HFC is free to communicate at any time and reports regular 
appearances in mainstream national TV/radio/daily papers, it has issued no press releases nor given any 
press conferences in recent years, and the English version of its website could be further developed.  

Table A1.11:Fiscal Governance Database Indicators 

The Country Fiscal Rule Strength Index (C-FRSI) shows the strength of national fiscal rules aggregated at the country level based 
on i) the legal base, ii) how binding the rule is, iii) monitoring bodies, iv) correction mechanisms, and v) resilience to shocks. The 
Medium-Term Budgetary Framework Index (MTBFI) shows the strength of the national MTBF based on i) coverage of the 
targets/ceilings included in the national medium-term fiscal plans; ii) connectedness between these targets/ceilings and the 
annual budgets; iii) involvement of the national parliament in the preparation of the plans; iv) involvement of independent fiscal 
institutions in their preparation; and v) their level of detail. A higher score is associated with higher rule and MTBF strength. 
Source: Fiscal Governance Database 

38 

2023HungaryEU AverageCountry Fiscal Rule Strength Index (C-FRSI)10.3914.52Medium-Term Budgetary Framework Index (MTBFI)0.400.73 
 
     
 
ANNEX 2: TAXATION 

This  annex  provides  an 
indicator-based 
overview of Hungary’s tax system.  It includes 
information on: (i) the tax mix; (ii) competitiveness 
and  fairness  aspects  of  the  tax  system;  and  (iii) 
tax  collection  and  compliance.  While  some 
measures  have been  adopted,  tackling  aggressive 
tax planning (ATP) remains a challenge. 

Hungary’s  tax  revenues  as  a  percentage  of 
GDP  are  below  the  EU  average,  with  a 
relatively  heavy  reliance  on  consumption 
taxes and a relatively low reliance on labour 
taxes.  Table  A2.1  shows  that  Hungary’s  annual 
tax  revenues  as  a  percentage  of  GDP  increased 
from  35.0%  in  2022  to  35.1%  in  2023  but 
remained below the EU average of 39.0%. Labour 
taxation (14.8% of GDP in 2023) is the largest tax 
base, although its relative importance has declined 
since  2010.  The  tax  system  also  relies  heavily  on 
consumption taxes (13.5% of GDP in 2023, above 
the  EU  average  of  10.5%).  Capital  taxation  in 
relation to GDP was 6.8% in 2023 (against an EU 
average  of  8.5%).  Revenue  from  environmental 
taxation is close to the EU  average (2.2% of GDP 
in  2023  as  compared  with  2%  in  the  EU),  but 
recurrent  property  taxation  remains  relatively  low 
(0.3%  of  GDP  in  2023  compared  with  the  EU 
average  of  0.9%).  Revenues  from  property  taxes 
were  relatively  low  (0.8%  GDP),  remaining  below 

Table A2.1:  Taxation indicators 

EU average (1.9%). 

Hungary has the lowest corporate income tax 
(CIT) rate in the EU (9%) but levies a number 
of  sector-specific  taxes  on  companies,  not 
always  based  on  profits.  In  addition  to  CIT, 
Hungarian  resident  companies  are  subject  to 
municipal tax (which is deductible for CIT purposes 
and  is  not  treated  as  ‘income  tax’  for  tax  treaty 
purposes) and activity-based taxes, some of which 
are not levied on profits. The top statutory CIT rate 
has  more  than  halved  over  the  past  ten  years, 
from 20.6% in 2014. The forward-looking average 
effective  tax  rate  was  11.1%  in  2022,  the  third-
lowest  among  EU  Member  States,  with  the  EU 
average  around  19%.  Hungary  has  enacted  the 
global  minimum  tax  directive  (‘Pillar  2’),  which 
ensures  a  minimum  tax  rate  of  15%  for  large 
companies. As Hungary’s nominal and effective tax 
rates  are  both  below  15%,  an  increase  in  tax 
revenues due to the ‘top-up tax’ is likely. 

There are several tax incentives available in 
the  Hungarian  tax  system,  including  areas 
investment  and 
such  as  R&D,  green 
investments  in  start-ups.  R&D  is  supported 
through  a  tax  credit  and  a  tax  base  reduction 
option.  Since  1 January  2024,  a  tax  incentive 
qualifying  as  a  refundable  incentive  under  the 

(1) Forward-looking effective tax rate (KPMG).  
(2) A higher value indicates a stronger redistributive impact of taxation. 
(*) EU-27 simple average. 
(**) For more details on the VAT gap, see European Commission, Directorate-General for Taxation and Customs Union, VAT gap in 
the EU - 2024 report, https://data.europa.eu/doi/10.2778/2476549  
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, OECD 

39 

HUMedian (EU-27)2010202120222023202420102021202220232024Tax structureTotal taxes (including compulsory actual social contributions) (% of GDP)36.933.635.035.137.840.239.739.0Taxes on labour (% of GDP)17.314.414.614.819.820.520.120.0of which, social security contributions (SSC, % of GDP)11.710.49.89.912.913.012.712.7Taxes on consumption (% of GDP)12.413.814.113.510.911.210.910.5of which, value added taxes (VAT, % of GDP)8.59.810.19.46.87.37.47.1Taxes on capital (% of GDP)7.25.46.36.87.18.58.78.5Personal income taxes (PIT, % of GDP)6.34.15.35.48.69.69.49.3Corporate income taxes (CIT, % of GDP)1.11.21.31.72.22.93.23.2Total property taxes (% of GDP)1.10.91.00.81.92.22.11.9Recurrent taxes on immovable property (% of GDP)0.30.40.30.31.11.11.00.9Environmental taxes (% of GDP)2.62.01.92.22.52.42.12.0Effective carbon rate in EUR per tonne of CO2 equivalentsNA59.6NA50.6NA86.0NA84.8Tax wedge at 50% of average wage (single person) (*)41.043.241.241.241.233.931.831.531.531.8Tax wedge at 100% of average wage (single person) (*)46.643.241.241.241.240.939.939.940.240.3Corporate income tax - effective average tax rates (1) (*)18.110.210.210.221.319.319.118.9Difference in Gini coefficient before and after taxes and cash social transfers (pensions excluded from social transfers) (2) (*)12.64.65.64.68.68.27.97.7Outstanding tax arrears: total year-end tax debt (including debt considered not collectable) / total revenue (in %) (*)12.010.635.532.6VAT gap (% of VAT total tax liability, VTTL) (**)4.72.36.67.0Progressivity & fairnessTax administration & complianceBy tax baseSome tax typesHungaryEU-27 
 
 
 
  
 
global minimum taxation (Pillar 2) rules, has been 
available for eligible R&D costs. A tax credit is also 
available  for  investments  of  strategic  importance 
for the transition to a zero net emissions economy. 
For  companies  investing  in  start-ups,  the  taxable 
profits may be reduced by three times the cost of 
shareholdings  acquired 
certain 
requirements). 

(subject 

to 

Graph A2.1: Tax revenue shares in 2023 

Source: Taxation Trends Data, DG TAXUD 

of 

taxes 

Hungary has made a commitment to simplify 
its tax system as part of the implementation 
of  its  recovery  and  resilience  plan  (RRP). 
Hungary’s RRP includes commitments to introduce 
tax  simplification  measures  by  reducing  the 
number 
tax-related 
to 
administrative  costs  and  thereby  contribute  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 
sector-specific  tax  measures.  While  Hungary  has 
made progress in this area, several sector-specific 
taxes remain in place (including those on financial 
institutions, energy and retail sales).  

lower 

Hungary’s  labour  tax  burden  is  significantly 
higher  than  the  EU  average  for  low-wage 
earners.  Hungary  has  a  flat  personal  income tax 
(PIT) rate of 15%, one of the lowest in the EU. As a 
result,  the  tax  wedge  (26)  is  the  same  across 
different  income  levels,  meaning  it  is  relatively 
high for low-income earners and relatively low for 
high-income  earners.  As  shown  in  Table  A2.1, 
Hungary’s  labour  tax  wedge  was  41.2%  in  2024, 

(26)  The  tax  wedge  is  defined  as  the  sum  of  personal  income 
social-security 
taxes  and  employee  and  employer 
contributions  net  of  family  allowances,  expressed  as  a 
percentage of total labour costs (the sum of the gross wage 
and social-security contributions paid by the employer). 

40 

which  is  higher  than  the  EU  average  for  single 
people earning 50% of the average wage (31.8%), 
but close to the EU average for people earning the 
average  wage  or  more  (40.3%).  This  means  that 
the  tax  system  places  a  disproportionate  burden 
on  lower-paid  workers  through  a  high  income-tax 
rate.  In  addition,  they  are  also  disproportionately 
burdened  by  high  consumption  taxes,  as  poorer 
households  consume  a  higher  proportion  of  their 
income than richer ones. The effectiveness of the 
tax  and  benefit  system  in  reducing  inequality  (as 
measured  by 
its  ability  to  reduce  the  Gini 
coefficient)  has  declined  over  time  (from  -12.6 in 
2010  to  -4.6  in  2023),  falling  below  the  EU 
average (-7.7 in 2023). 

Graph A2.2: Tax wedge for single and second 
earners, % of total labour costs, 2024 

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

Hungary has added a substantial REPowerEU 
chapter  to  its  RRP  but  challenges  remain  in 
the area of environmental taxation. Hungary’s 
plan  includes  13  reforms  and  16  investments  to 
reduce  its  reliance  on  fossil  fuels.  However,  the 
nominal marginal tax rates on diesel and unleaded 
petrol  remain  below  the  EU  average.  The  price  of 
diesel  for  private  road  use  is  lower  than  that  of 
unleaded  petrol,  even  though  diesel  has  a  higher 
carbon  content  and  a  greater  negative  impact  on 
air  quality.  This  is  true  for  both  the  tax  per  litre 
and  the  tax  per  tonne  of  CO2  emissions.  In  2024, 
the diesel-to-petrol ratio for the tax per litre stood 
at  0.94,  with  the  petrol  rate  set  at  EUR 392  per 
1 000 litres.(27) 

(27)  European Commission Taxes in Europe database 

(https://ec.europa.eu/taxation_customs/tedb/#/home) 

51.226.921.942.138.519.4Tax revenue shares in 2023, Hungary (outer ring) and EU (inner ring)Taxes on labourTaxes on consumptionTaxes on capital41.241.241.241.241.22025303540455050100150Tax wedge, % of total labour costsEarnings as % of the average wageSingle earner - HUSingle earner - EU averageSecond earner -  HUSecond earner -  EU average 
   
 
   
 
on 

tax 

and 

the  ongoing  digitalisation  of 

compliance 
demonstrating 

Hungary continues to perform comparatively 
tax 
well 
administration, 
both 
effectiveness and efficiency in tax collection. 
This  performance  is  expected  to  improve  further 
with 
relevant 
procedures  and  processes.  These  efforts  are  part 
of  Hungary’s  RRP  measures  to  digitally  transform 
tax  compliance  procedures  to  make  tax  reporting 
easier,  simpler  and  faster.  Hungary  is  currently 
enhancing 
recently 
launched  eVAT  platform 
to  streamline  and 
automate  the  preparation  of  VAT  returns.  The 
introduction  of  the  eReceipt  system  has  been 
postponed  to  1 July  2025,  while  preparations  for 
the multi-phase roll-out of the ePayroll platform in 
2026 appear to be on track. As part of an ongoing 
technical  support  instrument  (TSI)  project,  the 
Hungarian tax administration (NTCA) is working on 
a  comprehensive  digital  transformation,  including 
a  new  IT  strategy  and  improved  data  asset 
management. 

the  functionality  of 

the 

The  VAT  gap  is  still  well  below  the  EU 
average of 7%. In 2022, Hungary's VAT gap was 
2.3%  of  the  VAT  total  tax  liability.  While  the  EU-
wide  gap  increased  slightly  between  2021  and 
2022,  Hungary's  VAT  gap  decreased  by  2.4  pps. 
This  improvement  could  be  attributed  to  various 
policy  and  digital  instruments  implemented  over 
the years, such as the dedicated use of the reverse 
the  adaptation  of 
charge  mechanism  and 
electronic  monitoring  systems,  as  outlined 
in 
previous country report annexes(28). Tax arrears in 
2022  accounted  for  10.6%  of  total  net  revenue. 
This  was  significantly  below  the  EU  average  of 
32.6%,  although  that  average  was  distorted  by 
very large values in a few Member States. 

relevant 
The  cost  of  compliance  and 
facilitation  measures  present  a  relatively 
positive  picture.  In  2021,  the  total  cost  of 
compliance for SMEs was the second-lowest in the 
EU. The NTCA has also started providing pre-filled 
tax  returns  for  PIT  and  VAT. (29)  Hungary  scored 

(28)  In this context, it is also welcomed that Hungary is currently 
implementing a TSI project to align its current real-time 
reporting system to the digital VAT reporting requirements 
under the recently adopted ‘VAT in the digital age’ (ViDA) 
package and to prepare the framework for mandatory B2B 
e-invoicing. 

(29)  OECD, 2022 https://www.oecd.org/tax/forum-on-tax-
administration/tax-technology-tools-and-digital-
solutions/strategy-governanceand-new-skills.htm. 

highly  in  2021  on  electronic  filing,  with  99.8%  of 
CIT  returns  and  95.9%  of  PIT  returns  submitted 
electronically.  Electronic  filing  for  VAT  reached 
100%  in  2021 (30).  As  for  the  effectiveness  of 
dispute  resolution,  the  average  time  taken  to 
complete  a  mutual  agreement  procedure  (MAP) 
case 
the  EU 
average(31). 

is  considerably  shorter 

than 

transfer 

strengthening 

Hungary’s  RRP  includes  a  commitment  to 
strengthen the tax system against the risk of 
aggressive  tax  planning  (ATP).  This  includes 
measures  like  introducing  minimum  substance 
requirements  for  corporate  income  tax  for  shell 
companies, 
pricing 
regulations  and  broadening  the  scope  of  non-
deductibility for outbound payments.  Hungary has 
taken  action  to  improve  the  effectiveness  of  tax 
rules.  The  country  has  adopted 
avoidance 
measures 
implement  non-deductibility  of 
to 
interest  and  royalty  payments  to  listed  and  low-
tax jurisdictions starting January 2024. In addition, 
Hungary has strengthened its transfer pricing rules 
and 
the 
compliance 
digitalisation of its tax system (ePayroll, eReceipt, 
eVat) as described above. 

improved 

through 

(FDI) 

investment 

Whereas  it  is  still  early  to  assess  the 
effectiveness  of  the  changes  introduced, 
tackling  ATP  remains  a  challenge.  Foreign 
direct 
inward  flows,  as  a 
percentage of GDP, are almost three times higher 
than  the  EU  average  (194%  of  GDP  vs  84%  of 
GDP  in  the  EU  in  2023).  In  addition,  the  share  of 
inward  FDI  stocks  held  through  special  purpose 
entities relative to GDP (65%) is higher in Hungary 
than  at  EU  level  (25%)  (see  Graph  A2.3).  These 
figures suggest that Hungary may be used in ATP 
structures.  Hungary  does  not  leavy  a  withholding 
tax  on  interest,  dividend  or  royalty  payments, 
which  facilitates 
repatriation  of 
low-tax-cost 
invested  funds.  However,  Hungary  has  introduced 
withholding 
low-tax 
tax  on  payments 
jurisdictions.  The  Hungary-USA  double  tax  treaty 
was terminated with effect from 2024. 

to 

(30)  OECD Tax Administration 2023-© OECD 2023. 

(31)  All data derived from the Statistics on APAs and MAPs in the 

EU - European Commission (europa.eu). 

41 

 
 
 
Graph A2.3: FDI and use of SPEs in Hungary and 
the rest of the EU* as % of GDP, 2023 

*Aggregate data for 26 Member States. Data for Austria are 
confidential.  
Source: European Commission 

42 

0%50%100%150%200%250%HUEU26HUEU26Inward FDI stockOutward FDI stockFDI and use of SPEs in Hungary and res of the EU* as % of GDP, 2023Total FDISPEs 
  
PRODUCTIVITY 
ANNEX 3: INNOVATION TO BUSINESS  

improved  over 

R&D 
scientific 

investment 
and 

hinders 
Stagnating 
Hungary’s 
innovation 
performance.  The  2024  European  Innovation 
Scoreboard (32)  shows  that  Hungary's  innovation 
performance  has 
the  years; 
however,  the  country  is  still  performing  poorly  in 
comparison  to  the  EU  average.  Hungary’s  R&D 
intensity did not increase over the past decade and 
remains  well  below  the  EU  average  (1.38%  vs 
2.24%  of  GDP  in  2023).  Low  public  spending  on 
R&D  affects  the  quality  of  the  science  base, 
undermining  Hungary’s 
innovative  potential. 
Science-business  linkages  are  underexploited,  and 
innovation  activities  are  concentrated  in  a  small 
group  of  foreign  companies,  calling  for  decisive 
action  to  strengthen  and  broaden  Hungary’s 
domestic innovation base. 

Science and innovative ecosystems 

Low  public  spending  on  R&D  holds  back  the 
quality  and  performance  of  the  public 
science  base  and  Hungary’s 
transition 
towards  a  more  knowledge-based  economy. 
Public  R&D  expenditure  has  remained  stagnant 
over  the  past  years,  and  in  2023  was  both  well 
below the EU average (at 0.37% of GDP vs 0.72%) 
and  lower  than  in  other  Central  and  Eastern 
European  countries (33).  Due  to  this  significant 
underinvestment 
in  public  R&D,  Hungary  will 
struggle  to  reach  its  national  target  of  spending 
3%  of  GDP  in  total  (public  and  private  spending) 
on R&D by 2030 (34). This lack of public investment 
holds  back  scientific  excellence,  as  evidenced  by 
the share of Hungarian scientific publications as a 
percentage  of its total  publications  within the  top 
10%  most-cited  scientific  publications  worldwide, 
which  has  not  improved  over  the  years  and 
remains well below the EU average (5.9% vs 9.6% 

(32)  2024 European Innovation Scoreboard (EIS), country profile 

Hungary, country profile Hungary. 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). 

(33)  For example, public R&D investment accounts for 0.63% of 
GDP in Czechia, 0.55% in Poland, and 0.64% in Slovenia. 

(34)  National research, development and innovation strategy 

2021-2030. 

in 2021). To tackle this issue, the national research 
excellence  programme (35)  aims 
to  promote 
internationally  competitive  academic  excellence 
based  on  international  standards.  However,  this 
will  not  be  enough  to  overcome  the  chronic 
underfunding  of  the  public  science  base,  which, 
combined with a lack of monitoring and evaluation 
of  science  policies,  undermines  the  quality  of  the 
public research system. 

Graph A3.1: Public expenditure on R&D (GOVERD + 
HERD) as a percentage of GDP in 2023 

Source: Eurostat 

with 

along 

Underfunding  and  instability  in  the  research 
suboptimal 
landscape, 
institutional funding, hinder the efficiency of 
the  public  research  system  and  create 
uncertainties  for  researchers.  When  it  comes 
to the allocation of public funding, the government 
appears  to  favour  institutions  governed  by  public 
trust  funds  over  state-owned  universities,  which 
affects  scientific  excellence (36).  The  ongoing 
reorganisation of the research institutes of the ex-
Academy  of  Sciences  since  2019,  as  well  as 
evaluation  mechanisms (37), 
unclear 
contribute  to  uncertain  working  conditions  for 

internal 

(35)  Nemzeti Kutatási Kiválósági Program (NKKP) 

(36)  While public universities that have not changed based on the 
model receive basic funding for maintenance and by head 
count, the institutions that have changed receive extra 
funding for example for salaries or R&I activities from the 
government. with emphasis on quantitative rather than 
qualitative output. 

(37)  In 2023 HUN-REN set up a new indicator-based evaluation 

system, with retroactive performance requirements for 2022, 
fixing the financial allocations for research centres in 2024. 
At the request of HUN-REN, an international peer review of 
the research network was carried out in 2024. The fact that 
the methodology and results were not made public was 
strongly criticised by the research community and by the two 
biggest trade unions. 

43 

00.20.40.60.81ATCZSIPLSKHUEUaverage 
 
 
 
            
 
 
prospects, 

significantly  affects 

researchers.  This  uncertain  environment,  coupled 
with  low  salaries  and  the  absence  of  predictable 
career 
the 
attractiveness  of  academic  research  careers.  This 
further  weakens  the  skills  supply  that  is  key  for 
knowledge diffusion as well as society and market 
uptake  of  innovation.  The  roll  out  of  the  new  bill 
on reforming HUN-REN (38) and the introduction of 
funding  will 
multiannual  performance-based 
require  close  attention  and  that  it  preserves 
academic  freedom  and  leads  to  better  research 
conditions. On a more positive note, the John von 
Neumann programme (39) has been rolled out with 
the  goal  of  strengthening  Hungary’s  knowledge-
based  economy  and  for  it  to  become  one  of  the 
top  innovators  in  Europe  by  2030.  The  mission-
oriented approach of the programme is a key step 
towards  directing  R&I  efforts  towards  strategic 
goals,  but  it  would  benefit  from  more  strategic 
cross-cutting management in the form of a whole-
of-government approach (40). 

Business innovation 

capacity 

innovation 

Hungary’s 
remains 
limited  to  a  small  group  of  big,  foreign-
owned  enterprises  and  a  handful  of  large 
domestic  companies  in  the  manufacturing 
sector.  Business  enterprise  expenditure  on  R&D 
as  a  percentage  of  GDP  peaked  at  1.23  in  2021 
and  since then  has  stagnated  at  1.00,  well below 
the  EU  average  of  1.49.  The  Hungarian  economy 
largely  relies  on  large  foreign  direct  investment 
(FDI) net flows (41) from big medium-high-tech and 
high-tech  manufacturing  companies.  Domestic 
companies  mainly  contribute 
international 
production chains through assembly-type activities 
with  low  added  value,  and  only  a  few  large 
multinational  companies  have  relocated  their 
innovative activities to Hungary (42). A considerable 

to 

(38)  Nyitólap - Országgyűlés. 

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

(40)  Whole-of-government approach is the notion of ensuring 
policy coherence by applying a systemic, holistic, or cross-
sectoral approach to both policy challenges and solutions to 
meet an overarching objective.  

proportion of small and medium-sized enterprises 
do  not  engage  in  innovation  activities (43),  nor  do 
they perceive a need to do so, while there is a high 
share  of  non-innovators  with  a  potential  to 
innovate (44). 
(domestic) 
innovation base and overreliance on FDI may also 
explain  why  Hungary  has  only  one  company 
among the top 800 EU R&D spenders (45). 

Hungary’s 

narrow 

level  of  public 
The  comparatively  high 
support to  business  R&D in  Hungary  has  not 
yielded  the  expected  results.  The  government 
applies  a  number  of  stimuli  measures  to  foster 
business R&D, including indirect support measures 
through  tax  incentive  schemes (46).  Direct  support 
to business R&D amounts to 0.15% of GDP, which 
is one of the highest share in the EU. However, the 
measures  have  been  taken  up  by  a  smaller  than 
expected  number  of  enterprises (47),  and  the  high 
level of support has not translated into an increase 
in  innovation  output,  as  measured  by  patents. 
Rather,  the  number  of  patent  applications  filed 
under  the  Patent  Cooperation  Treaty  per  billion 
GDP  (in  PPS  €)  has  been  on  a  downward  trend 
over the last decade and fell to 1.1, well below the 
EU average of 3.2, in 2021. Hungary would benefit 
from  participating  in  the  unitary  patent  system, 
which  offers  key  advantages 
terms  of 
enhancing 
promoting 
competitiveness (48).  Hungary  was  ranked  36th  in 
the  2024  global  innovation  index,  which  is  lower 
than  the  previous  year,  and  policy  stability  for 
doing  business  was  highlighted  as  one  of  its 
weaknesses. 

innovation 

and 

in 

(43)  Business enterprise expenditure on R&D (BERD) performed 
by SMEs as % of GDP has been decreasing since 2018 and 
was 0.38 vs the EU average 0.40 in 2022. 

(44)  Non-innovators with a potential to innovate account for 
39.6%, against the EU average of 17.8% (source: EIS, 
Hungary country profile). 

(45)  The 2024 EU Industrial R&D Investment Scoreboard | IRI. 

(46)  Hungary - Details | INNOTAX Portal. 

(41)  39.4% of GDP is outstanding, against the EU average of 

1.9% (Source: EIS, Hungary’s country profile). 

(47)  Enhancing labour market relevance and outcomes of 
doctoral education: Country note Hungary | OECD. 

(42)  Enhancing labour market relevance and outcomes of 
doctoral education: Country note Hungary | OECD. 

(48)  Hungary is expected to join the Unified Patent Court 
Agreement, which it has signed but not yet ratified. 

44 

 
 
 
Graph A3.2: Patent applications to the EPO by 
country of applicants and inventors in 2023 

Source: Eurostat 

rights.  For  example, 

In response to this, and in addition to a number of 
funding  schemes,  the  newly  created  Hungarian 
Innovation  Agency  (NIÜ) (49)  has  launched  several 
non-financial programmes to help companies gain 
knowledge  of  project  development  and  industrial 
the  XPAND 
property 
programme  provides  tailor-made  training  to  help 
start-ups,  scale-ups  and  innovative  small  and 
medium-sized  enterprises  (SMEs)  to  enter  the 
international  market.  Going  forward,  assessment 
and monitoring – on a regular basis and based on 
international best practice – of the policy mix used 
to  foster  business  R&D, 
including  R&D  tax 
incentives (50),  is  crucial  to  make  public  spending 
more efficient and encourage SMEs and a broader 
range  of  economic  players  to  innovate  and  be 
involved 
innovation  value  chain.  This, 
combined  with  the  creation  of  an  environment 
helping  new  and  innovative  firms,  in  particular 
SMEs,  to  enter  the  market,  will  help  broaden 
Hungary’s 
its 
productivity growth and competitiveness. 

innovation  base  and  boost 

in  the 

Businesses  do  not  systematically  seek 
public-private  collaboration,  and  the  lack  of 
policies  and  a  culture  of  entrepreneurship 
affects  the  commercialisation  of  innovation. 
Cooperation  between  academia  and  businesses  is 
mainly  limited  to  incumbent  firms  with  links  to 
universities.  While  public-private  scientific  co-
publications,  as  a  percentage  of the total  number 
of  publications,  are  above  the  EU  average,  public 
expenditure  on  R&D  financed  by  businesses  as  a 

(49)  Home | Nemzeti Innovációs Ügynökség. 

(50)  The peer review of the country’s R&I system carried out in 

2016 already recommended systematising the evaluation of 
R&I support programmes and instruments based on 
international standards, Peer Review of the Hungarian R&I 
system | Research and Innovation. 

45 

of GDP decreased sharply over the past decade. In 
2022,  at  0.011%,  it  was  well  below  the  EU 
average of 0.050. Technology  transfer offices are 
not yet sufficiently embedded  in and accepted by 
academic circles, and spin-off channels are not yet 
well  developed (51).  As  a  response,  the  John  von 
Neumann  Program  launched  the  renewal  of  the 
university  technology  transfer  procedures.  While 
innovative  SMEs  has 
cooperation  between 
improved,  also  due  to  support  programmes  such 
as  Széchenyi  2020  (financed  by  the  2014-2020 
ERDF),  in  2024  it  was  73.1%  below  the  EU 
average,  having  deteriorated  by  7%  since  2023. 
The  Hungarian  start-up  university  programme 
(HSUP) (52) aims to improve the commercialisation 
of  R&D  results  from  higher  education  institutions 
by  raising  students’  interest  in  innovation  and 
entrepreneurship.  The  planned 
science  and 
innovation  parks (53)  are  also  expected  to  foster 
knowledge  valorisation.  Going  forward,  properly 
recently 
implementing  and  monitoring 
launched measures will be key, while at the same 
time  carefully  assessing  the  effectiveness  of 
existing  schemes  to  support  science-industry 
collaboration to maximise their impact. 

these 

The  adoption  of  digital  technologies  by 
enterprises  is  steadily  improving,  supported 
by  national  measures  and  EU  funding.  While 
Hungary  has  made  significant  progress  in  the 
digitisation  of  SMEs,  with  57.4%  of  SMEs  at  a 
basic level of digital intensity, it remains far below 
the  EU  average  of  72.9%.  SMEs  do  not  fully 
absorb digital technologies due to a lack of digital 
skills.  Only  7.4%  of  Hungarian  enterprises  have 
adopted  AI  technologies,  while  the  EU  average  is 
13.9%. 

Financing innovation 

in  Hungary 
Venture  capital  availability 
remains  unstable.  Based  on  market  statistics 
Venture  capital  investment  as  a  percentage  of 
GDP  progressed  well  until  2020,  but  then  almost 
halved  from  0.092  of  GDP  in  2021  to  0.052  in 
2023  (vs  the  EU  average  of  0.078).  Financing  at 
the  start-up  stage  dominates  the  Hungarian 

(51)  Hungarian Startup Report 2023. 

(52)  Hungarian Startup University Program. 

(53)  Neumann János Program. 

0.100.200.300.400.500.600.LUSEDKFINLDEATBEIEFREU averageMTITSICYEELTESPTCZPLELLVHRHUSKBGRO 
            
 
 
firms) 

new  graduates  in  science  and  engineering  per 
thousand  population  aged  25-34  has  been 
decreasing  over  the  past  years  and  in  2022  was 
well  below  the  EU  average,  at  8.4  vs  17.6.  As  a 
result,  in  2020  27%  of  Hungarian  enterprises 
reported a skills gap, and more than 30% (mostly 
large 
the 
manufacturing  sector (57).  Structural  reforms  will 
be key to address labour market needs, as science, 
technology, 
and  mathematics 
graduates  and  an  up-skilled  workforce  are 
tomorrow’s 
technology-based 
industries  and  emerging  areas  such  as  artificial 
intelligence. 

engineering 

difficulties 

specialists 

reported 

in 

in 

reported 

venture  capital  market,  while  incubation  financing 
has almost disappeared. The number of companies 
receiving  venture  capital  and  equity  funding  has 
been  decreasing  since  2022.  As  regards  the 
invested  amount, 
value  of 
the 
transactions was 183.7% higher in the first half of 
2024  than  in  the  first  half  of  2023,  and  21.6% 
lower  than  in  the  first  half  of  2022 (54).  Venture 
capital  funding  in  Hungary  is  concentrated  on 
start-ups  (53.1%  of  the  total),  with  a  much 
smaller  share  going  to  seed  financing  (15%)  and 
later  stage  ventures 
(32%),  where  capital 
requirements  are  usually  greater.  Public  co-
funding  programmes  for  early-stage  start-ups 
could  be  one  reason  for  this.  As  new  technology-
based  firms  are  likely  to  need  more  capital  for 
growth  also  in  later  stages,  more  work  is  needed 
to  support  scale-ups  at  the  development  stage 
(see also the annex on access to finance). 

Innovative talent 

for 

national 

strategy 

initiatives  supporting 

Entrepreneurship education is very limited in 
Hungary  and  systemic  changes  would  be 
needed to strengthen it. While there are several 
the 
state  and  private 
development of entrepreneurial skills, Hungary has 
no 
entrepreneurship 
education. Entrepreneurship education is used in a 
narrow  sense  in  the  national  school  curriculum, 
which  only  relates  it  to  economic  and  financial 
literacy (55).  According 
the  2023  Global 
Entrepreneurship Monitor (56), 36% of respondents 
feel they have the skills and knowledge to start a 
business,  which 
international 
standards.  Entrepreneurial  activity  is  moderate, 
with  early-stage  entrepreneurial  rates  below  the 
global average. 

low  by 

is  very 

to 

to 

fostering 

innovation 

Tackling  labour  and  skill  shortages  remains 
and 
critical 
maintaining competitiveness.  The share of the 
population  aged  25-34  who  have  successfully 
completed tertiary  education  has  been  stagnating 
over the past decade and stood at 32.3% in 2023, 
among the lowest rates in the EU. The number of 

(54)  Venture Capital and Private Equity update Hungary H1 2024. 

(55)  Government decree 110/2012. (VI. 4.) on the publication, 

introduction and application of the National core curriculum. 

(56)  Global Entrepreneurship Monitor 2023. 

(57)  Understanding Skill Gaps in Firms | OECD. 

46 

 
 
 
Table A3.1:  Key innovation indicators 

EU average for the last available year or the year with the highest number of country data. 
Source:  Eurostat, DG JRC, OECD, Science-Metrix (Scopus database), Invest Europe, European Innovation Scoreboard. 

47 

R&D intensity (gross domestic expenditure on R&D as % of GDP)1.261.31.1.581.631.391.38:2.243.45Public expenditure on R&D as % of GDP0.410.340.360.40.380.37:0.720.64Scientific publications of the country within the top 10% most cited publications worldwide as % of total publications of the country 5.95.15.95.9:::9.612.3Researchers (FTEs) employed by public sector (Gov+HEI) per thousand active population2.42.33.73.63.83.5:4.2:International co-publications as % of total number of publications46.549.750.852.150.751.3:55.939.3Business enterprise expenditure on R&D (BERD) as % of GDP0.830.961.211.2311:1.492.7Business enterprise expenditure on R&D (BERD) performed by SMEs as % of GDP0.370.350.470.420.38::0.40.3Researchers employed by business per thousand active population2.83.75.25.65.85.8:5.7:Patent applications filed under the Patent Cooperation Treaty per billion GDP (in PPS €)1.41.21.21.11::2.8:Employment share of high-growth enterprises measured in employment (%)16.8220.43:::::12.51:SMEs with at least a basic level of digital intensity% SMEs (EU Digital Decade target by 2030: 90%)::::51.73:57.4472.91:Data analytics adoption% enterprises (EU Digital Decade target by 2030: 75%):::::53.21:33.17:Cloud adoption% enterprises (EU Digital Decade target by 2030: 75%):::20.6:37.1239.838.86:Artificial intelligence adoption% enterprises (EU Digital Decade target by 2030: 75%):::2.98:3.687.4113.48:Public-private scientific co-publications as % of total number of publications8.710.410.711.410.710.5:7.78.9Public expenditure on R&D financed by business enterprise (national) as % of GDP0.040.0190.0080.0110.011::0.050.02Total public sector support for BERD as % of GDP0.260.210.240.260.191::0.2040.251 R&D tax incentives: foregone revenues as % of GDP0.120.060.0380.0350.0410.039:0.1020.141BERD financed by the public sector (national and abroad) as % of GDP 0.1420.1410.2000.2250.150::0.1000.110Venture capital (market statistics) as % of GDP, total (calculated as a 3-year moving average)0.030.040.080.090.080.05:0.08:Seed stage funding share (% of total venture capital)4.0620.4927.1822.8421.8914.97:7.29:Start-up stage funding share (% of of total venture capital)62.2667.8854.1846.6846.3353.07:44.02:Later stage funding share (% of total venture capital)33.6811.6218.6530.4831.7831.96:48.69:New graduates in science and engineering per thousand population aged 25-348.69.717.79.28.4::17.6:20222021Hungary201220172020Headline indicatorScience and innovative ecosystemsR&D investment & researchers employed in businessesPublic support for business innovationInnovation outputsDigitalisation of businessesAcademia-business collaborationFinancing innovationInnovative talent2023EU average (1)USA2024 
 
 
            
 
capacity  network)  coverage  above  the  EU 
average  and  5G  coverage  close  to  the  EU 
average. FTTP (fibre to the premises) coverage is 
high (76.2%; EU average 64.0%). In 2023, Hungary 
continued  to  progress  towards  the  2030  Digital 
Decade  connectivity  targets,  as  coverage  of  fixed 
VHCN  increased  to  84.1%  (4  percentage  points 
higher  than  2022).  This  corresponds  to  a  similar 
increase  in  take-up  by  consumers,  with  the  share 
of at least 1Gbps broadband lines reaching 37.2%, 
the  second  highest  in  the  EU.  Hungary  has  made 
considerable  progress  with  its  5G  network,  with 
coverage increasing to 83.7% in 2023 (up by 45% 
from  the  previous  year),  now  just  below  the  EU 
average (89.3%). 

incidents 

risk  of  cybersecurity 

is 
The 
increasing,  given  companies'  reliance  on 
In  2022,  13.4%  of 
digital  technologies. 
businesses 
incidents 
ICT  security 
registered 
leading  to  the  unavailability  of  ICT  services, 
destruction  or  corruption  of  data  or  disclosure  of 
confidential  data,  which  is  below  the  EU  average 
(22.2%).  However, businesses seem less prepared 
than EU peers as only 5.3% reported being insured 
against ICT security incidents (EU average 25.0%) 
and  79.0%  reported  using  ICT  security  measures 
(EU average 91.8%). 

Regulatory and administrative 
barriers 

Excessive regulation, ad hoc taxation, and an 
unstable business climate continue to hinder 
market entry, competition, and innovation. In 
the retail, energy, transportation, and professional 
limit 
strict 
services 
competition  and  affect  productivity.  Hungary  has 
the highest number of regulated professions in the 
EU  with  professions  like  tourist  guides,  patent 
trademark agents, and lawyers all having levels of 
restrictiveness above the EU average. 

regulations 

sectors, 

ANNEX 4: MAKING BUSINESS EASIER 

In an increasingly difficult economic climate, 
investment,  high  prices  and 
with  weak 
contracting  growth,  establishing  a  safe, 
predictable  business  environment  is  ever 
more critical and Hungary’s key challenge. 

Economic framework conditions 

The investment outlook is weak. Real GDP was 
expected to grow by 0.6% in 2024, and strengthen 
by 2025, but investment remains sluggish, due to 
the postponement of public investments and a fall 
in  business  optimism.  Uncertainties  around  the 
outlook for the automotive industry is expected to 
affect  investment.  A  late  2024  survey  by  the 
Industry  and 
German-Hungarian  Chamber  of 
Commerce 
investment 
sentiment,  with  more  firms  planning  to  cut 
spending than increase (58). Public net fixed capital 
formation  has  fallen  considerably  (0.48%  of  GDP 
in 2020 to 0.1% in 2024). According to the 2024 
EIB  Investment  Survey (59),  the  most  frequently 
mentioned  long-term  barriers  to  investment  are 
uncertainty  about  the  future  (72%);  energy  costs 
(60%); and availability of skilled staff (51%). 

indicated 

negative 

Investment  in  Hungary  is  heavily  oriented 
towards  machinery  and  equipment,  with 
limited  focus  on  intangibles.  Firms  allocate  a 
much  smaller  share  of  investment  to  R&D  than 
their  EU  counterparts.  In  2023,  the  share  of  R&D 
investment  was  2.8%  of  the  total,  significantly 
below the EU average of 7.7%. 

to 

Availability  of  finance  is  an  obstacle  to 
investment.  According 
the  2024  EIB 
Investment  Survey (60),  the  share  of  finance-
constrained  companies  is  higher  in  Hungary  than 
the  EU  overall.  In  2024  the  average  business-to-
business payment delay increased from 2023 and 
is now at 14.6 days (EU average: 15.5 days) (8). By 
contrast,  the  delay  in  payments  from  public 
entities  to  business  has  been  decreasing  and  is 
below the EU average (10.9 days vs 15.2 days). 

Hungary  is  equipped  with  strong  digital 
infrastructure  and  is  making  good  progress 
(very  high-
on  deployment,  with  VHCN 

(58)  Német-Magyar Ipari és Kereskedelmi Kamara 
(59)  EIB Investment Survey Country Overview 2024-Hungary 
(60)  EIB Investment Survey 2024: European Union overview 

48 

 
 
 
 
Graph A4.1: Making Business Easier: selected 
indicators. 

Share of (1) enterprises, (2) average intra-EU exports and 
imports in GDP, (3) firms, (4) SMEs. 
Sources: (1) EIB IS, (2) Eurostat, (3) ECFIN BCS, (4) SAFE 
survey. 

regulation 

country, 
develop  a 

According  to  the  OECD’s  product  market 
indicators,  Hungary  exhibits 
regulation 
the 
significantly  more 
than 
indicating  an 
average  OECD 
opportunity 
regulatory 
to 
framework  more  supportive  of  competition. 
Areas  needing  to  improve  include  simplifying 
administrative  processes 
starting  new 
businesses,  enhancing  methods  for  assessing  the 
impacts  of  new  and  existing  regulations  on 
competition, 
stakeholder 
involvement in the regulatory consultation process. 
Reducing  regulatory  barriers  in  the  professional 
and  retail  sectors,  as  well  as  non-tariff  trade 
barriers, would help productivity. 

increasing 

and 

for 

Business  entry  rates  are  low,  especially  in 
sectors  dominated  by  public  ownership.  The 
business registrations index for 2024 and its five-
year  average  are  below 
the  EU  average. 
Bankruptcy  declarations  in  2024  were  over  three 
times higher than in 2021, the highest rate in the 
EU.  The 
lower-than-average  entry  rates  are 
exacerbated  by  below-average  survival  rates  for 
five  years, 
new  businesses  over 

first 

the 

influenced by the strong presence of a few state-
owned enterprises limiting competition, innovation, 
and research. 

domestic 

State-friendly 
ownership 
is 
like  banking, 
increasing  across  sectors 
telecommunications,  utilities,  media,  and 
broadcasting.  The  diminishing  presence  of 
foreign capital (private net fixed capital formation 
as  a  percentage  of  GDP  has  more  than  halved 
since  2020)  and  a  lack  of  expertise  in  high-value 
industries  like  banking  and  telecommunications 
poses a risk to productivity growth and innovation. 
Recent  years  have  seen  various  cases  of  market 
interference  in  sectors  like  construction  and  retail 
(see below) that were detrimental to the business 
environment, discouraging investment from the EU 
and  abroad,  and  which  resulted  in  the  acquisition 
of  companies  by 
less  efficient  state-owned 
enterprises or private firms with government ties. 

Certain  firms  and 
industries  experience 
discriminatory  treatment  through  tailor-
made  taxes,  price  caps,  and  regulations 
imposed  at  short  notice,  implemented  with 
little  notice  and  no  prior  consultation.  For 
example,  there  are  price  caps  and  profit  taxes 
affecting  the  production  of  cement  and  ceramic 
products, as well as increased taxes for insurance 
and pharmaceutical companies. 

The  retail  sector  has  faced  a  chronically 
unstable  business  environment  with  many 
regulations  affecting  its  functioning,  while 
also  putting  a  disproportionate  burden  on 
foreign companies. The tax burden in this sector 
disproportionately  impacts  larger,  often  foreign-
owned  companies,  and 
legislation  prevents 
European  operators  from  adopting  a  franchised 
structure,  akin  to  that  of  larger  Hungarian  retail 
businesses.  Conditions  for  establishing  or  making 
than  400 m²  are 
larger 
changes 
to  stores 
transparency.  Rules 
lack 
unpredictable  and 
regulating  the  price  of  products,  their  promotion 
and retailer margins affect the viability of foreign 
retailers.  On  12 September  2024,  the  Court  of 
Justice  of  the  European  Union  ruled  in  case  C-
557/23 
fixing  a 
that  Hungarian  measures 
maximum price for the sale of certain agricultural 
products  and  the  obligation  to  offer  for  sale  a 
specific  quantity  of  such  products  violated 
a 
Regulation (EU) No 1308/2013 
in 
common  organisation  of 
by 
agricultural 

establishing 
the  markets 
amended 

products, 

as 

49 

45.417.67.152.78.547.916.61041.624.50102030405060from private entitiesfrom public entitiesMaterial shortages as afactor limiting productionEU Trade IntegrationRegulation as a majorobstacle to investment(4) Late payments(3) Shortages(2) SingleMarket(1) RegulatoryburdenShare (%)EU27HU 
     
The 

Regulation (EU) 2021/2117. 
proposed 
legislation  on  combating  food  waste  contains  a 
prohibition  on  retailers  selling  food  products  48 
hours  before 
their  expiry  date,  depriving 
predominantly foreign retailers of the possibility of 
managing their stocks effectively. 

these 

The  government  uses  its  powers  to  exempt 
deals  from  merger  scrutiny,  meaning  the 
impact  of 
the 
economy, competition, and the Single Market 
go  unexamined.  The  criteria  for  exemptions  are 
vague,  and  there  is  no  process  for  challenging 
these criteria or the decisions made. 

transactions  on 

The  government  recently  unveiled  welcome 
plans to assist SMEs in scaling up. The Demjan 
Sandor Programme, which is co-funded by the EU, 
aims  to  provide  financing  to  SMEs  to  strengthen 
competitiveness 
promote 
digitalisation, and lessen administrative burdens. 

investment, 

and 

Single Market 

Hungary 
is  an  open  economy,  highly 
integrated  into  the  Single  Market.  It  relies 
heavily  on  EU  sources  (27.3%  of  value  added  is 
sourced  from  the  rest  of  the  EU  compared  to  an 
EU average of 19.7%). 

Hungary experienced a sharp deterioration in 
conformity  with  EU  law  and  is  the  worst 
performer in the EU. The conformity deficit (the 
percentage of all directives transposed incorrectly) 
stood  at  3%  at  the  end  of  2024  (EU  average  of 
0.9%)  compared  with  2.3%  in  2022.  This  figure 
has  deteriorated  year-on-year  over  the  past  five 
years.  There  are  forty-one  ongoing  infringement 
procedures,  above  the  EU  average  of  26  and  a 
figure  that  has  considerably 
increased  since 
2020 (61). Hungary solved 78% of the SOLVIT (the 
system  for  resolving  EU-rights  issues)  cases  it 
managed  as  lead  centre,  which  is  below  the  EU 
average  of  85%.  Hungary  does  not  actively  take 
part  in  EU  tools  such  as  the  Single  Market 
Enforcement  Taskforce,  designed  to  improve  the 
functioning of the single market. 

(61)  Single Market Scoreboard 2024 
. 

Public procurement 

in 

public 

Competition 
procurement 
procedures  is  improving.  However,  nearly  one 
third  of  Hungarian  public  procurement  contracts 
above the EU threshold fail to attract multiple bids 
(32%  vs  EU  average  of  29%),  impacting  the 
efficiency  and  cost-effectiveness  of  procurement 
procedures;  nevertheless,  some 
improvements 
have been observed in recent years. 

that 

revised 

its  action  plan 

Hungary  initiated  targeted  reforms  in  some 
sectors 
in  mandatory 
brought 
preliminary  market  consultations  and  issued 
new  guidelines  for  contract  structuring  to 
attract  more  bidders.  Sectors,  such  as 
IT 
services, medical equipment, pharmaceuticals, and 
construction materials, show high levels of market 
concentration,  reducing  competitive  pressure.  To 
more  broadly  address  the  competition  issue,  in 
2024  Hungary 
for 
increasing  competition 
in  public  procurement, 
incorporating  fourteen  new  measures  based  on 
OECD  recommendations (62),  with  a  focus  on 
improving 
(EKR), 
enhancing  capacity-building  programmes,  and 
fostering SME participation. By 2024 Hungary had 
fully operationalised the Single-Bid Reporting Tool 
for tracking procurement outcomes and identifying 
sectors  with  persistently  low  competition.  In  late 
2023, Hungary also revised its public procurement 
performance  measurement  framework  to  include 
new  indicators  based  on  OECD  input,  with  the 
2024  report  providing  the  first  comprehensive 
assessment under these enhanced metrics. 

the  e-Procurement  system 

procedures 

procurement 

Removing  barriers 
the  procurement 
in 
market would aid competition. Existing barriers 
to  entry  might  be  removed  by  reducing  red  tape, 
streamlining 
(e.g. 
speeding-up  of 
the  decision-making  for  bid 
evaluation)  and  harmonising  legal  interpretations 
across  different  supervisory  bodies  to  reduce 
administrative complexity. Putting in place regular 
public-private 
continuously 
evaluating  the  impact  of  reforms  is  crucial  for 
increasing  suppliers’  participation  and  achieving 

dialogues 

and 

(62)  OECD (2024), Improving Competitive Practices in Hungary’s 
Public Procurement: Reducing Single-bids and Enhancing 
Supplier Participation, OECD Public Governance Reviews, 
OECD Publishing, Paris, https://doi.org/10.1787/5d1c1ec1-en 

. 

50 

 
 
 
Hungary’s  goal  of  reducing  further  single-bid 
procedures. 

Hungary  is  taking  steps  to  advance  the  use 
of  socially  responsible  public  procurement 
(SRPP).  The  Public  Procurement  Authority  has  a 
dedicated  website  for  SRPP,  which 
includes 
resources  such  as  guidelines  and  studies.  It  also 
provides  a  database  on  the  use  of  reserved 
contracts  with  the  registered  ‘sheltered  place  of 
employment.’  Data  collection  efforts  provide 
valuable  information  on  the  inclusion  of  social 
considerations  in  public  procurement.  In  2023, 
social  aspects  were  incorporated  into  4.2%  of 
public  procurement  procedures  conducted  below 
EU  thresholds,  with  these  procedures  accounting 
for  6.7%  of  the  total  value  (approximately  1.5 
times higher than in 2022) (63). 

(63)  kozbeszerzes.hu/media/documents/annual-report-2023.pdf 

51 

 
 
Table A4.1:  Making Business Easier: indicators. 

*Change in methodology in 2024: reporting late payments from public and private entities separately. 
**The 2024 data on single bids is provisional and subject to revision. 
Sources: (1) ECFIN BCS, (2) Eurostat, (3) EIB IS, (4) Digital Decade Country reports, (5) Interim Payment Report, (6) SAFE survey, 
(7) OECD, (8) up to 2023: Single Market and Competitiveness Scoreboard, 2024: Public procurement data space (PPDS). 

52 

POLICY AREA20202021202220232024EU-27 average8.823.422.210.87.110.024.438.539.028.623.120.21.82.32.72.31.92.34.74.43.93.64.913.4-71.880.384.1-78.8-64.270.176.2-64.0-17.657.983.7-89.3Regulatory environment10.87.67.910.98.524.518.011.910.914.814.615.618.98.714.014.010.915.1from public or private entities in the last 6 months43.934.640.643.6--from private entities in the previous or current quarter----45.447.9from public entities in the previous or current quarter----17.616.657.057.765.957.052.741.60.0450.0440.0440.0440.0510.0501.00.71.50.20.50.81.61.81.92.33.00.995.091.293.575.078.384.932.030.032.041.041.024.43940333223-655457.0HungaryINDICATOR NAMEInvestment climateShortagesMaterial shortage, firms facing constraints, %1Labour shortage, firms facing constraints, %1Vacancy rate, vacant posts as a % of all available ones (vacant + occupied)2InfrastructureTransport infrastructure as an obstacle to investment, % of firms reporting it as a major obstacle3VHCN coverage, %4FTTP coverage, %45G coverage, %4Reduction of regulatory and administrative barriersImpact of regulation on long-term investment, % firms reporting business regulation as a major obstacle3Late paymentsPayment gap - corporates B2B, difference in days between offered and actual payment5Payment gap - public sector, difference in days between offered and actual payment5Share of SMEs experiencing late payments, %*6Single MarketIntegrationEU trade integration, % (Average intra-EU imports + average intra EU exports)/GDP2EEA Services Trade Restrictiveness Index7ComplianceTransposition deficit, % of all directives not transposed8Conformity deficit, % of all directives transposed incorrectly8SOLVIT, % resolution rate per country8Number of pending infringement proceedings8Competition and transparency in public procurementSingle bids, % of total contractors**8Direct awards, %**8Public procurement 
 
 
 
 
 
       
 
ANNEX 5: CAPITAL MARKETS, FINANCIAL STABILITY AND ACCESS TO FINANCE 

to 

the 

the 

Hungary  has  a  negative  net  international 
investment  position  (NIIP)  however  it  has 
declined  throughout  the  last  years.  Banks, 
which  dominate  the  financial  sector,  are  robust, 
both  in  terms  of  capital  and  liquidity.  Capital 
markets  remain  underdeveloped  and  do  not 
contribute  sufficiently 
financing  of 
Hungarian  companies.  Retail  participation  has 
been improving when looking at the level of direct 
and  indirect  household  investments.  At  the  same 
time, 
investment  policies  of  domestic 
institutional  investors  are  quite  conservative.  The 
issuance  of  tax-free  government  bonds  (while 
raising the  withholding tax  on  funds  and  deposits 
from  15% 
the 
appropriate  incentives  to  foster  the  development 
of  capital  markets.  Plans  to  enable  the  use  of 
private  pension  savings  for  housing  purposes  in 
2025  also  reinforces  this  trend.  This 
leaves 
internal  financing as the main alternative to bank 
funding  for  Hungarian  firms,  which  is  a  limiting 
factor  for  the  set-up  and  subsequent  scale-up  of 
innovative start-ups with no or limited profitability. 
Moreover,  the 
less-developed  capital  markets 
reduce  the  exit  options  for  private  equity  and 
venture capital investors and contribute to a less-
developed  domestic  venture  and  growth  capital 
market,  further  compounding  the  lack  of  funding 
innovation,  a  key  element  for 
sources  for 
competitiveness. 

to  28%),  does  not  create 

Graph A5.1: Net savings-investment balance in 
Hungary 

Source: AMECO 

Net  external  liabilities  declined  to  32%  of 
GDP, suggesting that Hungary is a net capital 
  As  of  Q3  2024,  Hungary’s  net 
importer. 
international 
(NIIP)  was 
investment  position 
equivalent to -31.8% of GDP (see Graph A3.2). Net 
foreign  direct  investment  stock,  which  reached  -
32% of GDP as of Q3 2024, accounted for most of 
the NIIP. The significant stock of foreign reserves, 
which  amounted  to  22.4%  of  GDP,  decreases  net 
external  liabilities.  The  net  portfolio  investments, 
which are directly affected by the price volatility of 
equity  valuations  abroad  (assets)  and  in  Hungary 
(liabilities), were negative to the tune of -20.7% of 
GDP as of Q3 2024. They were in line with the net 
stock  of  other  investments,  which  amounted  to  -
1.5% of GDP at the same time. 

Availability and use of domestic 
savings  

Graph A5.2: International investment position of 
Hungary 

The  growing  net  private  savings  of  the 
Hungarian  economy  have  helped  to  mitigate 
vulnerabilities  related  to  external  financing.  
Throughout  2014  to  2023,  the  private  savings 
ratio  fluctuated  around  its  ten-year  average  of 
10.7% of GDP, rising to 11.7% in 2023 (see Graph 
A3.1).    The  net  private  investment  ratio,  which 
measures  the  private  sector's  net  contribution  to 
capital  accumulation  in  the  country,  averaged 
5.1% of GDP over the decade but dropped to 3.1% 
lending  to  the 
in  2023.  During  this  period, 
government showed an average deficit equivalent 
to 4.1% of GDP.  The substantial positive balance 
between net domestic savings and net investment, 
coupled  with  a  significant  government  deficit,  led 
to net lending of, on average, 1.5% of GDP to the 
rest of the world between 2014 and 2023. 

Source: ECB 

53 

-50510152025302017201820192020202120222023% of GDPPrivate investment, netLending to the governmentPrivate saving, netPrivate saving, grossBorrowing from the rest of the world-500-400-300-200-100010020030040020172018201920202021202220232024-Q3% of GDPForeign Direct Investment, AssetsPortfolio Investment, AssetsOther investment, AssetsOfficial reserve assetsForeign Direct Investment, LiabilitiesPortfolio Investment, LiabilitiesOther investment, LiabilitiesNIIP 
 
  
  
 
 
Structure of the capital markets and 
size of the financial sector 

The Hungarian economy has a small domestic 
equity market. The market capitalisation of listed 
equity  reached  17.5%  of  GDP  at  end-2023  (see 
Graph  A3.3).  Characteristically,  non-financial 
corporations  (NFCs)  accounted  for  46%  of  that 
capitalisation,  which  reflects  the  extent  to  which 
the  stock  market  is  geared  towards  funding  the 
non-financial  segment  of  the  real  economy.  The 
outstanding  volume  of  debt  securities  reached 
77.2%  of  GDP  at  end-2023.  Bonds  issued  by  the 
government  accounted  for  almost  78.5%  of  the 
total bonds at end-2023.  

Graph A5.3: Capital markets and financial 
intermediaries in Hungary 

Source: ECB, EIOPA, AMECO. 

services, 

Even  though  the  financial  sector  in  Hungary 
remains  dominated  by  banks,  non-bank 
financial  intermediaries are growing as well. 
The  banking  sector  is  the  largest  segment  of  the 
total  assets  of  banks 
financial 
accountedfor  100.2%  of  GDP  in  2023,  which 
remains  however  significantly  below  the  EU 
average of 253.4%. The domestically owned banks 
accounted  for  63.7%  of  total  banking  sector 
assets in 2023. The banking sector also has a very 
high  level  of  concentration  with  the top  five  MFIs 
representing 60% the sector in 2023 (EU average: 
51.1%). The insurance sector assets accounted for 
only 4.8% of GDP at end-2023. In 2023, insurance 
sector was composed of 26 institutions. However, 
the  top  five  market  participants  held  63%  of  the 

insurance market based on gross written premium 
income in 2023 (64). At this stage, ECB/EIOPA data 
were  not  available  on  assets  of  the  pension  fund 
sector, while the OECD reported the total assets of 
Hungary’s pension funds equate to around 4.5% of 
(65).  The 
total  assets  of 
GDP at  end-2023 
investment  funds  accounted  for  25%  of  GDP  in 
2023 (see section on institutional investors). 

Resilience of the banking sector 

banks 

Hungarian 

The  Hungarian  banking  system  is  stable  and 
resilient. 
remain  well 
capitalised,  with  the  total  capital  ratio  at  21%  in 
Q3-2024  (EU  average:  20.1%).  The  common 
equity  tier  1  (CET1)  stood  at  18.8%  in  Q3-2024 
(EU average: 16.6%) (see Table A3.1). The banking 
sector was exceptionally profitable in 2024 with a 
return  on  equity  (ROE)  at  21.3%  (EU  average: 
10%),  due  to  volatile  and  one-off  items  (an 
increase  in  dividend  income  and  reduction  of  the 
windfall tax) (66).  The government announced that 
windfall tax was still due in 2024, but the amount 
payable could be  reduced in line with an increase 
in banks' holdings of government securities. As of 
the 
1  July  2024,  the  MNB  has 
countercyclical 
rate 
buffer 
applicable to domestic exposures from 0 to 0.5%. 
The MNB has also decided to apply a 1% positive 
neutral  CCyB  rate  to  domestic  exposures  in  a 
neutral  risk  environment,  starting  from  1  July 
2025  (67).  Due  to  rising  commercial  real  estate 
(CRE)  market  risks,  the  MNB  also  decided  to 
reactivate the systemic risk buffer (SyRB)  as of 1 
July 2024 as a precautionary measure.  Hungarian 
banks’  aggregate  Minimum  Requirement  for  Own 
Funds  and  Eligible Liabilities  (MREL)  rate  stood  at 
24.6% of risk weighted assets at end-2023 (68). As 
of  1  January  2024,  all  banks  in  Hungary  meet 
their final MREL targets against an average MREL 
binding  target  (including  CBR)  of  23.9%  TREA 

increased 
(CCyB) 

capital 

(64)  MNB, 2024, Report on Insurance, funds, capital market risks 

and consumer protection, p. 21. 

(65)  OECD, 2024, Pension Markets in Focus-2024, p. 11. 

(66)  MNB, 2024, Financial Stability Report, Nov. 2024, p.5.  The 
government announced that tax was still due in 2024, but 
the amount payable could be reduced in line with an 
increase in banks’ holdings of government securities. 

(67)  MNB, Countercyclical capital buffer (CCyB) 

(68)  EBA MREL Dashboard - Q4 2023, p.13. 

54 

Non-financial corporationsFinancial corporationsNon-financial corporationsMFIsInsurance  and pension fundsOther financialsGovernmentMFIs​Insurance corporationsInvestment funds020406080100120     Listed equity                     Bonds                     Assets by sector% of GDP 
     
 
 
(including  CBR)  (69).  Based  on  the  stress  test 
results,  domestic  credit  institutions  would  meet 
the  regulatory  requirements  on 
liquidity  and 
capital  adequacy  even  in  the  event  of  a  severe 
shock  (70).  Hungary  has  published  information  on 
its  national  bail-in  mechanic  in  line  with  EBA 
guidelines (71). 

  Banks  met 

Banks’ liquidity is stable at a high level, with 
the  LCR 
minor  fluctuations. 
requirement  with  considerable  surplus  of  liquid 
assets at 177% (the expected level was 100%) in 
August  2024  (72).  The  net  stable  funding  ratio 
(NSFR)  is  also  met  by  banks,  with  a  systemic 
average  above  130%  (the  expected  level  was 
100%) (73). 

Hungarian  banks  continue  to  reduce  their 
non-performing  loans  (NPLs).  The  NPL  ratio 
stood at 2.3% in Q3-2024 (EU average: 1.9%). The 
NPL  ratio  of  corporate  loans  stagnated  at  a 
historically  low  level  of  3.3%  in  Q3-2024  (EU 
average:  3.5%).  The  NPL  ratio  of household  loans 
has fallen to 3.4% in Q3-2024 (EU average: 2.2%). 
Similarly, the NPL coverage ratio was 60% in Q3-
2024  (EU  average:  42.1%),  which  reflects  banks’ 
ability to absorb any future losses. 

Resilience of the non-bank financial 
intermediaries 

non-life  segment  is  larger  than  the  life  segment. 
The  sectoral  solvency  ratio  was  197.5%  in  2023. 
According  to  EIOPA’s  2024  dashboard,  Hungary 
had  a  comparatively  low  aggregated  insurance 
protection gap score for natural catastrophes (75). 

The pension fund market remains stable with 
profits,  but  the  declining  membership  is  a 
major  risk.  Hungary’s  public  pension  system  is 
pay-as-you-go  (PAYG),  a  defined  benefit  (DB) 
scheme  covering  all  employees,  while  mandatory 
private  pension  funds  were  eliminated  in  2010. 
Third-pillar  voluntary  private  pension  funds  are 
categorised  into  (i)  voluntary  pension  funds,  (ii) 
private  pension 
(iii)  voluntary 
funds,  and 
health/mutual  aid  funds,  where  the  voluntary 
pension  funds  account  for  around  90%  of  the 
assets.  The voluntary pension  fund  sector  had  28 
institutions  with  an  operating  profit  of  HUF  1.7 
billion  (EUR  4.4  million)  in  2023,  an  improvement 
compared to the previous year (76). The number of 
voluntary  pension  fund  members  has  been 
steadily  decreasing  for  15  years.  At  the  end  of 
2023, 1.1 million members had voluntary pension 
savings (0.3 million fewer than in 2008) due to the 
difficulty to appeal to the younger generation (77).  
The  health  and  mutual  aid  funds  had  16 
institutions  and  is  also  profitable.  The  number  of 
members in the health and mutual aid fund sector 
increased to 1.1 million, while the operating profit 
was  also  positive  at  HUF  1.4  billion  (EUR  3.6 
million) in 2023 (78). 

is 

sector 

insurance 

Hungary’s 
rather 
concentrated, with declining profits, and well 
capitalised.  The  sector-wide  return  on  equity 
(ROE) fell from 9.5% in 2022 to 5.4% in 2023 (74). 
The  profitability  of 
sector 
deteriorated  further  in  2023,  mainly  due  to  the 
impact  of the  extra  tax  levied  by  the  government 
on the insurance sector (based on annual premium 
income).  Based  on  gross  written  premiums,  the 

insurance 

the 

(69)  EBA MREL Dashboard - Q4 2023, p.13.  CBR (Combined 

Buffer Requirement) and TREA (Total Risk Exposure Amount) 

(70)  MNB, 2024, Financial Stability Report, Nov. 2024, p.5. 

(71)  ) EBA, Guidelines to resolution authorities on the publication 

of their approach to implementing the bail-in tool.  

(72)  MNB, 2024, Financial Stability Report, Nov. 2024, p.55. 

Sources of business funding and the 
role of banks 

Firms in Hungary rely slightly more than the 
EU  average  on  funding  from  banks  and  far 
less than the EU average on capital markets. 
More specifically, at the end of 2023, bank finance 
through  loans  constituted  31.2%  of  all  funding 
sources  for  Hungarian  non-financial  corporations 

(75)  EIOPA, 2024. Dashboard on Insurance Protection for Natural 

Catastrophes in a Nutshell. 

(76)  MNB, 2024, Report on Insurance, Funds, Capital Market Risks, 

and Consumer Protection, p.48. 

(77)  MNB, 2024, Report on Insurance, Funds, Capital Market Risks, 

(73)  MNB, 2024, Financial Stability Report, Nov. 2024, p.55. 

and Consumer Protection, p.47. 

(74)  MNB, 2024, Report on Insurance, funds, capital market risks 

(78)  MNB, 2024, Report on Insurance, Funds, Capital Market Risks, 

and consumer protection, p. 7. 

and Consumer Protection, p.49. 

55 

 
 
 
(NFCs)  (EU  average:  27.2%),  while  listed  shares 
and  bonds  represented  only  6.7%  of  funding 
sources  (EU  average:  23.8%).  The  overall  level  of 
NFC funding in Hungary was equivalent to 164.9% 
of  GDP,  which  is  substantially  lower  than  the  EU 
average of 230.3% of GDP (see Graph A3.4). 

the  2024  EIB 

Investment  Survey, 

Hungarian  firms  rely  mostly  on  internal 
financing like their European peers.  According 
to 
the 
investment  needs  of  67%  of  Hungarian  firms  are 
covered  by  internal  funding,  compared  to  an  EU 
average  of  66% (79).  At  the  same  time,  73%  of 
Hungarian  firms  believe  that  their  investment 
activities over the last three years were about the 
right  amount  (below  the  EU  average  of  80%), 
while  18%  of  Hungarian  firms  believe  that  their 
investment activities were too little (above the EU 
average of 14%). Overall, this suggests that most 
Hungarian firms do not perceive major investment 
gaps (80). 

Graph A5.4: Composition of NFC funding as % of 
GDP 

(1) Reference period 2023. 
Source: Eurostat 

Lending  to  households  picked  up  and  this  is 
expected  to  continue.  For  households,  the 
annual  credit  growth  rate  for  adjusted  loans  has 
edged up from 2.7% in 2023 to 7.9% in Q3-2024. 
in 
This  growth 
macroeconomic 
reformed 
fundamentals, 
family subsidy programme (HPS Plus programme), 
and  an  increase  in  consumer  loans (81).  According 
lending  survey 
to 
conducted by the Hungarian National Bank (MNB), 

the  October  2024  bank 

improvements 

is  due 

the 

to 

(79)  EIB, 2024, 2024 EIB Investment Survey, p. 29. 

(80)  Ibid., p. 7. 

in  the  retail  segment  the  demand  for  unsecured 
loans  is  not  expected  to  continue  to  rise  while 
demand for housing loans may pick up again over 
the next six months (82). 

Lending to corporates slowed down while the 
outlook  also  remains  subdued.  For  NFCs,  the 
annual  credit  growth  rate fell  from  6.2%  in  2023 
to  3.1%  in  Q3-2024,  due  to  insufficient  demand 
(in  particular  from  small  and  medium-sized 
enterprises  (SMEs))  (83).  According  to  the  MNB’s 
October 2024 bank lending survey, the investment 
is  dampened 
activity  of  domestic  companies 
mainly  by  subdued  consumer  demand, 
the 
lingering  effects  of  inflation  and  uncertainty. 
Looking  ahead  to  the  next  six  months,  banks  do 
not  expect  demand  for  long-term  loans  (typically 
investment loans) to pick up (84). 

Capital markets and the participation 
of retail investors 

Hungarian  capital  markets  remain  under-
developed.  The  main  stock  exchange  in  Hungary 
is  the  Budapest  Stock  Exchange  (BSE),  which  is 
home  to  around  155  listed  companies (85).  The 
MNB has the controlling ownership of the BSE. The 
BSE  total  annual  revenue  for  H1-2024  was  23% 
lower than H1-2023 (86).  The equity market is the 
most  important  segment  of  the  BSE,  accounting 
for  around  90%  of  trading  revenue  in  H1  2024, 
while  the  second 
is 
generated  by  derivatives (87).  The  BSE  also 
operates  a  multilateral  trading  facility  (MTF)  for 
SMEs  called  BSE  Xtend;  and  a  new  market 
segment  for  secondary  bond  trading  called  BSE 
Xbond.  The  use  of  equity by  SMEs  is very low,  as 
only  3%  of  SMEs  indicated  in  the  2024  SAFE 
survey that equity was relevant to them, compared 
to an EU average of 12% (88). 

largest  trading  revenue 

(82)  MNB, 2024, Trends in Lending, Nov. 2024. 

(83)  MNB, 2024, Financial Stability Report, Nov. 2024, p. 22. 

(84)  MNB, 2024, Trends in Lending, Nov. 2024. 

(85)  BSE, 2024, Semi-Annual Report, June 2024, p. 2. 

(86)  BSE, 2024, Semi-Annual Report, June 2024, p. 3. 

(87)  BSE, 2024, Semi-Annual Report, June 2024, p. 7 

(88)  European  Commission,  2024,  Data  and  Surveys-SAFE, 

(81)  MNB, 2024, Financial Stability Report, Nov. 2024, p. 28. 

Results by country, T27. 

56 

050100150200250HUEU% of GDPLoansTrade credit and advancesBondsListed sharesUnlisted sharesOther equity 
  
 
 
While there is no comprehensive government 
strategy on promoting capital markets, some 
sector-specific strategies were introduced by 
important  national  players  in  the  financial 
the  former  2016-2020 
sector.  Building  on 
strategy (89), the BSE developed a new strategy for 
2021-2025  to  further increase  the  role  of  capital 
markets  (e.g.  promoting  the  ESG  aspect  in  both 
classes,  exploring 
equity  and  bond  asset 
cooperation  opportunities  in  the  CEE  region,  and 
improving IT innovation and security) (90). In 2018, 
the MNB adopted a seven-point strategy report to 
promote  the  insurance  sector  in  Hungary.  The 
seven  points  and  targets  are:  (i)  widespread  self-
care (e.g. increasing coverage of life insurance and 
voluntary  pension  fund  contracts,  the  number  of 
(e.g. 
contracts); 
penetration  of  gross  written  premium/GDP);  (iii) 
increasing  the  competitive  market;  (iv)  efficient 
sales  (e.g.  use  of  innovative  channels  through 
online  sales);  (v)  economies  of  scale;  (vi)  fair  and 
competitive  profitability;  and  (vii)  well-capitalised 
insurers (91).  The  MNB  carefully  monitors  the 
development of these seven targets on an annual 
basis. 

(ii)  converting  market  size 

Hungarian  households  have  a  high  saving 
rate,  with  the  majority  of  their  financial 
assets  held 
in  government  bonds  and 
investment  funds,  but  more  can  be  done. 
Encouraging  the  build-up  of  universal  funded 
supplementary  pension  schemes  would  positively 
contribute to (i) the sustainability and adequacy of 
pension  benefits;  (ii)  investment  in  equity;  (iii) 
access  to  finance;  (iv)  growth;  and  (v)  innovation. 
In 2023, Hungarian households had a lower-than-
average holding of cash and deposits, representing 
nearly  a  quarter  (21.4%)  of  household  assets 
compared to the EU average of 32.3% (part of the 
deposits  seem  to  be  replaced  by  domestic 
government  bonds,  very 
tax 
exemptions  on  these  bonds).  In  2023,  37.1%  of 
household  financial  assets  were  held  in  three 
asset  categories:  (i)  pension  funds;  (ii)  investment 
funds; and (iii), directly held in financial investment 
instruments (92).  This  is  still  short  of  the  EU 

likely  due 

to 

average  of  45.4%  (see  Graph  A3.5).  In  Hungary, 
direct  and  intermediated  retail  investment  by 
households  was  52% 
in  2022  (EU  average: 
56.2%), which is rather high. 

taxation 

hindering 

favours 
the 

certain 
Financial 
investments, 
broader 
development  of  capital  markets.  In  2022,  the 
Hungarian  government  started  issuing  long-term 
bonds  for  retail  investors,  which  were  tax  free, 
while  raising  the  withholding  tax  on  funds  and 
deposits  from  15%  to  28%  (starting  in  July 
2023) (93). Long-term savings (deposits, fund units 
and  other  securities  held  in  a  special  savings 
account for at least  five years)  were also exempt 
from  tax.  Moreover,  under  a  new  regulation,  as 
from  October  2023,  banks  must  inform  their 
clients  about  the  potential  loss  they  may  suffer 
from  holding  their  money  in  cash  instead  of 
investing  in  government  bonds (94).  0verall,  it  is 
towards 
difficult 
insurance  products  (which  also  have  a  large 
majority  of  government  bonds)  or  investment 
funds, if direct access to government bonds is tax 
free.  A  wider  review  of  the  incentives  in  place  to 
promote  retail  participation  in  financial  markets 
may also be warranted. 

incentivise  retail  clients 

to 

Graph A5.5: Composition of household financial 
assets per capita and as % of GDP 

(1) Reference period 2023. 
Source: Eurostat 

(89)  BSE, 2015, BSE Strategy 2016-2020. 

(90)  BSE, 2020. BSE Strategy 2021-2025. 

(91)  MNB, 2018, The 10-year vision of the insurance sector in 7 
points; also MNB, 2024, Report on Insurance, funds, capital 
market risks and consumer protection, p. 19. 

(92)  The breakdown is: bonds 15.5%, investment funds: 11.7%, 
insurance and pension products 6.4%, listed shares: 2.8%. 

(93)  EFAMA, 2024, Household Participation in Capital Markets, 

Jan. 2024, p. 42. 

(94)  EFAMA, 2024, Household Participation in Capital Markets, 

Jan. 2024, p. 42. 

57 

0501001502002500102030405060708090HUEUHUEUper capita (000 EUR) (lhs)% of GDP GDP (rhs)Currency and depositsInsurance and pension fundsInvestment fundsBondsListed sharesUnlisted sharesOther equityHH Debt (liability) 
 
  
 
The role of domestic institutional 
investors 

in  Hungary  amounted 

The  Hungarian  fund  management  industry  is 
quite  small,  with  conservative  investment 
strategies.  In  Q3-2024,  the  net  asset  value  of 
to 
investment  funds 
HUF 19 611.4 billion  (EUR  49.6  billion) (95).  In  Q3-
2024,  the  largest  proportion  of  investment  fund 
assets  was  allocated  to  bonds  (29.9%),  followed 
by real estate funds (17.4%), private equity funds 
(12.1%),  absolute  return  funds  (9.4%),  mixed 
securities funds (8%), equity funds (5.7%), money 
market  funds  (2.4%),  and  venture  capital  funds 
(0.1%)  (96).  In  2023  and  2024,  the  Hungarian 
government  introduced  new  asset  allocation  rules 
for investment funds, including a mandatory quota 
for  investment  funds  to  allocate  at  least  5%  of 
their portfolio (and an additional 3% in short term 
securities 
to  Hungarian 
government bonds (97). 

for  certain 

funds) 

The  Hungarian  insurance  sector  is  small  and 
has  conservative  investment  strategies.  It 
mainly  invests  in  government  bonds  at  43.4%  of 
total  assets  by  Q2-2024  (compared  to  19%  for 
the European Economic Area as a whole) (98), while 
cash and deposits accounted for 4.7%. Investment 
funds  accounted  for  42.1%  (of  which  63.1%  was 
in  private  equity 
in  equity  funds  and  0.1% 
funds) (99). Equities accounted for 4.7% of insurers’ 
investment  portfolio,  corporate  bonds  for  3.2%, 
and property for 1.5%. Domestic assets accounted 
for 79% of total investments (100). 

The  domestic  pension  fund  industry  has  a 
investment  profile,  with  a 
conservative 

(95)  MNB, 2024, Time series of investment funds, Q3-2024. 

(96)  MNB, 2024, Time series of investment funds, Q3-2024; 

Government Decree No 55/2024 entered into force on 1 July 
2024, laying down that there would be four main types of 
funds based on their primary asset categories: securities 
funds, real estate funds, venture capital funds and mixed 
funds (there are a total of fourteen categories of investment 
funds within the four types). 

(97)  Government Decree No 208/2023 on investment rules for 

each investment fund and Government Decree No 55/2024. 

(98)  EIOPA, 2024, Insurance Statistics. 

(99)  EIOPA, 2024, Insurance Statistics. 

greater  focus  on  bonds.  As  mentioned  earlier, 
Hungary’s public pension system is pay as you go 
(PAYG)  covering  all  employees,  while  mandatory 
private  pension  funds  were  practically  eliminated 
in 2010. As regards voluntary pension funds, debt 
(nearly  half 
securities  accounted  for  54.3% 
domestic)  of  the  total  assets  held  by  pension 
funds,  while  investment  funds  accounted  for 
32.7% (including venture capital funds), shares for 
9.7%,  and  bank  deposits  for  1.6% (101).  Overall,  a 
better  developed  pensions  sector  could  help 
develop the domestic capital market. 

The participation of pension fund investors in 
providing  funding  for  start-ups  and  venture 
capital investors is very low. A 2024 paper by 
the  think  tank  CEPS  showed  that  Hungarian 
pension  fund  participation  in  private  equity  and 
venture  capital  funds  between  2007-2023  was 
close  to  0%  and  one  of  the  two  lowest  levels  in 
the  EU  (substantially  short  of  the  19%  for  the 
Baltic  states  or  +20%  shares  for  the  Nordic 
Member States) (102). 

Recent  government  plans  on  voluntary 
private  pension  funds  may  hinder  capital 
market  growth.  In  October  2024, the Hungarian 
its  plans  to  propose 
government  announced 
allowing  the  tax-free  use  of  private  pension 
savings  for  housing  purposes  as  a  one-off 
measure  in  2025.  According  to  a  recent  draft 
proposal, it will be possible to use the full amount 
of  savings  from  voluntary  pension  funds  for 
renovations,  equity 
for  new  mortgages  or 
repayments  for  existing  mortgages (103).  This  plan 
may  trigger  an  outflow  of  pension  funds  (money 
saved for retirement) to housing renovation or the 
purchase of housing. 

The depth of available venture and 
growth capital 

The  domestic  venture  and  growth  capital 
market is not developed enough to meet the 

(101) MNB, 2024, Time series of pension funds, Q3-2024. 

(102) CEPS, 2024, Closing the gaping hole in the capital market for 

EU start-ups – the role of pension funds, p. 2. 

(100) MNB, 2024, Report on Insurance, funds, capital market risks 

(103) Reuters, 2024. Hungary seeks housing boost from pensions 

and consumer protection, p. 22. 

ahead of 2026 election 

58 

 
 
 
Table A5.1:  Financial indicators 

(1) Annualised data. 
Credit growth and pension funds EU data refers to the EA average. 
Source: ECB, ESTAT, EIOPA, DG FISMA CMU Dashboard, AMECO. 

financing needs of innovative firms. The value 
of  annual  private  equity  relative  to  nominal  GDP 
went up to 0.25% in 2018 and dropped to 0.05% 
in  2023  (EU  average  in  2023:  0.41%) (104).  The 
value of annual venture capital investment relative 
to  nominal  GDP  went  up  to  0.10%  in  2019  and 
then  dropped  to  0.03%  in  2023  (EU  average: 
0.05%) (105). Given the limited venture capital (VC) 
and private equity (PE) activity in Hungary, there is 
a financing gap for early-stage innovative firms in 
need  of  capital  (see  the  Innovation  to  Business 
Annex). 

initiatives 

in  place  to 
There  are  some 
promote  start-up  funding.  The  Hungarian 
Private  Equity  and  Venture  Capital  Association 
reported  that,  during  H1 2024,  40  companies 
received  HUF 32 271 million  (EUR  81.6  million) 
from VC and PE funds (106). There was a significant 
increase  (183.7%)  in  the  invested  amount,  even 
though  the  number  of  deals  in  H1 2024  was 

than 

lower 

21.6% 
in  H1 2023.  Companies 
operating  in  communications,  real  estate,  and 
business  and  industrial  services  sectors  received 
69.1% of the total capital invested in the first half 
of  2024 (107).  The  MNB  has  set  up  an  innovation 
hub as a forum for direct and flexible contact with 
innovators,  and  a  regulatory  sandbox  where 
innovative 
tested  more 
easily (108).  However,  there  is  no  comprehensive 
legal  framework  to  facilitate  the  creation  and 
growth of start-ups as in other Member States. 

solutions 

can  be 

Financing the green transition 

The  financing  needs  of  Hungary’s  green 
transition  could  pose  a  challenge.  Significant 
investment will be required in the next decades to 
achieve  climate  neutrality  by  2050 (109).  In  the 
financial  sector,  the  MNB  has  taken  a  number  of 

(104) European Commission, 2024, Overview of CMU Indicators – 

2024 Update, Indicator 11. 

(107) HVCA, 2024, Venture Capital and Private Equity, Update 

(105) European Commission, 2024, Overview of CMU Indicators – 

Hungary, H1 2024. 

2024 Update, Indicator 16. 

(108) MNB, 2023. Fintech and Digitisation Report 

(106) HVCA, 2024, Venture Capital and Private Equity, Update 

(109) Ministry  of  Innovation  and  Technology.  National  Clean 

Hungary, H1 2024. 

Development Strategy 2020-2050 

59 

20172018201920202021202220232024-Q3EUTotal assets of MFIs (% of GDP)95,392,390,4106,5109,0108,2100,296,7248,4Common Equity Tier 1 ratio14,216,715,815,917,716,917,618,816,6Total capital adequacy ratio16,218,518,018,319,718,920,121,020,1Overall NPL ratio (% of all loans)8,45,44,23,63,23,12,42,31,9NPL (% loans to NFC-Non financial corporations)9,84,43,84,13,33,63,43,33,5NPL (% loans to HH-Households)12,29,86,86,16,05,73,93,42,2NPL-Non performing loans coverage ratio59,1---56,555,156,960,042,1Return on Equity114,514,714,37,612,712,121,221,310,0Loans to NFCs (% of GDP)16,517,017,018,518,117,816,715,630,0Loans to HHs (% of GDP)14,814,114,616,116,314,613,513,344,5NFC credit annual % growth10,213,614,18,910,715,26,23,10,8HH credit annual % growth2,67,316,614,315,18,02,77,90,7Stock market capitalisation (% of GDP)---16,417,513,017,518,169,3Initial public offerings (% of GDP)0,040,000,000,010,000,000,00-0,05Market funding ratio35,233,132,535,740,139,837,8-49,6Private equity (% of GDP)0,130,250,120,170,160,150,05-0,41Venture capital (% of GDP)0,040,050,100,090,090,050,03-0,05Financial literacy (composite)------44,0-45,5Bonds (as % of HH financial assets)12,412,715,315,114,513,615,5-2,7Listed shares (as % of HH financial assets)1,71,51,71,82,52,52,8-4,8Investment funds (as % of HH financial assets)10,39,28,27,88,79,311,7-10,0Insurance/pension funds (as % of HH financial assets)9,38,48,37,87,36,26,4-27,8Total assets of all insurers (% of GDP)7,06,36,36,55,84,54,85,054,8Pension funds assets (% of GDP)--------23,41-34-1011-1718-2425-27Colours indicate performance ranking among 27 EU Member States.Banking sectorNon-banks sector 
 
 
 
  
 
the 

green 

preferential 

measures  to  foster  the  growth  of  green  finance, 
capital 
including 
requirements programme (110), the green mortgage 
bond purchase programme and funding for growth 
green  home  programme (111).  In  Hungary,  the 
issuance of bonds with environmental,  social, and 
governance  objectives  as  a  share  of  total  bond 
issuance  was  higher  in  H1 2024  at  around  13% 
than  its  three-year  average  of  around  8%  and  is 
higher than that of most of its EU peers (112). 

Hungary  launched  a  project  to  develop  a 
domestic  green  capital  markets  strategy  to 
create  a  supportive  regulatory  environment. 
In  July  2020,  Hungary  launched  a  project  to 
develop  a  sustainable  capital  markets  strategy 
with  the  assistance  of  the  European  Bank  for 
Reconstruction  and  Development  (EBRD)  and  the 
European Commission. The aim was to help capital 
markets  finance 
in  support  of 
investments 
environmental  sustainability,  and  to  allow  ‘green’ 
companies  to  access  more  favourable  equity  or 
bond funding (113). 

Financial literacy 

Financial  literacy  has  improved  in  Hungary 
over  the  years  and  is  now  close  to  the  EU 
average.  Financial  literacy  is  crucial  to  promote 
retail-investor  participation  in  capital  markets  but 
also to familiarise SMEs with alternatives to bank 
financing.  The  July  2023  Eurobarometer  survey 
showed  that  only  16%  of  Hungarians  had  a  high 
level  of  financial  literacy,  72%  a  medium  level, 
and  the  remaining  12%  a  low  level,  compared  to 
the EU average of 18% for high financial literacy, 
64% for medium, and 18% for low (114). This leads 
to  an  overall  financial  literacy  indicator  (the 

(110) This  2020  programme  allows  participating  banks  to  reduce 
the  amount  of  capital  they  are  required  to  set  aside  for 
environmentally sustainable assets such as green loans. 

(111) These  two  programmes  are  part  of  the  2021  MNB  green 
monetary  policy  toolkit  strategy  to  support  green  housing 
loans. MNB, 2024, Green Finance Report – July 2023. 

(112) AFME, 2024, CMU Key Performance Indicators, p. 23. 

(113) C.  Kandrács,  2023,  Financing  a  Sustainable  Economy  in 
Hungary,  Opportunities  and  Challenges.  Public  Finance 
Quarterly, 2023/1. 

(114) European  Commission,  2023,  Flash  Eurobarometer  Survey  -
Monitoring  the  level  of  financial  literacy  in  the  EU  -  July 
2023, p. 17. 

average  of  the  financial  knowledge  and  financial 
behaviour  indicators)  of  44%  vs  an  EU  average 
score of 45.5% (115). 

In  Hungary,  the  government  has  been 
involved  in  improving  financial  education 
alongside initiatives taken by other state and 
non-state  financial  market  stakeholders.  In 
2017,  the  Ministry  of  Finance (116)  adopted  a 
strategy  and  an  action  plan  (2017-2023)  for 
improving  the  population’s  financial  awareness. 
Other  public  bodies  (such  as  the  MNB,  as  it  is 
required to do so)  and non-public bodies (such as 
the  Hungarian  Banking  Association)  operating  in 
the financial market are trying to improve financial 
awareness  through  various  programmes  and 
activities.  Financial  knowledge  is  also  taught  in 
primary  and  secondary  schools (117).  More  can  be 
done in terms of deepening practical skills, as well 
as widening the scope to include SMEs in financial 
literacy initiatives. 

(115) European Commission, 2024, Overview of CMU Indicators – 

2024 Update, Indicator 27. 

(116) In January 2023, the task of improving financial awareness 
was transferred to the Ministry of Economic Development. 

(117) Hergár, Kovács, Németh, (2024), Status and development of 

Financial Literacy in Hungary. 

60 

 
 
 
ANNEX 6: EFFECTIVE INSTITUTIONAL FRAMEWORK 

digitalisation 

Hungary’s institutional framework influences 
its  competitiveness.  The  country  would  benefit 
from  greater  legal  certainty,  improved  regulatory 
legislative  simplification  and  fewer 
practices, 
administrative  burdens.  The 
competitiveness 
strategy for 2024-2030 is moving in this direction. 
The 
public 
of 
administration is expanding with a focus on user-
centricity,  but  at  a  slower  pace  than  the  EU 
average.  Further  challenges  relate  to  the  low 
attractiveness  of  the  Hungarian  administration. 
The  Hungarian  recovery  and  resilience  plan  (RRP) 
contains  several  reforms  in  the  areas  of  anti-
corruption, justice and better-lawmaking. However, 
the plan’s implementation is significantly delayed. 

Hungarian 

Public perceptions 

Graph A6.1: Trust in justice, regional / local 
authorities and in government 

(1) EU-27 from 2019; EU-28 before 
Source: Standard Eurobarometer surveys 

regional  and 

Trust in public institutions remains above the 
local 
EU  average,  with 
authorities  achieving  higher  scores  than 
other  institutions  (Graph  A6.1).  Aspects  that 
could  increase  public  trust  in  Hungary’s  public 
transparency  about 
administration  are  more 
decisions  and  the  use  of  public  money  and  less 
(118).  The  perceived  quality  of 
bureaucracy 
government  has  remained  unchanged  at  values 

(118) Understanding Europeans’ views on reform needs - April 
2023 - - Eurobarometer survey, Country Fact Sheet. 

trust  and 

below  the  EU  average  (119).  Several  measures 
facilitating 
aimed  at  enhancing 
communication  with  the  public  are  ongoing:  in-
person  service  delivery,  mobile  service  points  and 
dedicated  delivery  in  post  offices.  Online  services 
are  being  rolled  out,  such  as  digital  citizenship 
offering 
e-government 
services,  the  digital  land  registry  and  automated 
VAT  for  businesses  (eÁFA).  The  Act  on  Regional 
Development  (120)  passed  in  2024  aims  to  tackle 
disparities  and  foster  trust  in  regional  and  local 
authorities. 

e-identification 

and 

Quality of legislation and regulatory 
simplification 

for  primary 

Hungary’s  processes  for  developing  and 
evaluating  legislation  remains  below  the  EU 
average.  Performance  in  regulatory  tools  like 
public  consultation,  ex-ante  impact  assessment 
and  reviews  of  existing  regulations  is  broadly 
laws  and  subordinate 
similar 
regulations,  and  it  improved  slightly  over  2021-
2024.  However,  stakeholder  engagement  and  ex 
post  evaluation  of  legislation  both  remain  below 
the EU average. In particular, there is potential for 
improving  the  methodology,  systematic  adoption, 
transparency,  oversight  and  quality  controls  of 
public 
consultations  of  both  primary  and 
is  still 
secondary 
substantial  room  for  increasing  the  transparency, 
frequency,  oversight  and  quality  controls  of  ex 
post  evaluation  of  legislation  (Graph  A6.2).  A 
review  of  the  methodology  governing  regulatory 
impact  assessments  came  into  effect  in  2025. 
Furthermore, the median time for law adoption in 
Hungary is visibly below that of the median time in 
the  EU-27  countries  (Graph  A6.3).  The  state  of 
emergency  allowing  the  government  to  override 
laws through decrees was extended once again for 
the whole of 2024 and up to November 2025. This 
limits  public  consultation  and  weakens 
legal 
certainty.  

legislation.  Moreover,  there 

(119) Inforegio - European Quality of Government Index 

(120) https://vehir.hu/cikk/73829-navracsics-tibor-a-kozigazgatas-
varhato-fejleszteseirol-beszelt-veszpremben (Accessed on 
13/01/2025). 

61 

00.10.20.30.40.50.60.7AutumnSpringAutumnSpringAutumnSpringAutumnSpringAutumnSpringAutumnSummerWinterSummerWinterSpringAutumnSpringAutumn2014201520162017201820192020202220232024Justice,  legal system EU27Justice,  legal system HURegional or local public authorities EU27Regional or local public authorities HUGovernment  EU27Government  HU 
 
       
 
 
 
 
 
Table A6.1:  Hungary. Selected indicators on administrative burden reduction and simplification 

(1) This table presents a subset of iREG indicators focusing on regulatory costs. The indicators refer to primary legislation. 
Source: (2025), Regulatory Policy Outlook 2025 [https://doi.org/10.1787/56b60e39-en] and Better Regulation across the 
European Union 2025 (forthcoming). 

Graph A6.2: Indicators of Regulatory Policy and 
Governance (iREG) 

Graph A6.3: Median time for law adoption in 
Parliament (days) 

Source: OECD (2025), Regulatory Policy Outlook 2025 and 
Better Regulation across the European Union 2025 
(forthcoming). 

is 

to 

room 

There 
further  strengthen 
mechanisms  for  simplifying  regulations.  For 
example, ex post evaluations of legislation are not 
required to consider the consistency of regulations 
and  address  areas  of  duplication.  Moreover,  the 
government  has  not  conducted  recently  in-depth 
reviews  of  specific  regulatory  areas  and  public 
stocktakes of legislation (see table A4.1). 

Source: European Commission based on national parliament’s 
websites 

The  OECD  product  market 
regulation 
indicator  shows  that  Hungary’s  licensing 
system  is  well  aligned  with  many  best 
practices,  but  not  all  of  them.  For  example, 
while  the  government  keeps  an  up-to-date  online 
inventory  of  all 
licences 
required/issued  to  businesses  by  public  bodies, 
there  is  no  requirement  for  the  government  to 
licences  and 
regularly  assess  whether  such 

the  permits  and 

62 

0.00.51.01.52.02.53.03.54.0Primary lawsSubordinateregulationsPrimary lawsSubordinateregulationsPrimary lawsSubordinateregulationsHU_StakeholderengagementHU_Regulatory ImpactAssessmentHU_Ex-post evaluation oflegislationMethodologySystematic adoptionTransparencyOversight and quality control2021EU-270102030405060708090HUEU-27Ex ante impact assessment of legislationEx post evaluation of legislationIdentify and assess the impacts of the baseline or ‘do nothing’ option.Is required to consider the consistency of regulations and address areas of duplication.Identify and assess the impacts of alternative non-regulatory options.Is required to contain an assessment of administrative burdens.Quantify administrative burdens of new regulations.Is required to contain an assessment of substantive compliance costs.Quantify substantial costs of compliance of new regulations.Compares the impact of the existing regulation to alternative options.Assess macroeconomic costs of new regulations. Periodic ex post evaluation of existing regulations is mandatory.Assess the level of compliance.Government uses stock-flow linkage rules when introducing new regulations (e.g., one-in one-out).Identify and assess potential enforcement mechanisms.A standing body has published an in-depth review of specific regulatory areas in the last 3 years.In the last 5 years, public stocktakes have invited businesses and citizens to assess the effectiveness, efficiency, and burdens of legislation.When developing new legislation, regulators are required to …Yes /  For all primary laws For major primary laws For some primary lawsNo / Never 
     
 
       
 
     
 
Table A6.2:  Digital Decade targets monitored through the Digital Economy and Society Index 

Source: State of the Digital Decade report 2024 

permits  are  still  required  or  should  be  withdrawn 
(see  also  Annex  4).  Moreover,  the  B-READY 
indicators  (121)  show  that  there  is  much  potential 
for  cutting  the  time  needed  to  obtain  a  property 
transfer,  a  construction-related  permit  and  an 
environmental licence. Unlike 19 other EU Member 
States,  Hungary  lacks  a  dedicated  institution  for 
promoting pro-productivity policies. 

Social dialogue 

Social  dialogue  in  Hungary  remains  limited, 
especially  in  the  public  sector.  Despite  some 
improvements  regarding  the  transparency  and 
institutional  framework  of  tripartite  forum  of  the 
private  sector  (VKF),  the  overall  framework  of 
social  dialogue  is  still  weak  (see  Annex  10).  This 
is partly  due  to  the  fragmentation  of  employers’ 
and  employees’  representations,  with  different 
memberships  and 
the 
establishment  of  a  separate  employment  status 
for  certain  groups  of  public  employees  has 
weakened  their  ability  to  defend  their  collective 
interests. There is little to no consultation of social 
partners  on  major  challenges  and  reforms  to 
labour  market  and  social  policies.  ESF+ is 
supporting social partners in building capacity (122). 

functions.  Moreover, 

(121) World Bank. 2024. Business Ready 2024. Washington, DC: 

World Bank. doi:10.1596/978-1-4648-2021-2. 

(122) For  an  analysis  of  the  involvement  of  Hungary’s  social 
partners at national level in the European Semester and the 
Recovery  and  Resilience  Facility,  see  Eurofound  (2025), 
National-level  social  governance  of  the  European  Semester 
and the Recovery and Resilience Facility. 

Digital public services 

The  supply  of  digital  public  services  to 
citizens  and  businesses  in  Hungary  is  below 
the  EU  average  with  a  larger  gap  for 
businesses  (table  A6.2).  Hungary  has  progressed 
in the EU’s Digital Decade target for digital public 
services for citizens. In 2023 it had a score of 73, 
compared to the EU average score of 79 in 2023. 
Hungary’s  score  for  digital  public  services  for 
businesses  is  75,  compared  to  an  EU  average 
score of 85. Concerning access to electronic health 
records,  Hungary  performs  relatively  well,  scoring 
86  out  of  100,  significantly  exceeding  the  EU 
average  of  79.  This  success  can  largely  be 
attributed  to  the  development  of  the  EESZT 
(Electronic  Health  Service  Space/Health  Window 
application).  The  new  mobile  application,  which 
provides access to health records, has become the 
country’s  most  widely  used  mobile  digital  public 
service.  The  main  gaps  in  Hungary’s  e-health 
maturity  are  the  inability  to  authenticate  with  a 
(pre)notified  eID  and  the  fact  that  the  access 
service  does  not  follow  guidelines  on  web 
accessibility. 

The  uptake  of  online  public  services  is  very 
high (85%, EU average: 75.0%). However, the use 
of eID is still low. Only  31.5% of  individuals have 
used their eID to access online services for private 
purposes  in  the  last  12  months,  below  the  EU 
average  of  41%  (123). Hungary  has  not  yet  set  up 
and  notified  eID  schemes for  legal  persons  under 

(123) European Commission. Digital Decade 2024: Country reports 

63 

Digital Decadetarget by 20302022202320242024EU-27Digitalisation of public services164687379100Score (0 to 100)20212022202320232030274767585100Score (0 to 100)202120222023202320303na808679100Score (0 to 100)20212022202320232030HungaryEU-27Digital public services for citizensDigital public services for businessesAccess to e-health records 
 
 
 
  
 
businesses 

the  eIDAS  Regulation(124).  This  means 
that 
authenticate 
Hungarian 
themselves  to  access  public  services  provided  by 
other  Member  States,  including  those  enabled  by 
the  Once-Only  Technical  System,  part  of  the  EU 
Single Digital Gateway (125). 

cannot 

finalising 
necessary 
the 
Hungary 
is 
for  seamless,  automated 
infrastructure 
exchange  of  authentic  documents  and  data 
across the EU. There are still additional  steps to 
be  taken by Hungary to become technically ready 
to connect to the Once-Only Technical System (126). 

Civil service 

Hungary's  civil  service  is  relatively  young, 
with  a  higher  ratio  of  staff  aged  49  or  below 
compared to those aged 50 or above than the EU 
average (127). The share of employees with higher 
education  is  relatively  low,  in  contrast  to  the 
strong  participation  of  civil  servants  in  adult 
learning. 

can 

impact 

The  low  attractiveness  in  the  Hungarian 
its  overall 
administration 
performance. One of the major challenges is the 
significant  pay  gap  (128)  between  the  public  and 
private  sector  contributing  to  a  high  turnover 
amounting  to  20-30%  per  year  (129).  The  lack  of 
attractiveness 
limited 
opportunities for teleworking where Hungary ranks 
well  below  the  EU  average.  A  system  of  in-kind 
benefits aims to address the problem. The system 
includes discounts for sports and cultural services 
combined  with  local  programmes  for  onboarding 
and employees’ wellbeing.  

exacerbated 

by 

is 

Integrity 

A  far  higher  percentage  of  companies  than 
the  EU  average  consider  corruption  to  be 
widespread and a problem in doing business, 
and ensuring timely and effective application 
of  anti-corruption  measures  in  practice  is 
crucial.  In  Hungary,  78%  of  companies  consider 
that  corruption  is  widespread  (EU  average  64%) 
and  41%  consider  that  corruption  is  a  problem 
when  doing  business  (EU  average  36%)  (130). 
Moreover,  only  25%  of  companies  believe  that 
people  and  businesses  caught  bribing  a  senior 
official  are  appropriately  punished  (EU  average 
31%)  (131).  There  has  been  no  progress  yet  in 
establishing  a  robust  track  record  against  high-
level  corruption  and  enforcement  against  foreign 
bribery  is  still  lacking  (132).  The  Hungarian  RRP 
at 
includes 
strengthening  the  anti-corruption  framework.  It 
remains  vital  to  ensure  that  these  measures  are 
timely  and  effectively  applied 
in  practice. 
Furthermore,  public  procurement  remains  an  area 
at  high  risk  of  corruption  in  Hungary.  29%  of 
companies (EU average 27%) think that corruption 
has prevented them from winning a public tender 
or a public procurement contract in practice in the 
last  three  years  (133).  Construction,  health,  IT  and 
communication  services  also  appear  to  be  high-
(134).  The  RRP  contains  several 
risk  areas 
the  area  of  public 
commitments  also 
procurement. 

several  measures 

targeted 

in 

yet 

to  put 

in  place 
Hungary  has 
comprehensive  regulations  on  lobbying  and 
the  post-employment  obligations  of  public 
officials.  The  new  National  Anti-Corruption 
the 
Strategy  2024-2025  and  Action  Plan, 
government  committed 
forward  a 
legislative  proposal  for  a  lobbying  law,  including 
rules  on  revolving  doors,  to  be  prepared  by  the 

to  bring 

(124) European Commission, eIDAS Dashboard 

(125) European Commission, The Once Only Principle System: A 

breakthrough for the EU’s Digital Single Market 

(130)Flash Eurobarometer 543 on businesses’ attitudes towards 

corruption in the EU (2024). 

(126) European Commission, Once-Only Technical System 

(131)Ibid. 

Acceleratormeter 

(132)See the 2024 country-specific chapter for Hungary of the 

(127) Eurostat. Employment by sex, age and economic activity. 

Rule of Law Report, p. 20. 

(128)Overall the pay gap is 12% according to official statistics. 
see KSH Central Statistical Office (2024) link and link 

(133) Flash Eurobarometer 543 on businesses’ attitudes towards 

corruption in the EU (2024). 

(129)https://kormany.hu/hirek/a-hatekony-kozigazgatashoz-a-

(134) See the 2024 country-specific chapter for Hungary of the 

regiok-egyuttmukodesere-van-szukseg 

Rule of Law Report, pp. 25-26. 

64 

 
 
 
Ministry  of  Justice  by  30  November  2025. 
Hungary’s  lobbying  rules  remain  incomplete,  with 
no  systematic  follow-up 
to  cases  of  non-
compliance,  which  can  create  unfair  advantages 
for some businesses. Post-employment restrictions 
and cooling-off periods remain largely fragmented 
and limited in personal scope, and enforcement of 
sanctions remains largely ineffective (135). 

Justice 

to 

taken 

The  justice  system  continues  to  perform 
efficiently  overall.  The  disposition  time  in  civil 
and commercial  cases in first instance courts has 
increased  slightly  but,  at  135  days,  compared  to 
134 days in 2022, is still among the lowest in the 
EU.  The  estimated 
resolve 
time 
administrative  cases  at  first  instance  has  further 
decreased and continues to be one of the lowest in 
the EU (120 days, compared to 125 days in 2022). 
The  quality  of  the  justice  system  is  good  overall, 
including as regards digitalisation. The courts have 
several digital tools at their disposal, including an 
electronic  case  management  system,  distance 
communication  technology  and  secure  electronic 
communication.  Despite  a  recent  increase  of  the 
salary base, stakeholders have expressed concerns 
about 
its  adoption.  The 
for 
Commission  is  monitoring  the  implementation  of 
the  recent  reform  seeking  to  strengthen  judicial 
independence (136). 

the  process 

(135) See the 2024 country-specific chapter for Hungary of the 

Rule of Law Report, pp. 21-22. 

(136) For more detailed analysis of the performance of the justice 
system in Hungary, see the upcoming 2025 EU Justice 
Scoreboard and the 2024 Rule of Law Report. 

65 

 
 
 
SUSTAINABILITY 
ANNEX 7: CLEAN INDUSTRY AND CLIMATE MITIGATION 

is 

faces 

significant 

Hungary 
challenges 
regarding  its  clean  industry  transition  and 
climate  mitigation:  Despite  progress  in  battery 
in  broader  net-zero 
manufacturing,  capacity 
technologies 
limited,  with  existing  policy 
frameworks  not  offering  comprehensive  support. 
is  highly  dependent  on  critical  raw 
Hungary 
material  imports,  highlighting  vulnerabilities  in 
strategic  autonomy.  Urgency  is  needed  to  tackle 
industrial  emissions, improve  waste management, 
and enhance circular economy practices, alongside 
efforts  to  reduce  emissions  from  transport  and 
buildings. This annex reviews the areas in need of 
urgent  attention 
industry 
transition and climate mitigation. 

in  Hungary’s  clean 

Strategic autonomy and technology 
for the green transition  

Net zero industry 

Hungary is a leader in battery manufacturing 
but production in other net zero technologies 
remains  modest  (137).  It  is  emerging  as  a 
significant  player  in  the  production  of  electric 
vehicle 
(EV)  batteries,  with  a  manufacturing 
capacity amounting to between 40 and 42 GWh/y 
(17-18%  of  total  EU  capacity)  for  battery  and 
storage 
technologies.  Prominent  Chinese  EV 
battery manufacturers, such as EVE Energy, CATL, 
and  Sunwoda,  are  expanding  operations.  The 
Chinese  company  BYD  established  a  new  electric 
vehicle  and  battery  manufacturing  facility 
in 
Szeged, starting in 2025.  

Labour shortages are an issue in the battery 
value  chain,  with  companies  attracting  workers 
from  each  other,  other  value  chains  and  non-EU 
countries.  Vocational  training  programmes  are 
struggling to provide the necessary skills.  

Hungary  is  a  competitive  exporter  of  heat 
pump  components,  such  as  centrifugal  pumps, 
heat  exchange  units  and  electric  generating  sets.  
The domestic market has huge potential, with the 
government  aiming  to  install  at  least  100 000 

(137) European  Commission:  Directorate-General  for  Energy,  The 
landscape  across  the 

industry 

net-zero  manufacturing 
Member States 2025. 

heat pump systems (producing 400 MW) by 2030. 
In  contrast,  production  capacity  ranges  between 
100  and  400  MW/y  (approximately  1-2%  of  the 
EU  capacity)  for  solar  PV,  with  capacity  for  both 
equal shares of modules and cells.  

The  policy  framework  supporting  the  scale-
up  of  net  zero  technology  manufacturing  is 
limited  to  sectoral  policies.  The  government 
has  introduced  various  supportive  policies  for  the 
battery sector, including substantial tax breaks and 
subsidies,  and  a  National  Battery  Strategy(138)  to 
position  Hungary  as  a  key  contributor  to  the 
European  supply  chain.  But  the  country  lacks  a 
comprehensive  enabling  regulatory  framework. 
There 
industrial 
permitting, introduce  non-price  criteria in  auctions 
and  public  procurement  or  develop  industrial 
clusters promoting innovation. 

to  streamline 

is  no  move 

Hungary has ambitious plans for a hydrogen 
industry, but the sector is still in its early stages. 
The  National  Hydrogen  Strategy  (2021)  outlines 
goals for a hydrogen economy, emphasising green 
hydrogen production for industrial decarbonisation 
and  sustainable  transportation.  The  strategy  aims 
to  produce  36 000  tons  of  hydrogen  a  year  by 
2030. However, significant action has yet to occur, 
with  only  the  largest  industrial  consumers  and 
stakeholders beginning smaller projects. 

Transforming the car industry 

The  automotive  industry  is  an  important 
sector for Hungary,  representing  a  considerable 
proportion of manufacturing output and up to 15% 
of exports(139). In 2023 it employed approximately 
increasing 
100 000 
engagement 
from 
Chinese companies. The rise in electric vehicle (EV) 
production  is  drawing  major  suppliers,  including 
the world’s largest battery manufacturers. 

There 
internationally,  particularly 

individuals. 

is 

External  forces  create  significant  future 
challenges.  These  include  the  weakening  of  the 
German  economy,  it  primary  market.  A  sizable 
proportion  of  vehicle  manufacturing  output  is 
exported  to  the  US,  making  it  vulnerable  to 
international geopolitical shifts. 

(138) Hungarian-National-Battery-Industry-Strategy-

2030_ENG.pdf 

(139) Industry – Hungarian Central Statistical Office 

66 

 
 
 
 
 
 
 
The automotive sector is grappling workforce 
issues  to  stay  competitive.  Dual  challenges  of 
labour  shortages  and  high  labour  costs  present 
obstacles  for  automotive  manufacturers.  In  the 
third  quarter  of  2024  compared  with  the  same 
quarter in the previous year, Hungary had the third 
highest increases in hourly  wage costs for the EU 
(+14.1%)  (140),  part  of  a  continued  trend  over  the 
past  decade.  New  manufacturing  sites  have 
difficulties  finding  affordable  local  workers  and 
are  recruiting  people  from  other  regions  of 
Hungary or foreign workers. 

Hungary  has  an  ageing  car  fleet,  with  over 
20% of vehicles being more than 20 years old(141). 
Although  Hungary  is  transitioning  towards electric 
vehicles, in 2023, 75.7% of new registrations were 
still petrol-powered cars (including hybrids). 

Critical raw materials 

Hungary  is  dependent  on  imports  of  critical 
raw  materials,  which  are  key  for  a  green 
transition.  Despite  a  recent  decrease,  Hungary’s 
material import dependency (142) (24.1%) was still 
above the EU average in 2023 (22%). The average 
import  concentration  index  (143)  of  0.2  between 
2018  and  2023  is  slightly  higher  that  the  EU 
average  (0.18).  In  2023,  the  share  of  domestic 
material  consumption  (144)  dedicated  to  non-
metallic  minerals  and  biomass  was  higher  (145) 
than  the  EU  average  (respectively  62.4%  and 
25.9%  vs.  54.4%  and  22.9%),  showing  the 
dependency  of  Hungary’s  economy  on  these 
specific  categories  of  raw  materials.  Hungary’s 
material footprint (146) increased to 15.7 t/capita in 
2023, above the EU average (14.2 t/capita). While 
it is a leading producer of perlite (second in the EU 
and sixth worldwide), it lacks domestic production 
of many essential materials and relies on imports. 

The  largest  imports  of  critical  raw  materials 
include aluminium, coking coal and fluorspar (147).  

is 

rate 

room 

There 
reduce  Hungary’s 
to 
dependency  on critical raw material in  some 
sectors  of  the  circular  economy.  Hungary’s 
recycling 
for  electrical  and  electronic 
equipment  waste  (148)  has  decreased  in  the  last 
year  and  is  now  slightly  below  the  EU  average 
(79.3% vs. 80.7% in 2022). Hungary would benefit 
from  increasing  recycling  and  relying  less  on 
critical  raw  materials  imports.  The  recycling  and 
reuse  rate  for  vehicles  (149)  was  above  the  EU 
average in 2022 (96.9% vs. 89.1%). 

Climate mitigation 

Industry decarbonisation 

Manufacturing  provides  less  than  a  sixth  of 
all  greenhouse  gas  emissions,  but 
its 
emissions  intensity  is  high,  dominated  by 
process  emissions.  At  15%,  the  share  of  industry 
in  Hungary’s  total  greenhouse  gas  emissions  is 
below  the  EU  average  of  21% (150).  In  2022,  the 
manufacturing  sector  emitted  320  g  CO2eq  of 
greenhouse  gases  per  euro  of  gross  value  added 
(GVA), almost 20% more than the EU average. The 
emissions  intensity  of  manufacturing  production 
decreased  by  36%  since  2017,  more  than  in  the 
EU  overall  (20%).  More  than  half  of  Hungary’s 
industrial  emissions  (56%  in  2022)  are  related  to 
industrial  processes;  in  the  EU  this  value  is  43%, 
the remainder being related to energy use.  

The  process  related  emissions  intensity  of 
manufacturing  in  Hungary  is  improving  but 
still  high.  Between  2017  and  2022,  process  and 
product 
of 
manufacturing production in Hungary improved by 

emissions 

intensity 

related 

(140) Eurostat: Labour cost index - recent trends - Statistics 

Explained 

(141) Newly registered electric cars by country | European 

Environment Agency's home page 
(142) Eurostat, dataset [env_ac_mid], 2024. 
(143) Concentration in selected raw materials, Import 

concentration index based on a basket of critical raw 
materials, based on COMEXT Data. 
(144) Eurostat, Dataset [env_ac_mfa], 2024. 
(145) European Environment Agency (EEA), Hungary 2024 circular 

economy country profile, December 2024. 

(146) Eurostat, dataset [cei_pc020], 2024. 

(147) RMIS - Country Profiles 
(148) Eurostat, Dataset [cei_wm60], 2024. 
(149) Eurostat, Dataset [env_waselvt], 2024. 
(150) In  2023.  Manufacturing  includes  all  divisions  of  the  “C” 
section  of  the  NACE  Rev.  2  statistical  classification  of 
economic  activities.  In  the  remainder  of  this  section,  unless 
indicated  otherwise,  data  on  manufacturing  refer  to  the 
divisions  of  the  NACE  section  C  excluding  division  C19 
(manufacture  of  coke  and  refined  petroleum  products),  and 
the  year  2022.  The  source  of  all  data  in  this  section  is 
Eurostat;  data  following  the  UNFCCC  Common  Reporting 
Framework (CRF) are from the European Environment Agency 
(EEA), republished by Eurostat. 

67 

 
 
 
28%,  above  the  EU  average  of  23%.(151)  In  the 
same  period,  energy  use  -related  emissions 
intensity improved by 18%, only slightly above the 
EU  average,  16%.  As  a  result,  the  energy-related 
emissions  intensity  of  Hungary’s  manufacturing 
sector is like that of the EU, with 134 g CO2eq per 
euro of GVA. With 172 g/€, its process and product 
use-related  emissions  intensity  remains  much 
higher  than  in  the  EU  overall,  99  g/€.  Between 
2017  and  2022,  Hungary  saw  an  increase  of  6 
percentage  points  in  the  share  of  electricity  and 
renewables in the final  energy consumption of its 
manufacturing sector, bringing that share to 46% 
in 2022. At the same time, the energy intensity of 
manufacturing production decreased by 9 per cent, 
from 1.9 to 1.8 GWh per euro of GVA. 

Graph A7.1: GHG emission intensity of manu-
facturing and energy-intensive sectors, 2022 

intensity  of  GVA 

in  the  EU.  Hungary  has  seen 

CO2eq/€,  the  emissions 
in 
Hungary’s chemical industry is comparatively high, 
7th 
increased 
electricity  prices for large consumers to  very high 
levels,  putting  EEIs  under  pressure (153).  By  2024, 
production  in  the  chemical  industry  and  the 
manufacture  of  basic  metals  and  non-metallic 
mineral  products  declined  by  up  to  one  third. 
Production in the paper sector remained stable. 

Graph A7.2: Manufacturing industry production: 
total and selected sectors, index (2021 = 100), 
2017-2023 

Source: Eurostat 

Source: Eurostat. 

Energy-intensive  sectors  have  come  under 
industries 
lately.  Energy-intensive 
pressure 
(EEIs) (152)  account 
for  11%  of  Hungary’s 
manufacturing  gross  value  added.  With  2.3  kg  of 

(151) For the GHG emissions intensity of GVA related to energy use 
and  industrial  processes  and  product  use  respectively,  GHG 
emissions  are  from  inventory  data  in  line  with  the  UNFCCC 
Common  Reporting  Format  (CRF),  notably  referring  to  the 
source sectors CRF1.A.2 –  fuel combustion in manufacturing 
industries  and  construction  and  CRF2  –  industrial  processes 
and  product  use.  The  CRF1.A.2  data  broadly  correspond  to 
the NACE C and E sectors, excluding C-19. GVA data (in the 
denominator  for  both  intensities)  are  aligned  with  this 
sectoral  coverage.  Therefore,  they  are  not  fully  consistent 
with the data referred to in other part of this section. 

(152) Notably,  the  manufacture  of  paper  and  paper  products 
(NACE  division  C17),  of  chemicals  and  chemical  products 
(C20),  “other”  non-metallic  mineral  products  (C23;  this 
division includes manufacturing activities related to a single 
substance of mineral origin, such as glass, ceramic products, 
tiles,  and  cement  and  plaster),  and  basic  metals  (C24).  To 
date,  these  industries  are  energy-intensive  –  i.e.  consuming 
much  energy  both  on  site  and/or  in  the  form  of  purchased 
electricity  –  and  greenhouse  gas  emissions  intensive,  in 
various combinations. 

Hungary  has  some  measures  to  support  the 
industry;  more  are 
decarbonisation  of 
needed. Hungary encourages the development of 
renewable  energy  supply  and  energy  storage  in 
industry parks. Electricity market players have also 
begun  to  set  up  renewable  power  purchase 
agreements. 
be 
These  measures 
complemented by dedicated support for improving 
energy  efficiency  in manufacturing  processes  and 
helping companies switch to cleaner technologies, 
also through demand-side measures. 

could 

(153) To  date  in  Hungary,  electricity  prices  for  non-household 
consumers  are  among  the  highest  in  the  EU.  For  a  detailed 
analysis  of  energy  prices,  see  Annex  8  on  the  affordable 
energy transition. 

68 

00.511.522.533.54C-C19C17C20C23C24KG CO2eq / €HungaryEU-27607080901001101202017201820192020202120222023ManufacturingManufacture of paper and paper productsManufacture of chemicals and chemical productsManufacture of other non-metallic mineral productsManufacture of basic metals 
  
 
      
 
Reduction of emissions in the effort 
sharing sectors 

Graph A7.3: Greenhouse gas emissions from the 
effort sharing sectors, 2005 and 2023 

Hungary is projected to reach its 2030 effort 
sharing  target  if  it  adopts  and  implements 
the  planned  additional  climate  mitigation 
measures  (154).  In  2023,  GHG  emissions  from 
Hungary’s  effort  sharing  sectors  are  expected  to 
have been 14.7% below those of 2005. By 2030, 
current  policies  are  projected  to  reduce  them  by 
15.2%  relative  to  2005  levels.  Additional  policies 
considered  in  Hungary’s  final  updated  National 
Energy  and  Climate  plan  (NECP)  are  projected  to 
entail  reductions  by  a  further  9.8  percentage 
points. Hence Hungary is projected to overachieve 
its  effort  sharing 
-18.7%,  by  6.3 
target, 
percentage points (155), once those measures have 
been adopted and implemented. 

Swift  action  on  decarbonising  transport  and 
buildings  appears  particularly  needed 
in 
Hungary.  Between  2005  and  2023,  greenhouse 
gas  emissions  from  road  transport  increased  by 
17%  in  Hungary,  while  they  decreased  by  5%  in 
the  EU  overall.  Speeding  up  climate  mitigation  in 
these  sectors  would  help  protect  households, 
businesses  and  transport  users  in  Hungary  from 
the impact of the forthcoming carbon price. 

in  Regulation 

(154) The national greenhouse gas emission reduction target is set 
out 
(the  Effort  Sharing 
(EU)  2023/857 
Regulation).  It  applies  jointly  to  buildings  (heating  and 
cooling); road transport, agriculture; waste; and small industry 
(known as the effort sharing sectors). 

(155) The  effort  sharing  emissions  for  2023  are  based  on 
inventory  data.  The  final  data  will  be 
approximated 
review. 
established 
Projections  on  the  impact  of  current  policies  (“with  existing 
measures”,  WEM)  and  additional  policies  (“with  additional 
measures”, WAM), as per Hungary’s final updated NECP. 

in  2027  after  a  comprehensive 

Source: European Environment Agency 

Sustainable industry 

Circular economy transition 

through 

additional 

There  is  room  to  increase  the  economy’s 
circularity 
policies. 
Resource productivity increased to 1.33 Euro/kg in 
2023  but  remains  under  the  EU  average  (2.74 
Euro/kg).  The  circular  material  use  rate  remained 
below the EU average in 2023 (5.9% vs 11.8%). In 
May  2023,  the  OECD  report  “Towards  a  National 
Circular  Economy  Strategy  for  Hungary” (156) 
suggested  measures  to  support  the  circular 
economy  transition,  such  as  providing  additional 
economic incentives for the separate collection of 
municipal  bio-waste  by  supporting  “pay-as-you-
throw”-based  household  waste  charges  and 
increasing 
landfill  taxes.  A  National  Circular 
Economy  Strategy,  as  requested  in  the  OECD 
report, is under preparation. 

in 

performance 
is  deteriorating.  Hungary 

waste 
Hungary’s 
is 
management 
generating  less  waste  than  the  EU  average,  with 
municipal  waste  generation  of  429  kg/capita  in 
2023 (vs. an EU average of 511 kg/capita), but the 
country continues to show several negative trends 
(see Graph  A7.4).  The  recycling  rate  for municipal 
waste decreased from 37.4% in 2019 to 33.4% in 
2023  (EU  average  48.7%)  and  the  recycling  rate 

(156) OECD, Towards a National Circular Economy Strategy for Hungary, 

OECD Publishing, Paris, 2023. 

69 

010203040506020052023MtCO2eDomestic transport (excl. aviation)Buildings (under ESR)AgricultureSmall industryWaste 
 
      
 
Graph A7.4: Municipal waste treatment 

for  plastic  packaging  waste  decreased  to  28%  in 
2022 (EU average 41%). Hungary has missed the 
2020  EU  recycling  targets  and  significant  efforts 
will  be  needed  to  reach  the  targets  for  preparing 
for reuse and recycling of municipal waste and for 
recycling  of  plastic  and  glass  packaging  waste, 
which  has  been  postponed  to  2030.  Hungary  is 
also  at  risk  of  not  meeting  the  2035  target  to 
landfill  no  more  than  10%  of  municipal  waste 
generated,  with  a municipal  waste  landfilling  rate 
at  54% 
for 
construction  and  demolition  waste  (157)  slightly 
increased to 22.2% in 2022 (EU average 79.8%). 

in  2023.  The 

recycling 

rate 

Hungary doesn’t invest enough in the circular 
economy  transition.  Hungary  is  estimated  (158) 
to need total additional investment worth at least 
EUR  316  million  a  year  for  the  circular  economy 
transition, 
waste  management, 
representing  0.19%  of  Hungary’s  GDP  and  12.9% 
of  investment  needs  in  the  environmental  sector. 
Hungary would benefit from further implementing 
economic instrument to invest in infrastructure for 
separate collection, sorting and recycling. 

including 

Zero pollution industry 

Hungary  is  among  the  Member  States  most 
affected  by  the  health  impacts  from  air 
pollution.  Health  impacts  of  air  pollution  (159) 
amounted to 90 032 years of life lost in 2022. It 
is  estimated  (160)  that  every  year  around  8  600 
deaths can be attributed to fine particulate matter 
2.5 (PM2.5), 1 300 deaths to nitrogen dioxide (NO2) 
and 2 000 to ground-level ozone (O3). Some main 
sources  of  air  pollution  are  industrial  processes 
and related activities (transport, energy production, 
and waste  treatment), alongside  heating systems, 
and Hungary would benefit from measures linking 
energy  efficiency  and  air  pollution.  Emissions 
intensity  of  industrial  air  pollutants  in  Hungary 
caused  more  damage 
the 
environment  than  in  average  in  the  EU,  with  EUR 
37.8 of damage per thousand EUR of gross value 
added  (GVA)  (161)  in  2021,  compared  to  an  EU 
average of EUR 27.5/thousand EUR GVA.  

to  health  and 

Source: Eurostat 

Air  quality  is  a  major  concern,  with  industry 
large  amounts  of 
continuing  to  release 
pollutants.  Despite  a  positive  trend  for  some 
pollutants,  the  situation  worsened  for  several 
substances.  Between  2010  and  2022,  industrial 
release of PM10 increased by 174% and cadmium 
(Cd), mercury (Hg), and lead (Pb) by 449%. It is the 
highest increases of all Member States. Hungary is 
not meeting its emissions reduction commitments 
(162)  for  2020-2029  for  ammonia  (NH3)  and  PM2.5 
and not projected to meet commitments for 2030 
onwards  for  NOx,  non-methane  volatile  organic 
compounds, NH3 and PM2.5. An estimated (163) total 
additional  investment  of  at  least  EUR  512 million 
a  year  is  needed  to  meet  its  environmental 
objectives  concerning  pollution  prevention  and 
control, representing 0.30% of Hungary’s GDP. 

Water  pollution  from  industry  is  falling, 
except  for  heavy  metal  releases.  Between 
2010  and  2022,  industrial  releases  of  pollutants 
to  water  decreased  by  25%  for  total  nitrogen, 
25%  for  total  organic  carbon  and  26%  total 
phosphorus. However, the releases of heavy metal 
(Cd,  Hg,  Pb  and  nickel)  increased  by  38%  (164). 

(157) Based on Eurostat, dataset 

[env_wastrt__custom_13270296], 2024. 
(158) Environmental Implementation Review 2025. 
(159) Eurostat, Dataset [hlth_cd_iap], 2025. 
(160) EEA, Hungary – air pollution country fact sheet 2024, 

December 2024. 

(162) EEA, Hungary – air pollution country fact sheet 2024, 

December 2024. 

(163) European Commission, DG Environment, Environmental 

investment needs & gaps assessment programme, 2025 
update. Expressed in 2022 prices. 

(164) EEA, Industrial releases of pollutants to water and economic 

(161) EEA, Industrial emission intensity indicators, 2021. 

activity in the EU-27, September 2024. 

70 

390406420407429010020030040050060020192020202120222023Kg per capitaMaterial recyclingComposting and digestionLandfill/disposalTotal incineration (incl. energy recovery)Waste treatment unspecifiedEU-27 total waste per capita 
 
      
 
Waste  management  is  the  main  contributor  to 
industrial  emissions to water (165), and to a lesser 
extent  the  chemical,  energy  production,  and  pulp 
and paper industries.  

(165) Industrial  Reporting  under  the  Industrial  Emissions  Directive 
2010/75/EU  and  European  Pollutant  Release  and  Transfer 
Register Regulation (EC) No 166/2006 - ver. 12.0 Sep. 2024 
(Tabular data). 

71 

 
 
Table A7.1:  Key clean industry and climate mitigation indicators: Hungary 

Source:  Net zero industry: European Commission: The net-zero manufacturing industry landscape across Member States: final 
report, 2025. Automotive industry transformation: Eurostat. Critical raw materials: Eurostat. Climate mitigation: See 
footnotes in the "climate mitigation" section; reduction of effort sharing emissions: EEA greenhouse gases data viewer; European 
Commission, Climate Action Progress Report, 2024. Sustainable industry: Years of life lost due to PM2.5: Eurostat and EEA, 
Harm to human health from air pollution in Europe: burden of disease status, 2024. Air pollution damage: EEA, EU large industry 
air pollution damage costs intensity, 2024. Emissions covered: As, benzene, Cd, Cr, Hg, NH3, Ni, NMVOC, NOX, Pb, dioxins, PM10, 
PAH, SOX. Water pollution intensity: EEA, EU large industry water pollution intensity, 2024. Releases into water covered from 
cadmium, lead, mercury, nickel. Other indicators: Eurostat. 

72 

Strategic autonomy and technology for the green transitionNet zero industryOperational manufacturing capacity 2023- Solar PV (c: cell, w: wafer, m: module), MW200 (c), 200 (m)- Electrolyzer, MW-- Wind (b: blade, t: turbine, n: nacelle), MW-- battery, MWh40000-42000Automotive industry transformation201720182019202020212022202320182021Motorisation rate (passenger cars per 1000 inhabitants), %357375393406418426435539561New zero-emission vehicles, electricity motor, %0.640.951.162.383.534.225.381.038.96Critical raw materials201720182019202020212022202320182021Material import dependency, %29.527.126.827.929.724.124.222.6Climate mitigationTrendIndustry decarbonisation201720182019202020212022202320172022GHG emissions intensity of manufacturing production, kg/€0.440.440.420.430.40.320.310.340.27Share of energy-related emissions in industrial GHG emissions58.659.358.858.860.258.356.144.842.5Energy-related GHG emissions intensity of manufacturing163.0164.1154.9158.7154.9134.4-158.4132.9and construction, kg/€Share of electricity and renewables in final energy consumption39.439.941.541.542.545.747.343.344.2in manufacturing, %Energy intensity of manufacturing, GWh/€1.941.941.902.022.031.771.711.291.09Share of energy-intensive industries in manufacturing production10.77.3GHG emissions intensity of production in sector [...], kg/€- paper and paper products (NACE C-17)0.700.610.620.580.530.540.47-0.730.68- chemicals and chemical products (NACE C20)1.971.942.092.202.282.352.74-1.251.26- other non-metallic mineral products (NACE C23)2.542.542.562.552.342.182.15-2.532.24- basic metals (NACE C24)2.042.062.042.391.822.011.08-2.793.49Reduction of effort sharing emissions20182019202020212022202320182023GHG emission reductions relative to base year, % -3.6-8.1-14.7- domestic road transport14.921.84.315.524.717.21.45.2- buildings-30.8-32.8-29.5-25.3-35.2-44.221.432.92005202120222023TargetWEMWAMEffort sharing: GHG emissions, Mt; target, gap, %47.846.144.040.8-18.7-3.56.34Sustainable industryTrendCircular economy transition20182019202020212022202320182021Material footprint, tonnes per person15.516.514.414.514.315.714.715.0Circular material use rate, %6.9        5.5        5.1        5.0        4.9        5.9        11.611.1Resource productivity, €/kg0.9        0.9        1.0        1.1        1.3        1.3        2.12.3Zero pollution industryYears of life lost due to PM2.5, per 100,000 inhabitants1,377    988      1,032    1,124    1,350    -702571Air pollution damage cost intensity, per thousand € of GVA    37.8          27.5      Water pollution intensity, kg weighted by human factors per bn € GVA    0.6   0.9HungaryEU-27HungaryEU-27HungaryEU-27 
 
 
  
 
ANNEX 8: AFFORDABLE ENERGY TRANSITION 

This  annex  outlines  the  progress  made  and 
the  ongoing  challenges  faced  in  enhancing 
energy  competitiveness  and  affordability, 
while advancing the transition to net zero. It 
examines  the  measures  and  targets  proposed  in 
the  final  (draft)  updates  to  the  national  energy 
and climate plans (NECPs) for 2030. 

recent  years  have  witnessed  a 
While 
significant  growth  in  solar  photovoltaics 
(PVs), lack of spare grid capacity and system 
flexibility  hinder  further  renewable  energy 
expansion.  Consumer  empowerment  remains 
very  limited,  with  little  or  no  access  to  dynamic 
pricing  and  aggregators’  services.  Regulated 
energy  prices  for  households  represent  a  major 
cost  for  the  system  and  increase  the  burden  of 
high prices for businesses, whose electrification is 
also  slowed  down  by  a  very  unfavourable 
electricity/gas  price 
remains 
significantly  dependent  on  Russian  fossil  fuels, 
with very little progress in supply diversification. 

ratio.  Hungary 

Energy prices and costs 

Graph A8.1: Retail energy price components for 
household and non-household consumers, 2024 

(i) For household consumers, consumption band is DC for 
electricity and D2 for gas. Taxes and levies are shown 
including VAT. 
(ii) For non-household consumers, consumption band is ID for 
electricity and I4 for gas. Taxes and levies are shown 
excluding VAT and recoverable charges, as these are typically 
recovered by businesses. 
Source: Eurostat 

Hungary’s retail electricity and gas prices for 
households have declined in 2024 and remain 
the lowest in the EU due to the government’s 
price  cap.    The  share  of  network  costs  in 

electricity prices is double the EU average for both 
gas  and  electricity,  at  55.4%  and  27.2% 
respectively. Taxes are significantly lower than the 
EU  average,  with  no  excise  duty  being  applied  on 
top of the VAT for electricity and only a very small 
one for gas.  

Retail energy prices for industrial consumers 
have also fallen and while they remain above 
the  EU  average  the  gap  has  narrowed 
significantly  compared  to  2023.  Hungarian 
non-household  consumers  still  pay  26% more  for 
electricity  and  16%  more  for  gas  than  the  EU 
average. Taxes and levies (excluding VAT) account 
for only 9.2% of electricity prices and 6.9% of gas 
prices  for  industrial  users,  considerably  below  the 
EU averages of 11% and 9%, respectively. 

affecting 

consumption 

With  an  average  of  101 EUR/MWh 
in 
2024(166), Hungary had the EU’s sixth-highest 
wholesale electricity prices; and while prices 
in  Hungary  declined  early  in  the  year  amid 
falling natural gas costs, they surged during 
the  spring/summer  and  again  in  the  winter, 
diverging  from  Central-Western  European 
(CWE)  markets.  This  increase  was  driven  by 
factors 
and 
both 
generation.  Prolonged  summer  heatwaves  and  a 
cold  winter  led  to  higher  consumption  in  the 
region,  while  increased  export  needs  from  certain 
coupled  markets  and  limited  non-fossil  flexibility 
the  supply-demand  gap, 
further  exacerbated 
especially  during  peak  demand  hours.  This  gap 
was  mainly  covered  by  costly  natural  gas-fired 
generation, ramping up during the evening hours in 
the summer and throughout the entire day during 
the winter, as well as higher imports (mostly from 
Slovakia  and  Austria).  Consequently,  and  more  so 
than in 2023, these conditions drove concentrated 
price spikes in the evening hours (18h-21h), when 
solar  output  declined  and  demand  increased, 
especially during the  summer. On  the  other  hand, 
lower 
average  daytime  hourly  prices  were 
compared  to  2023,  likely  owing  to  the  uptake  of 
solar  output  in  Hungary  (+37%  in  2024)  and  in 
neighbouring markets(167). 

(166) Fraunhofer (ENTSO-E data). 
(167) Yearly electricity data, Ember (generation and consumption 
data throughout the paragraph). 

73 

 
 
 
 
 
 
Graph A8.2: Monthly average day-ahead wholesale 
electricity prices and European benchmark 
natural gas prices (Dutch TTF) 

(i) the Title Transfer Facility (TTF) is a virtual trading point for 
natural gas in the Netherlands. It serves as the primary 
benchmark for European natural gas prices. 
(ii) CEE and CWE respectively provide average prices in the 
central-western European (Belgium, France, Germany, 
Luxembourg, the Netherlands and Austria) and central-
eastern European (Poland, Czechia, Slovakia, Hungary, 
Slovenia and Romania) markets. 
Source: S&P Platts and ENTSO-E 

Flexibility and electricity grids 

Hungary  is  part  of  the  Core(168)  capacity 
calculation  region.  The  general  trend  in  this 
region  is  a  reduction  of  the  cross-border  capacity 
made  available  to  trade,  which  also  applies  to 
Hungary.  Member  States  should  ensure  that  a 
minimum  of  70%  of 
technical  cross-border 
capacity  is  available  for  trading.  Hungary  has  an 
action plan in place to reinforce the electricity grid 
and  can  do  more  to  further  increase  cross-zonal 
electricity  trading,  particularly  with  Austria,  by 
optimizing 
the  use  of  existing  cross-border 
infrastructure.    Furthermore,  Hungary  adopted  a 
network  development  plan  for  a  new  Hungarian-
Romanian  cross-border  electricity  transmission 
line.  Construction  is  planned  to  start  in  January 
2026. 

(168) Core is the capacity calculation region (CCR) which covers 
central European countries namely Austria, Belgium Czechia, 
Germany, France, Croatia, Hungary, the Netherlands, Poland, 
Romania, Slovenia, Slovakia and, once connected, Ireland. A CCR 
is a group of countries which calculate cross-border electricity 
trade flows together. 

of 

implementation 

The 
grid-related 
legislation  and  developments  needs  to  be 
accelerated.  In  2024,  an  unprecedented  number 
of  applications  for  the  connection  of  renewable 
energy sources (RES) to the grid exceeding 10 GW 
caused  continuing 
restrictions  for  new  grid 
connection. The transmission system operator and 
distribution system operators hosted ‘free capacity 
announcements’  to  assess  project  developers’ 
interest  in  connection  points.  This  was  done  in 
order  to  ease  the  strain  on  the  grid  by  indicating 
development 
The 
transmission  system  operator  required  collateral 
from  project  developers  and  allowed  projects  to 
connect  earlier  than  planned  in  order  to  inhibit 
speculation  and  support  the  sector’s  continued 
growth. 

investment 

needs. 

and 

Government  Decree  54/2024  has  effectively 
halted  new  grid  connections 
for  most 
recent 
renewable  energy  projects,  annulling 
capacity  applications  exceeding  10  GW.  Capacity 
requests  for  grid  connection  beyond  2030  have 
been  systematically  rejected.  The  Decree  states 
that a new grid connection capacity allocation 
system  will  be  implemented  starting  in  early 
2025,  making  new  feed-in  capacity  for  weather-
dependent  renewables  unlikely in  the  near  future. 
However,  on-site  (self-consumption  only)  power 
plants remain unaffected. 

The Hungarian government is adopting a top-
down grid connection management approach, 
where the transmission system operator will 
determine  both  the 
locations  for  new 
connections  and  the  type  of  capacity 
required. According to the government, this would 
improve the outlook for wind, geothermal and non-
fossil  storage,  which  could  be  useful  to  balance 
the  recent  growth  of  solar  PVs.  While  aiming  to 
align  grid  expansion  with  renewable  growth,  the 
measures  create  uncertainties 
investors, 
potentially  slowing  new  projects  and  favouring 
existing  developments  with  secured  grid  access. 
Currently,  the  estimated  time  taken  to  connect  a 
utility-scale  PV  system,  as  reported  by  the 
industry,  is  about  six  years,  which  is  substantially 
longer 
(around  four 
the  EU  average 
years)(169).  As  for  wind  energy,  the  first  grid 
connection of a wind farm is not expected before 

than 

for 

(169) EU Market Outlook For Solar Power 2023 – 2027, 

SolarPowerEurope. 

74 

 
 
 
 
2029.  This  demonstrates  that  the  strain  on  the 
grid poses a barrier to future growth. 

The  electricity  system  shows  significant 
untapped  flexibility  potential.  Hungary  does 
not  report  on  the  installed  non-fossil  flexibility 
capacity in the draft updated NECP. In spite of this, 
Hungary  has  committed  to  taking  steps  to 
promote  the  installation  of  electricity  storage 
through a combination of legislative and financial 
incentives,  including  in  the  form  of  pumped-
storage  power-plant  capacity.  The  promotion  of 
demand  response  is  one  of  Hungary’s  objectives. 
The  development  of  flexible  tariff  structures  and 
the 
legislative  environment 
supporting the creation of aggregators have been 
mentioned  by  Hungary  as  ways  to  achieve  this. 
Despite the government ambition to achieve 1GW 
storage  capacity  by  2030,  today  total  capacity  is 
around  only  0.02GW,  with  only  DK  and LV  having 
less  in  the  EU.  The  lack  of  system  flexibility, 
coupled  with 
increasing  penetration  of 
intermittent solar energy, is reflected in the rising 
number of negative prices occurences, 74 in 2023 
and 53 in 2024. 

creation  of  a 

the 

regulatory 

framework 

Hungary’s 
still 
contains  barriers  to  the  development  of 
response 
resources.  Demand-side 
flexible 
cannot access the wholesale market and access to 
the  ancillary  service  market 
involves  specific 
barriers to assets installed at the distribution level. 
The slow deployment of smart meters impacts the 
availability of dynamic retail contracts.  

limited. 
Consumer  empowerment  remains 
Electricity  consumers  in  Hungary  have  access  to 
fully  regulated  offers  only,  i.e.  regulated  fixed 
prices and regulated variable prices for households 
and  regulated  fixed  prices  for  non-household 
consumers(170).  The  share  of  fixed-price  contracts 
is  100%  vs  an  EU  average  of  73%(171).  In  2023, 
consumers  in  Hungary  did  not  have  access  to 
dynamic-price  contracts.  In  the  same  year,  the 
electricity switching rates of household consumers 
to  2022(172). 
decreased  by  0.4%  compared 
Electricity  switching 
rates  of  non-household 
consumers  are  not  reported.  In  Hungary,  in  2023 

(170)https://www.acer.europa.eu/sites/default/files/documents/Pub

lications/ACER-CEER_2024_MMR_Retail.pdf 

(171) Idem. 

(172) Idem. 

only  9%  of  consumers  had  access  to  smart 
meters(173), compared to an EU average of around 
63%,  and  it  is  not  possible  for  consumers  to 
access near real-time consumption data. By 2030, 
the  EU  set  a  80%  target  for  smart  meters 
deployment.  

Hungary’s  first  energy  community  was 
registered  in  2023.  The  aim  of  the  Hungarian 
energy strategy is to ensure that, by 2030, at least 
one renewable energy community operates in each 
of  Hungary’s  175  microregions.  But 
the 
development  of  energy  communities  is  hampered 
by  poor  grid  access  as  well  as  by  regulatory  and 
financial  barriers.  Hungary  has  recently  adopted 
legislation  that  simplifies  permit-granting  for 
renewable  energy  communities.  To  this  end, 
Hungary 
launched  a  funding  programme  of 
EUR 12.7 million  in  2024.  There  are  only  three 
energy 
the 
percentage  of  households  generating  electricity  is 
3.2%(174). 

in  Hungary  and 

communities 

in  the 

largely  stagnant 

In  2023,  electricity  accounted  for  20.9%  of 
Hungary’s  final  energy  consumption,  below 
the EU average of 22.9%, and this share has 
remained 
last 
decade(175).  When 
it  comes  to  households, 
electricity  accounts  for  20.1%  of  final  energy 
consumption, while in industry it represents 37.7% 
(see  also  Annex  7).  In  Hungary,  the  electricity/gas 
price ratio for industry is almost 4, higher than in 
most  of  the  EU.    Households  pay  electricity  more 
than three times as much as gas. This represents a 
major  obstacle  for  the  electrification  of  the 
Hungarian  economy.  In  the  transport  sector,  the 
share  of  electricity  in  final  consumption  remains 
negligible 
in 
electrification  across  sectors  is  required  for  cost 
the  economy  and 
effectively  decarbonising 
bringing  the  benefits  of  affordable  renewable 
generation to consumers.(176) 

at  2.3%. 

progress 

Further 

(173) Idem. 

(174) Idem. 

(175) CAGR (compound annual growth rate) of 1.2% between 
2013 and 2023 and minimum/maximum share of 18.4% and 
20.9%, respectively. 
(176) Analysis based on Eurostat data for the second semester of 
2024. For household consumers, consumption band is DC for 
electricity and D2 for gas, which refer to medium-sized 
consumers and provide an insight into affordability. For non-
household consumers, consumption band is ID for electricity 
and I4 for gas, referring to large-sized consumers, providing 

75 

 
 
 
 
Renewables and long-term contracts 

Graph A8.3: Hungary's installed renewable 
capacity (left) and electricity generation mix 
(right) 

RES  permitting.  These  include  (i)  introducing 
legislation  that  simplifies  permit-granting  for 
renewable  energy  communities,  (ii)  efforts  to 
ensure  better  grid  planning  by  having  operators 
announce application rounds for connection points 
and  (iii)  introducing  deposits  to  limit  unrealised 
projects. There is room for improvement in human 
resources,  repowering  existing  installations  and 
establishing  regulatory  sandboxes  for  innovative 
RES projects. 

“Other” includes renewable municipal waste, solid biofuels, 
liquid biofuels, and biogas. 
Source: IRENA, Ember 

In  2024,  total  installed  solar  capacity  of 
solar  PV  has  reached  7.7  GW,  with  a  30% 
YoY  increase  and  surpassing  the  national 
(6GW). 
target  previously  set  for  2030 
Regarding  onshore  wind,  despite  some  positive 
regulatory  progress  in  removing  obstacles,  total 
capacity  is  stuck  at  0.3GW  for  10  years  and  the 
2030 target of 1 GW remains unambitious. This is 
particularly  notable  given 
the  government’s 
recognition of wind energy’s role in diversifying the 
electricity mix and reducing system and balancing 
costs.  In  2023,  the  share  of  renewables  in  final 
energy consumption  – calculated according to the 
RED methodology, was 17%, among the lowest in 
the  EU  and  significantly  below  the  EU  average  of 
24.5%.  

Renewables  generated  32%  of  electricity  in 
Hungary in 2024, below the EU overall share of 
47%(177). 25% of electricity was produced by solar 
energy,  the  highest  share in  the  EU.      The energy 
mix is still largely dominated by fossil fuels (68% 
share),  with  renewables  covering  just  14%  of 
gross  inland  consumption  in  2023  (the  aggregate 
value for the EU is 20.1%.  

Hungary  has  taken  several  important  steps 
towards  improving  the  legal  framework  on 

an insight into international competitiveness (price used for 
the calculation excludes VAT and other recoverable 
taxes/levies/fees as non-household consumers are usually 
able to recover VAT and some other taxes). 

(177) Yearly electricity data, Ember. 

systems  and  energy 

Hungary  has  doubled  its  target  for  solar  PV 
in  its  final  updated  NECP.  By  2030,  Hungary 
aims  to  have  12  GW  of  solar  PV  capacity.  To 
support  this  development, 
in  2024  Hungary 
launched the Napenergia Plusz programme, which 
offers  residential  customers  who  want  to  install 
solar  panel 
storage 
equipment with a non-refundable state grant of up 
to  66%  of  the  investment  costs.  Some  25 000 
the  measure. 
households  will  benefit 
Moreover, by the end of 2024, no new schedule on 
the expected allocation of support for renewables 
had  been  released  on  the  Union  Renewables 
Development  Platform.  Nor  did  Hungary  make  a 
pledge under the European wind power action plan 
either. 

from 

The power purchase agreement (PPA) market 
in  Hungary  is  currently  in  its  very  early 
stages,  with  only  a  few  dozen  MW  of 
capacities being contracted. The first corporate 
PPA contract in Hungary was signed in early 2022, 
for  26 MW  of  PV  capacity,  as  an  on-site  PPA 
between 
ID  Energy  Group  and  Lafarge.  PPA 
contracts  are  in  a  disadvantaged  position  relative 
to  contract-for-difference  (CfD)  auctions  because 
energy  producers  must  pay  an  additional  income 
tax, whereas the participants in CfD are exempted. 
This rule was slightly amended in early 2024, as a 
new  regulation  exempts  power  plants  from  the 
payment of this tax if their capacity is over 5 MW 
and they are implemented through an on-site PPA 
contract,  and  do  not  feed  into  the  electricity 
network.  Regarding  CfD,  since  March  2022,  no 
tender  for  new  renewable  energy  projects  has 
been  organised,  allegedly  due  to  the  lack  of  grid 
connection  capacities.  The  system  allows  for 
delayed  entry  into  the  compensation  payment 
scheme,  leaving  producers  with  the  possibility  of 
entering  into  short-term  PPAs  (or  other  merchant 
conditions  are  more 
solutions) 
advantageous  and  thus  enabling  them  to  avoid 
pay-backs if electricity prices are high. 

if  market 

76 

 
 
 
Energy efficiency 

Hungary has demonstrated progress towards 
reaching  the  2030  EU  targets  for  energy 
efficiency.  In  2023,  primary  energy  consumption 
(PEC)  decreased  by  7.3%  to  22.12  Mtoe.  Final 
energy  consumption  (FEC)  decreased  by  7.6%  to 
16.76 Mtoe. Compared to 2022, FEC decreased in 
all main sectors: in industrial by 7.4%, in transport 
by 5.5%, in residential by 7.9% and in services by 
recast  Energy  Efficiency 
14.2%.  Under 
Directive  (Directive  2023/1791),  Hungary  should 
try  to  reach  a  PEC  of  23.35  Mtoe  and  an  FEC  of 
16.17 Mtoe by 2030. 

the 

Hungary  has  notified  the  Commission  of  its 
comprehensive  heating  and  cooling  assessment 
identifying  potential  for  the  application  of  high-
efficiency  cogeneration  and  efficient  district 
heating and cooling in line with Article 25(1) of the 
Energy Efficiency Directive. 

As part of its long-term renovation strategy, 
Hungary  aims  to  reach  20%  savings  in  the 
energy  use  of  the  residential  building  stock 
by  2030.  In  the  final  updated  NECP,  Hungary 
announced  that  the  upcoming  national  building 
renovation  plan,  of  which  the  draft  is  due  to  be 
prepared 
in  2025,  will  be  more  ambitious 
regarding  the  building  stock,  while  the  associated 
measures  will  also  be  reviewed.  Although  final 
energy  consumption  in  households  decreased  by 
7.8%  between  2022  and  2023,  it  remained more 
or  less  constant  when  limate  corrections  were 
applied(178).  Therefore,  Hungary  needs  to  step  up 
its  efforts  to  improve  the  energy  efficiency  of 
buildings if it is to make a meaningful contribution 
for  energy 
target 
to 
consumption in the buildings sector. 

the  2030 

reduction 

in  Hungary  was  3.4 

subsidy  covering  up  to  50%  of  renovation  costs 
and  corresponding  to  a  project  value  of  up  to 
HUF 3 000 000  (EUR 7 300)  for  families.  This 
subsidy  can  also  cover  heat  pumps.  In  2023, 
electricity 
times  more 
expensive  than  gas,  which  increased  to  4.0  times 
more  expensive  in  the  first  half  of  2024.  This 
means that end users will save energy but will not 
make  any  significant  financial  savings  if  they 
choose  a  heat  pump  for  heating.  The  residential 
electricity-to-gas  price  ratio  has  increased  by  7% 
over the past five years, making heat pumps less 
financially attractive. 

It 

investment. 

Hungary  deploys  a  supportive  national 
financing  framework  that  mobilises  energy 
is  composed of 
efficiency 
grants  and  subsidies  and  of  relevant  financial 
instruments that can leverage private investments. 
In 2024, Hungary continued to implement several 
relevant  financing  measures,  notably  the  Baross 
Gábor  credit  programme  -  green  investment  loan 
(Baross  Gábor  Újraiparosítási  Zöld  Beruházási 
Hitel). As part of its national  financing framework 
supporting  energy  efficiency,  Hungary  adequately 
energy 
deploys 
efficiency,  These 
loan 
scheme  for  energy  efficiency  and  renewable 
energy-based modernisations of the building stock 
(Lakossági  energiahatékonysági  Hitelprogram),  as 
well as tax credits. The effectiveness of the energy 
efficiency  obligation  schemes  to  support  energy 
efficiency in enterprises is undermined by the low 
mandatory  annual  savings  and  low  penalties  for 
non-compliance.  In  term  of  sectors  supported, 
Hungary’s  national  financing  framework  mainly 
focuses on public and residential buildings. 

include  the  residential 

instruments 

financial 

for 

Security of supply and diversification 

In  2022,  heating  and  cooling  represented 
85% of the country’s residential final energy 
consumption (compared to an EU average of 
78%),  of  which  23%  came  from  renewables 
(compared  to  an  EN  average  of  26%). 
Approximately  12 000  heat  pumps  were  sold  in 
2023,  representing  a  decrease  of  25%  compared 
to  the  previous  year. Hungary  offers  a  renovation 

(178) Climate correction applied to the whole final energy 
consumption in households that is multiplied by the average 
heating degree days (HDD) over the period 2006-2023 and 
divided by the HDD in the corresponding year. 

Since  Russia’s  invasion  of  Ukraine,  Hungary 
has strengthened its energy ties with Russia. 
In  2023  and  2024,  Hungary  imported  substantial 
volumes  of  Russian  gas  beyond  the  long-term 
contract  of  4.5  bcm  per  year,  with  2024  imports 
nearing 7 bcm. 

Russian  crude  accounts  for  around  74%  of 
its  oil  imports  in  2023.  The  country  could 
compensate  for  a  potential  phase-out  of  the 
Druzhba  pipeline  by  making  more  use  of  the 
Janaf/Adria pipeline in Croatia. 

77 

 
 
Hungary remains fully dependent on Russian 
nuclear  fuel.  It  has  taken  some  steps  to  ensure 
security  of  supply.  Notaybly  in  October  2024,  the 
Paks  operator  concluded  an  agreement  with  an 
alternative 
for 
supplier 
deliveries  from  2027.  It  is  important  for  Hungary 
to  develop  a  national  plan  to  fully  phase  out  its 
dependency  on  Russian  nuclear  fuel,  as  foreseen 
by  the  REPowerEU  Roadmap  adopted  on  6  May 
2025. 

(Framatome) 

fuel 

Fossil fuel subsidies 

Income/price 

In  2023,  environmentally  harmful  (179)  fossil 
fuel  subsidies  without  a  planned  phase-out 
before  2030  represented  1.01%(180)  of 
Hungary’s  GDP(181),  above  the  EU  weighted 
support 
average  of  0.49%. 
accounted  for  89%  of  this  volume,  while  tax 
measures and direct  grants represented 10% and 
1%,  respectively.  Fossil  fuel  subsidies  without  a 
planned phase-out before 2030 and which do not 
specifically  address,  in  a  targeted  way,  energy 
poverty  nor  genuine  energy  security  concerns 
included  the  utility  cost  reduction  programme,  a 
VAT  reduction  for  district  heating  using  natural 
gas, and excise tax refunds for agricultural use of 
diesel.  Additionally,  Hungary’s  2023  Effective 
Carbon  Rate(182)  averaged  EUR  50.6  per  tonne  of 
CO₂, below the EU weighted mean of EUR 84.806. 

179 Direct fossil fuel subsidies that incentivise maintaining or 
increasing in the availability of fossil fuels and/or use of 
fossil fuels. 

180  Numerator is based on volumes cross-checked with the 
Hungarian authorities. For all Member States, it includes 
public R&D expenditures for fossil fuels as reported by the 
IEA (Energy Technology RD&D Budgets) and excludes, for 
methodological consistency, excise tax exemption on 
kerosene consumed in intra-EU27 air traffic.  

181  2023 Gross Domestic Product at market prices, Eurostat. 

182 The Effective Carbon Rates is the sum of carbon taxes, ETS 
permit prices and fuel excise taxes, representing the 
aggregate effective carbon rate paid on emissions. 

78 

 
 
Table A8.1:  Key Energy Indicators 

Source: Eurostat, ENTSO-E, S&P Platts 

79 

20212022202320242021202220232024Household consumer - Electricity retail price (EUR/KWh)0.1005          0.0975              0.1141              0.1044          0.2314              0.2649          0.2877          0.2879          Energy & supply [%]34.2%27.6%26.3%23.4%36.6%54.3%55.6%47.8%Network costs44.5%51.2%52.4%55.4%26.7%25.3%24.8%27.2%Taxes and levies including VAT21.3%21.2%21.3%21.3%36.7%20.3%19.6%25.0%VAT21.3%21.2%21.3%21.3%14.5%13.4%13.8%14.6%Household consumer - Gas retail price0.0306          0.0301              0.0335              0.0286          0.0684              0.0948          0.1121          0.1128          Energy & supply53.6%51.5%34.6%42.3%43.7%61.0%64.5%53.9%Network costs25.2%27.2%44.2%36.4%22.5%17.3%17.1%18.3%Taxes and levies including VAT21.2%21.3%21.2%21.3%33.8%21.7%18.4%27.8%VAT21.2%21.3%21.2%21.3%15.5%11.6%10.2%13.6%Non-household consumer - Electricity retail price0.0931          0.2014              0.2525              0.1987          0.1242              0.1895          0.1971          0.1661          Energy & supply54.2%67.7%55.4%52.9%43.0%66.5%63.0%55.8%Network costs19.9%11.5%21.3%20.0%15.8%10.7%11.9%15.5%Taxes and levies excluding VAT7.2%-0.8%3.2%9.2%30.4%9.9%11.2%15.4%Non-household consumer - Gas retail price0.0398          0.0859              0.0834              0.0552          0.0328              0.0722          0.0672          0.0517          Energy & supply57.7%73.9%68.4%67.0%66.2%77.3%77.3%68.7%Network costs5.1%2.7%6.1%6.3%7.7%3.8%5.3%7.1%Taxes and levies excluding VAT20.1%2.7%5.4%6.9%12.5%6.1%7.3%11.6%Wholesale electrity price (EUR/MWh)113.4270.9107.1100.7111.0233.299.184.7Dutch TTF (EUR/MWh)n/an/an/an/a46.9123.140.534.420172018201920202021202220232024Gross Electricity Production (GWh)32,915          32,067              34,291              34,930          36,120              35,802          35,546          -Combustible Fuels15,407       14,725           15,429           15,358       15,301          14,392       11,704       -Nuclear16,098       15,733           16,288           16,055       15,990          15,812       15,918       -Hydro220             222                219                244             212                178             222             -Wind758             607                729                655             664                610             646             -Solar349             629                1,497             2,459         3,796            4,732         6,925         -Geothermal1                 12                  18                  16               12                  4                 16               -Other Sources82               139                111                143             145                73               115             Gross Electricity Production [%]Combustible Fuels46.8%45.9%45.0%44.0%42.4%40.2%32.9%-Nuclear48.9%49.1%47.5%46.0%44.3%44.2%44.8%-Hydro0.7%0.7%0.6%0.7%0.6%0.5%0.6%-Wind2.3%1.9%2.1%1.9%1.8%1.7%1.8%-Solar1.1%2.0%4.4%7.0%10.5%13.2%19.5%-Geothermal0.0%0.0%0.1%0.0%0.0%0.0%0.0%-Other Sources0.2%0.4%0.3%0.4%0.4%0.2%0.3%-Net Imports of Electricity (GWh)12,87814,34812,58411,67712,75412,15211,099-As a % of electricity available for final consumption 32.1%35.1%30.4%28.2%29.1%28.2%26.2%-Electricity Interconnection [%]58.3%58.8%53.1%35.3%32.5%41.4%48.0%41.7%Share of renewable energy consumption - by sector [%]Electricity7.5%8.3%10.0%11.9%13.7%15.3%19.5%-Heating and cooling19.9%18.2%18.2%17.7%17.9%20.2%22.3%-Transport7.7%7.7%8.1%11.6%6.2%7.8%7.6%-Overall13.6%12.5%12.6%13.9%14.1%15.1%17.1%-20202021202220232020202120222023Import Dependency [%] 56.6%54.1%64.2%62.1%57.5%55.5%62.5%58.3%of Solid fossil fuels 43.7%38.5%41.4%24.9%35.8%37.2%45.9%40.8%of Oil and petroleum products 87.1%86.9%89.4%89.0%96.8%91.7%97.8%94.5%of Natural Gas 75.6%67.2%99.1%98.6%83.6%83.6%97.6%90.0%Dependency from Russian Fossil Fuels [%]of Natural Gas 95.0%95.0%82.4%78.1%41.0%40.9%20.7%9.3%of Crude Oil61.0%58.2%85.7%77.4%25.7%25.2%18.4%3.0%of Hard Coal21.7%18.1%7.3%0.0%49.1%47.4%21.5%1.0%2017201820192020202120222023Gas Consumption (in bcm)10.7               10.3                  10.4                  10.9               11.4                  9.7                 8.6                 Gas Consumption year-on-year change [%]7.0%-3.6%0.7%4.2%5.1%-14.9%-10.9%Gas Imports - by type (in bcm)9.8                 7.7                     11.7                  7.9                 7.5                    9.3                 8.2                 Gas imports - pipeline9.8                 7.7                     11.7                  7.9                 7.5                    9.3                 8.2                 Gas imports - LNG0.00.00.00.00.00.00.0Gas Imports - by main source supplier [%]Russia95.0%95.0%95.0%95.0%95.0%82.4%78.1%Romania0.0%0.0%0.0%0.0%0.0%0.0%11.5%United States0.0%0.0%0.0%0.0%0.0%0.0%4.9%HungaryEU 
 
     
 
ANNEX 9: CLIMATE ADAPTATION, PREPAREDNESS AND ENVIRONMENT 

faces 

challenges 

events  and 

regards  water 

resilience.  Hungary 

Climate  change  and  environmental  pollution 
are  serious  threats  to  Hungary’s  population, 
environment  and  economy.  The  country  is 
showing  an  increasing  vulnerability  to  extreme 
in 
climate 
implementing preparedness strategies, particularly 
as 
is 
increasingly exposed to drought and flood hazards, 
as  illustrated  by  the  floods  in  September  2024. 
implement 
Urgent  measures  are  needed 
to 
sustainable  water  management 
strategies, 
focusing  on  green  infrastructures,  and  to  ensure 
the long-term sustainability of sectors that rely on 
ecosystem  services.  The  state  of  nature  and 
ecosystems 
creating 
to  Hungary's  economy  and 
significant 
to  take 
competitiveness.  The  country  needs 
targeted  measures  to  effectively  prevent  further 
degradation,  better  protect  its  nature,  and  ensure 
sufficient  investments  to  restore  ecosystems.  To 
that end, Hungary should continue taking steps to 
ensure  its  transition  towards  more  sustainable 
agriculture practices. 

to  degrade, 

continues 

risks 

Climate adaptation and preparedness 

As regards the impacts of climate change in 
Hungary, the problems of droughts and flash 
floods  have  recently  moved  into  focus.  Over 
the  past  century,  the  increase  in  the  average 
temperature  in  Hungary  (1.2 °C  over  the  period 
1901-2018) has been significantly higher than the 
estimated  global  figure  of  0.9 °C.  The  upward 
in  the  average  temperature  has  been 
trend 
particularly  sharp  since  the  1980s.  This  coincides 
with  increasingly  long  and  intense  droughts,  with 
regions  experiencing  both  a  scarcity  and  an 
abundance  of  water  within  the  same  year.  Heavy 
rainfall has become more frequent, and part of the 
annual  distribution  of  rainfall  is  expected  to  shift 
to occurring outside the vegetation period (183). 

Agriculture  is  particularly  vulnerable  to  the 
impacts  of  climate  change,  and  sustainable 
water  management  strategies  are  therefore 
needed.  In  2022,  drought  affected  27%  of 
Hungary’s  territory,  with  devastating  damage  to 

(183) See the modelling of the Hungarian Meteorological Service.  

agriculture (184).  According  to  Hungary’s  third  river 
basin  management  plan,  recent  droughts  have 
affected  crop  and  livestock  production,  inland 
waterway  navigation,  and  public  water  supply. 
Among the risks relating to climate change, further 
to  droughts  and  floods,  Hungary’s  agriculture  is 
vulnerable to soil erosion, windstorms and early or 
late frosts. These risks can lead to yield reduction, 
forest  fires  and  the  spread  of  new  pests  and 
diseases.  In  2019,  Hungary  adopted  a  drought 
management  plan  with  a  range  of  drought 
mitigation measures. It does not provide details on 
the  projected  impacts  of  these  measures  though, 
nor  how 
scarcity 
relate 
management  areas.  Overall,  there  have  been  no 
significant  changes  in  how  the  Water  Framework 
in  Hungary 
Directive 
regarding  water  abstraction  and  water  scarcity 
management.  Considering  the  climate  and  socio-
economic  changes  in  the  Danube,  Hungary  would 
benefit  from  enhanced  international  cooperation 
on  water  abstraction  and  water  scarcity,  through 
existing  international  frameworks  such  as  EUSDR, 
ICPDR  and  bilateral  water  commissions  among 
others.  

implemented 

to  water 

(WFD) 

these 

is 

for 

enhancing 

There 
is  room  for  more  preparedness 
measures  based  on  green  infrastructures  in 
Hungary.  Due  to  more  frequent  droughts,  with 
higher temperatures and evaporation, agriculture's 
demand for water is increasing. This puts pressure 
on  groundwater  and  water  supply  systems.  In 
recent  years,  Hungary  has  focused  on  irrigation 
development 
agricultural 
productivity.  In  this  context,  Hungary  will  need 
comprehensive  measures  to  develop  a  resilient 
and  water-efficient  agriculture.  A  change  of 
agricultural  practices  would  reinforce  climate 
adaptation 
on 
prevent 
increasingly  unreliable  rain  and  river  flows  (185). 
Hungary’s  common  agricultural  policy  strategic 
plan  supports 
investments  and  agroecological 
practices for natural water retention and resource 
efficiency,  and  it  is  expected  to  improve  water 
balance on 1 million hectares of agricultural land. 
According  to  the  second  flood  risk  management 

dependency 

and 

(184) In 2022, among the EU Members with over 3 mn inhabitants, 
only Belgium, France, Croatia and Portugal had larger parts 
of their territory affected by droughts. 

(185) Commission Staff Working Document, Third river basin 

management plans, second flood hazard and risk maps and 
second flood risk management plans, Member State: 
Hungary, 4 February 2025. 

80 

 
 
 
 
 
 
plan (186),  Hungary  considers  natural  long-term 
in 
flood  prevention  by  addressing 
floodplains,  but  its  flood  protection  strategy  still 
relies mainly on structural water retention projects 
and  grey  infrastructures.  Hungary  would  also 
benefit  from  further  transboundary  coordination 
on flood protection. 

land  use 

risks  appear 

Although  uninsured 
low, 
potential  losses  in  Hungary  due  to  climate 
change  impacts  cannot  be  ignored.  In  2022, 
climate-related  economic 
losses  amounted  to 
about  1.4%  of  gross  domestic product  (GDP) (187). 
Hungary’s  insurance  protection  gap  for  natural 
catastrophes,  though  not  including  droughts,  is 
comparatively  low  overall,  albeit  moderate  for 
floods. A stress test in the European Commission’s 
fiscal  sustainability  report  (2021)  finds  non-
negligible fiscal impacts for Hungary from possible 
climate  change  related  hazards,  even  under  the 
1.5 °C and 2 °C scenarios (188). 

is 

Hungary has scope to reinforce to strengthen 
institutional  and  administrative  aspects  of 
its climate adaptation policies. The ministry of 
energy 
for  climate 
the  main  authority 
adaptation, with some responsibilities shared with 
other ministries and administrations. The follow-up 
on  Hungary’s  national  climate  strategy  of  2018 
through  annual  action  plans  has  been  pending. 
Local authorities are not legally obliged to prepare 
climate  strategies,  but  all  the  counties  and  132 
settlements  have  elaborated  a  climate  strategy 
including  adaptation.  NATéR,  the  policy  support 
tool  for  domestic  climate  adaptation  with  data, 
forecasts and information on climate impacts, has 
not  been  further  developed  since  2020,  which 
impairs  its  usefulness  going  forward.  There  is  a 
need for capacity building on adaptation including 

(186) Commission Staff Working Document, Third river basin 

management plans, second flood hazard and risk maps and 
second flood risk management plans, Member State: 
Hungary, 4 February 2025. 

(187) Source: Eurostat. Still, this magnitude was exceptional so far; 

such losses have been typically macroeconomically 
negligible up until now. 

(188) Notably an increase in the debt to GDP ratio of 3 to 4 

percentage points. The report finds that an increase in global 
temperatures of 3 °C would lead to more abrupt and 
nonlinear impacts. The analysis only considers extreme 
events and not the compounding impacts of slow-onset 
climate change. It cautions that the results are likely to 
underestimate expected fiscal impacts. See: European 
Commission, 2021, Fiscal Sustainability Report, Part 2, 
Chapter 2, Link. 

at  subnational  level;  to  this  end,  Hungary  intends 
to  prepare  a  curriculum  and  training  materials  to 
strengthen  administrative  capacity  on  climate 
adaptation and integrated water management.  

Water resilience 

There  is  room  for  improvement  in  Hungary's 
water  resilience.  Water  productivity (189)  has 
slightly  increased  in  Hungary  over  recent  years 
(190),  with  EUR 30  per  m³  of  abstracted  water  in 
2022. The water exploitation index plus (WEI+) has 
also slightly increased from 1.4% in 2021 to 1.7% 
in  2022,  but  it  remains  below  the  EU  average 
(3.6%  in  2021).  Despite  a  decreasing  trend,  the 
energy  sector  is  still  Hungary's  most  water-
consuming sector  (191), accounting for 72% of the 
net water consumption in 2022 (e.g. 1 043 million 
m³  of  a  total  of  1 446  million  m³).  However,  net 
increased 
water 
between  2010  and  2022,  by  136% 
for 
manufacturing,  29%  for  public  water  supply,  and 
11%  for  agriculture.  Hungary  has  also  room  to 
increase  administrative  capacity  in  the  water 
sector. Following a transfer of responsibilities from 
the  Ministry  of  Interior  in  2024,  the  Ministry  of 
Energy  became  the  main  authority  for  water 
management,  protection,  and  utilities.  However, 
water  governance  is  still  shared  with  the  Ministry 
of  Agriculture,  notably  regarding  water  supply  for 
agriculture,  and  the  Ministry  of  Interior,  regarding 
drinking water quality. 

consumption 

significantly 

Water  quality  is  a  major  challenge  for 
Hungary  due  to  the  significant  pressures  on 
water  bodies  from  agriculture,  industry  and 
settlements.  According  to  Hungary’s  third  river 
basin  management  plan,  only  11.3%  of  surface 
water  bodies  are  classified  as  having  good 
ecological  status/potential,  far  below  the  EU 
average  (37.3%),  mainly  due  to  diffuse  nutrient 
pollution  from  agriculture.  Their  chemical  status 
has  not 
the  second  plan’s 
assessment, as only 46% of surface water bodies 
have  a  good  chemical  status,  mainly  due  to 

improved  since 

(189) Measured as GDP in 2010 chain linked volumes over total 

fresh surface water abstracted in cubic metres. 

(190) EUR 28 per m3 of abstracted water in 2018. 

(191) Based on data provided by the European Environment 

Agency (EEA) between 2010 and 2022. 

81 

 
 
 
percentage 

processes (192). 
the 
bodies, 

industry  emissions  and 
pollution  from  heavy 
regards 
As 
combustion 
groundwater 
of 
groundwater  bodies  with  good  quantitative  status 
remains  at  80%,  below  the  EU  average  (90%). 
Moreover, 17.3% of groundwater bodies with good 
quantitative  status  are  identified  as  being  at  risk 
of  falling  to  a  poor  status  by  2027.  The 
percentage  of  groundwater  bodies  with  a  good 
chemical  status  has  slightly  increased  to  80.5%. 
However,  10.8%  of  groundwater  bodies  with  a 
good chemical status in Hungary are identified as 
being  at  risk  of  falling  to  a  poor  status  by  2027. 
Groundwater  bodies  are  mainly  affected  by 
untreated  wastewater,  nutrients  from  agriculture, 
urban 
and 
contamination  from  old  industrial  sites.  The  third 
plan highlights that there are significant pressures 
from  agriculture,  industry  and  settlements  in 
Hungary. 

industrial  wastewater 

run-off, 

some 

progress, 

Despite 
Hungary’s 
wastewater  treatment  remains  a  significant 
cause  for  concern.  Wastewater  treatment  is  a 
major  source  of  water  pollution,  as  discharges  of 
urban  wastewater  are  a  significant  cause  of  poor 
water  quality  in  Hungary,  in  particular  for  rivers 
and  groundwater  bodies.  Hungary  is  one  of  the 
Member  States  that  has  faced  the  greatest 
difficulties  in  implementing  the  Urban  Waste-
Water  Treatment  Directive  (UWWTD).  Despite  an 
increase  since  2018,  Hungary’s  compliance  rate 
with the Directive was only 59% in 2020 (193), far 
below the  EU  average (76%),  resulting  in  a  ruling 
against it by the Court of Justice of the European 
Union  in  2023.  The  Hungarian  authorities  have 
acknowledged  that  many  plants  in  operation 
should be refurbished or upgraded. 

Hungary  has  scope  to  take  additional 
measures  to  achieve  compliance.  EUR 659 
million  from  national  sources  and  EU  funds 
already 
to  meeting  Hungary’s 
investment  needs  for  water  protection  and 
investment  needs 
management.  However,  the 

contribute 

(192) Failure to achieve good chemical status is mainly due to a 

small number of persistent, bioaccumulative and toxic (PBT) 
substances (polybrominated diphenyl ethers, mercury, 
polyaromatic hydrocarbons, perfluorooctane sulfonic acid 
and its derivatives and heptachlor and heptachlor epoxide) 
and non-PBT substances ((arsenic, but also cadmium, lead 
and nickel, along with the hydrocarbon fluoranthene). 

financing  needs 

revised  and  strengthened 

(Graph  A9.2)  show  a  substantial  gap  for  water 
(EUR 610 
protection  and  water  management 
million  per  year  by  2027  or  0.36%  of  Hungary’s 
GDP).  Over  half  of  this  gap  can  be  attributed  to 
unaddressed 
in  wastewater 
management  (EUR  313  million  per  year).  EUR 40 
million  per  year  of  the  investment  gap  relates  to 
drinking  water,  while  around  EUR 255  million  per 
year  relates  to  other  aspects  of  the  WFD. 
Infrastructure development would help to improve 
wastewater  collection  and  treatment  and  water 
reuse, and to reduce leaks in the networks and the 
general  water  supply.  Increasing  investment  will 
be  all  the  more  important  as,  on  one  hand,  the 
UWWTD  was 
in 
2024 (194),  and  on  the  other,  Hungary  plans  to 
further  develop  several  water-intensive  industrial 
plants  in  the  coming  years.  For  instance,  the 
Hungarian  authorities  has  announced 
the 
construction  of  plants  dedicated 
to  battery 
in  Nyíregyháza  and  Debrecen, 
manufacturing 
increase  both  water  and  energy 
which  will 
demands,  and 
issue  of  potential 
the 
pollution,  with  increased  needs  for  wastewater 
treatment. Additional investments are also needed 
to  increase  administrative  capacities,  implement 
effective measures to achieve full compliance with 
the  WFD  and  the  UWWTD,  decontaminate  water 
bodies,  and  support  nature-based  solutions,  flood 
prevention  and  river  restoration.  Hungary  would 
also  benefit 
transboundary 
from  enhanced 
cooperation to achieve the objective of the WFD. 

raise 

Biodiversity and ecosystems 

Biodiversity  and  nature  are  deteriorating  in 
Hungary, and actions to restore habitats and 
species  should  be  strengthened.  According  to 
the  latest  available  data,  only  13.3%  of  the 
country’s habitats have a good status, lower than 
the 
the  EU  average  of  14.7%.  Similarly, 
conservation  status  of  species  is  concerning,  with 
35%  reported  as  having  a  good  status,  slightly 
above the EU-28 average (27%). Less than 8% of 
(195)  show  a  favourable 
the  forest  habitats 
conservation  status,  and  overall  Hungary’s  forest 

(194) Directive 2024/3 019, of 27 November 2024. The deadline 

for transposition is 31 July 2027. 

(193) European Commission, 2020, UWWTD National Summary 

(195) Assessments done for the forest habitats listed under 

Chapter 2020 Hungary, LInk. 

Article 17 of the Habitats Directive. 

82 

 
 
 
conditions  are  more  degraded  than  the  EU 
average,  with  a  forest  health  indicator  of  0.58  in 
2018  (compared  to  the  EU  average  of  0.62). 
Moreover,  data  show  deteriorating  trends  for 
habitats  and  species  compared  to  the  previous 
reporting  period.  This  situation  has  serious 
implications  for  Hungary’s  environmental  and 
climate  resilience,  as  the  loss  of  biodiversity 
impairs ecosystems’ ability to provide services that 
help mitigate  the  effects of  climate  change  (such 
as regulating water cycles, maintaining soil health, 
and  sequestering  carbon)  and  climate-related 
events such as floods, fires and droughts. 

Nature  degradation  creates  significant  risks 
to  competitiveness,  as  Hungary’s  economy 
services.  Overall, 
relies  on  ecosystem 
Hungary’s  dependency  on  ecosystem  services  is 
close  to  the  EU  average,  with  44%  of  its  gross 
value  added  showing  a  high  level  of  dependency, 
ranking  13th  among  the  Member  States.  Several 
sectors, such as agriculture, forestry, fisheries, the 
mining  and  metals  industry,  construction,  water 
utilities  and  healthcare  delivery  (see  Graph  A9.1) 
are  particularly  dependent  on  ecosystem  services, 
with  100%  of  the  gross  value  added  of  these 
sectors  directly  dependent  on  ecosystem  services. 
This means that failure to maintain the capacity of 
to  deliver  services  could  entail 
ecosystems 
significant  costs  or  even  stop  production  in  these 
sectors.  Protecting  and  restoring  key  ecosystems 
would  ensure  that  the  long-term  competitiveness 
of these and other economic sectors is preserved. 

Graph A9.1: Direct dependency(1) on ecosystem 
services(2) of the gross value added generated by 
economic sector in 2022 

(1) Dependency based on the sector’s own operations, 
excluding value chain operations within countries and across 
international value chains. A high dependency indicates a high 
potential exposure to nature-related shocks or deteriorating 
trends, which means that the disruption of an ecosystem  
service could cause production failure and severe financial 
loss. 
(2) Ecosystem services are the contributions of ecosystems to 
the benefits that are used in economic and other human 
activity, including provisioning services (e.g. biomass 
provisioning or water supply), regulating and maintenance 
services (e.g. soil quality regulation or pollination), and cultural 
services (e.g. recreational activities). 
Source: Hirschbuehl et al., 2025, The EU economy's 
dependency on nature, Link. 

Targeted  action  on  nature  protection  and 
restoration  is  needed  in  order  to  meet 
In 
Hungary’s  nature  restoration  targets. 
2022, 22.2% of Hungary's territory was protected 
land  area,  and  this  percentage  has  remained 
stable  over  the  last  few  years,  below  the  EU 
average.  There  is  therefore  scope  for  Hungary  to 
achieve 
to  expand 
protected  areas  and  improve  the  conservation  of 
existing protected areas by 2030, as set out in its 
National  Biodiversity  Strategy  for  2030 (196). 
Between 2006 and 2012, the extent of soil areas 
providing  flood  control  ecosystem  services  in 

its  political  commitment 

(196) Government of Hungary, 2023, National Biodiversity 

Strategy, Link. 

83 

0%20%40%60%80%100%AgricultureForestryFishery and acquacultureMining and metalsConstructionWater utilitiesHealthcare deliveryAviation travel and tourismFood beverages and tobaccoSupply chain and transportPublic services and othersElectricityChemical and materials industryElectronicsOil and gasReal estateHeat utilitiesAutomotiveRetail consumer goods and…Information technologyBanking and capital marketsInsurance and asset…Digital communicationsHighMediumLow 
     
 
in 

Hungary  fell  by  12%  due  to  soil  sealing  (197). 
Another of Hungary's areas for action concerns the 
restoration  of  5 029  km2  of  habitats  listed  in 
Annex I to the Habitats Directive, corresponding to 
up  to  5.4%  of  its  territory  (198).  Hungary  needs 
investment  per  year  to 
EUR 1 482  billion 
effectively conserve and restore its natural capital, 
mitigate  the  impacts  of  climate  change,  and 
preserve the country’s rich biodiversity (see Graph 
for 
financing 
A7.2).  The  current 
biodiversity  and  ecosystem  conservation 
in 
Hungary is around EUR 482 million per year, which 
represents  a  financing  gap  of  EUR 1  billion.  This 
shortfall puts at risk the country’s commitment to 
global biodiversity agreements and undermines its 
long-term economic and social development. 

level  of 

Graph A9.2: Investment needs and gaps in EUR 
million, in 2022 constant prices 

Source: European Commission, DG Environment, 
Environmental investment needs & gaps assessment 
programme, 2025 update. 

Sustainable agriculture and land use 

Hungary’s  carbon  removals  fall  short  of  the 
level  of  ambition  needed  to  meet  its  2030 

in 

target  for  land  use,  land  use  change  and 
forestry  (LULUCF).  Hungary  has  seen  modest 
improvements 
its  LULUCF  sector  carbon 
removals  since  2018.  To  meet  its  2030  LULUCF 
target,  additional  carbon  removals  of  -0.9  million 
tonnes of CO2 equivalent (CO2eq) are needed (199). 
The  latest  available  projections  show  a  gap  to 
target  of  0.1  million  tonnes  of  CO2eq  for 
2030 (200).  Additional  measures  therefore  need  to 
be applied to reach the 2030 target. 

Hungarian  agriculture  has  an 
increasing 
environmental  impact on  air,  water  and  soil. 
Hungary's  utilised  agricultural  area 
(UAA) 
amounted  to  5  million  hectares  in  2022.  There 
was  a  significant  increase  in  nutrient  losses 
between  2018  and  2021  (from  43 kg  to  56.1 kg 
of  nitrogen  per  hectare  of  UAA),  which  is  a 
significant  environmental  concern  and  poses  a 
threat  to  human  health.  According  to  data  from 
the  Nitrates  Directive,  7.27%  of  groundwater 
monitoring  stations  in  Hungary  recorded  average 
nitrate  concentrations  above  50 mg/l  between 
2016  and  2019,  exceeding  the  healthy  threshold 
for  human  consumption.  The  livestock  density 
index was 0.43 in 2020, below the EU average of 
0.75.  Ammonia  emissions  from  agriculture  have 
shown  an  increasing  trend  over  the  last  decade, 
representing 92.8% of total agricultural emissions 
in  2022,  which  is  above  the  EU  average  (89.8%). 
Hungary  only  monitored  the  level  of  pesticide 
pollution  at  a  few  monitoring  stations  (and  only 
for  rivers).  Despite  this  low  level  of  monitoring, 
60%  of  surface  water  bodies  were  reported  as 
exceeding the pesticide thresholds in 2021. 

to 

of 

reduce 

policies 
impact 

Hungary must pursue its efforts to transition 
to  a  sustainable  food  system  by  further 
implementing 
the 
agriculture. 
environmental 
Agriculture  is  a  key  economic  sector  in  Hungary. 
The bioeconomy, encompassing the production and 
processing  of  biological  products,  contributed 
EUR 10.75  billion  of  added  value  to  the  country’s 
gross  domestic  product  in  2021  (201),  showing  an 
increasing trend since 2018. Agriculture accounted 
for  around  EUR 5.1  billion,  the  beverage  industry 
EUR 477 million, and the food industry contributed 

(197) European Commission, European Environment Agency 

(2021), Accounting for ecosystems and their services in the 
European Union. 

(198) European Commission (2022), Impact assessment 

accompanying the proposal for a Regulation on nature 
restoration. 

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

Regulation (EU) 2023/839. 

(200) Climate Action Progress Report 2024 COM/2024/498. 

(201) Jobs and wealth in the EU bioeconomy 

84 

 - 200 400 600 800 1,000 1,200 1,400 1,600BiodiversityWaterBaselineGap 
     
 
 
around  EUR 2.4  billion 
to  Hungary’s  GDP. 
Sustainable agriculture practices can help mitigate 
the  environmental 
impact  of  agriculture  and 
ensure  the  long-term  competitiveness  of  the 
sector.  Hungary's  common  agricultural  policy 
strategic  plan  supports  measures  to  improve 
carbon storage, protect natural resources, preserve 
biodiversity  and  pursue  other  climate  and 
environmental  objectives,  with  EUR 1.2  billion, 
71%  of  its  rural  development  funding,  and  EUR 1 
billion, 15% of its direct payments. However, there 
is  scope  to  further  promote  sustainable  practices. 
In  2022  (202),  organic  farming,  which  reduces  the 
use of synthetic fertilisers and pesticides, made up 
only  6.3%  of  Hungary’s  agricultural  land,  below 
the 2020 EU average of 9.10%. 

(202) D’Andrimont, R. et al., 2024, Estimation of the share of 

landscape features in agricultural land based on the LUCAS 
2022 survey, Link. 

85 

 
 
Table A9.1:  Key indicators for progress on climate adaptation, preparedness and environment 

(1) The data show the average for the timespan 2006-2023 based on EFFIS - European Forest Fire Information System. 
(2) Scale: 0 (no protection gap) – 4 (very high gap). EIOPA, 2024, Dashboard on insurance protection gap for natural catastrophes. 
(3) van Daalen, K. R. et al., 2024, The 2024 Europe report of the Lancet Countdown on health and climate change: unprecedented 
warming demands unprecedented action. The Lancet Public Health. 
(4) This indicator measures total water consumption as a percentage of the renewable freshwater resources available for a given 
territory and period. Values above 20% are generally considered to be a sign of water scarcity, while values equal or greater than 
40% indicate situations of severe water scarcity. 
(5) European Commission, 2024, seventh Implementation Report from the Commission to the Council and the European 
Parliament on the implementation of the Water Framework Directive (2000/60/EC) and the Floods Directive (2007/60/EC) (Third 
River Basin Management Plans and Second Flood Risk Management Plans). 
(6) For this indicator, the EU average includes figures for the UK under the previous configuration, EU-28. 
(7) European Commission, 2023, EU Bioeconomy Monitoring System dashboards. 
(8) Nitrates can persist in groundwater for a long time and accumulate at a high level through inputs from anthropogenic sources 
(mainly agriculture). The EU drinking water standard sets a limit of 50 mg NO3/L to avoid threats to human health. 
(9) Net removals are expressed in negative figures, net emissions in positive figures. Reported data are from the 2024 
greenhouse gas inventory submission. 2030 value of net greenhouse gas removals as in Regulation (EU) 2023/839 – Annex IIa. 
Source: Eurostat, EEA 

86 

Climate adaptation and preparedness:20182019202020212022202320182021Drought impact on ecosystems00.770.251.7826.1906.772.76[area impacted by drought as % of total]Forest-fire burnt area (1)715          715          715          715          715          715          [ha, annual average 2006-2023]Economic losses from extreme events8              14            11            34            2 430       30            24 142       62 981       [EUR million at constant 2022 prices]Insurance protection gap (2)----0.88         0.88         [composite score between 0 and 4]Heat-related mortality (3)32            32            32            32            32            [number of deaths per 100 000 inhabitants in 2013-2022]Sub-national climate adaptation action44            53            55            56            56            59            4144[% of population covered by the EU Covenant of Mayors for Climate & Energy]Water resilience:20182019202020212022202320182021Water Exploitation Index Plus, WEI+ (4)1.31.41.41.41.7-4.54.5[total water consumption as % of renewable freshwater resources]Water consumption1 337       1 407       1 441       1 507       1 446       -           [million m3]Ecological/quantitative status of water bodies (5)[% of water bodies failing to achieve good status]Surface water bodies---84%---59%Groundwater bodies---20%---93%Biodiversity and ecosystems:20182019202020212022202320182021Conservation status of habitats (6)13.3-----14.7-[% of habitats having a good conservation status]Common farmland bird index80.781.081.377.375.7-72.274.42000=100Protected areas---2222--26[% of protected land areas]Sustainable agriculture and land use:20182019202020212022202320182021Bioeconomy's added value (7)9 452       9 744       9 681       10 750     634 378     716 124     [EUR million]Landscape features----4              -[% of agricultural land covered with landscape features]Food waste--939184-[kg per capita]Area under organic farming3.95.76.05.86.37.99-[% of total UAA]Nitrogen balance43.040.749.956.1--[kg of nitrogen per ha of UAA]Nitrates in groundwater (8)------[mgNO3/l]Net greenhouse gas removals from LULUCF (9)4 806-       5 382-       7 106-       7 195-       6 803-       -           256 077-     240 984-     [Kt CO2-eq]HungaryEU-27HungaryEU-27HungaryEU-27HungaryEU-27 
 
  
 
FAIRNESS 
ANNEX 10: LABOUR MARKET 

In recent years, Hungary's labour market has 
performed  well  and  shown  considerable 
improvement.  However,  the  country  still  faces 
structural  challenges  that  have  a  detrimental 
its  competitiveness  and  potential 
impact  on 
include 
economic  growth.  These  challenges 
regional 
low  productivity,  stark 
persistently 
imbalances,  a  low  and  declining  impact  of  the 
Active  Labour  Market  Policy  (ALMP)  system  and 
the  lack  of  an  integrated  service  provision,  as 
reflected  in the  significant  underrepresentation  of 
certain  groups  in  the  labour  market  -  particularly 
Roma  communities,  people  with  lower  levels  of 
educational 
persons  with 
disabilities.  As  Hungary  works  towards  its  2030 
employment-rate target, key challenges to achieve 
a  more  robust  and  inclusive  labour  market  and 
thriving  economy 
the 
potential  of  underrepresented  groups  and 
improving the effectiveness of social dialogue. 

include  harnessing 

attainment 

and 

- 

Regions  with  historically 
lower  educational 
attainment  levels  have  high  youth  unemployment 
rates,  e.g.  22.8%  in  Southern  Transdanubia  in 
2024,  when  4.2%  of young  people  in  the  15-294 
age  group  were  unemployed  for  12  months  or 
longer.  These  figures  also  show  the  negative 
impact of dropping out of school and early school 
leaving  (see  Annex  12).  The  proportion  of  young 
people  not  in  employment,  education  or  training 
(NEETs)  remained  around  the  EU  average  among 
15–29-year-olds (10.9% vs 11.0% in 2024).  

Graph A10.1: Unemployment rates (%) 

Hungary’s 
labour  market  outcomes  are 
stable  and  stand  at  historically  high  levels, 
but  the  slightly  increasing  unemployment 
rates  require  monitoring.  Employment  and 
activity  rates  (for  the  20  –  64  and  15  –  64  age 
groups  respectively)  reached  historical  peaks  in 
2024  (81.1%  and  78.6%).  Both  rates  remained 
well  above  the  EU  average  in  2024  (75.8%  and 
75.4%). At 85%, the country’s 2030 employment-
rate  target  is  within  reach,  but  persistently  low 
employment rates among vulnerable groups might 
make  it  difficult  to  meet  the  target.  Employment 
growth is slowing down, and the number of people 
who  hold  a  second  job  has  risen  steadily  since 
2021.  The  overall  unemployment  rate  increased 
from 3.6% in 2022 to 4.1% in 2023 and 4.5% in 
2024.  Long-term  unemployment  rose  by  0.2 
percentage  points  (pps)  to  1.4%,  in  2023,  and 
increased  further  to  1.5%  in  2024.  In  2024, 
unemployment  increased  in  all  regions  except  in 
Pest,  and  was  around  7%  in  three  of  the  four 
least-developed regions. These regional disparities 
are the result of lower educational attainment and 
fewer jobs in rural areas (see Annex 17). 

Young  people  continue  to  face  significant 
difficulties  finding  work.  In  2024,  15.2%  of 
young  people  between  15-24  were  unemployed 
(up  by  4.6  pps  from  2022).  Young  people  with 
lower levels of educational attainment were much 
more likely to be unemployed, both in Hungary and 
in  the  rest  of  the  EU  (29.2%  vs  19.8%  in  2023). 

Source: Eurostat. 

In  the  period  2021  to  2027,  the  ESF+  is  the 
only  source  of  funding  for  the  Youth 
Guarantee.  Its  aim  is  to  support  the  labour 
market  integration  of  NEETs,  albeit  with  a  large 
budget  of  EUR 526 million.  Since  2024,  Hungary  
has been trying to help the more vulnerable young 
people,  especially  the  inactive,  by  establishing 
country-wide  mapping  strategies  and  outreach 
plans.  There  is  further  scope  for  improving  the 
quality  and  choice  of  Youth  Guarantee  training 
intended  to  increase  long-term  employability.  As 
loans 
from  2025, 
(Munkáshitel)  of  up  to  HUF  4  million  (around 
EUR 10 000)  are  available  to  17–25-year-olds. 
Such loans are contingent on at least 20 hours of 
self-employment 
employment  per  week  or 
throughout 
loan  period;  students  and 
the 
graduates  in  higher  education  are  excluded.  The 
idea  is  to  offer  financial  incentives  for  young 

interest-free,  multi-purpose 

87 

02468101214162015201620172018201920202021202220232024Unemployment rate 15-74Long-term unemployment rate 15-74Youth Unemployment rate 15-24 
 
 
   
 
 
to 

people  into  work  more  quickly.  However,  this 
measure  might  be  less  effective  for  low-skilled 
young people, who would rather need reskilling or 
upskilling,  which  is  a  long-term  investment  in 
making  them  more  employable  but  discourages 
in  higher  education.Vulnerable 
participation 
groups  such  as  low-qualified  adults,  Roma 
and  persons  with  disabilities  also  face 
integration. 
labour  market 
barriers 
Employment outcomes in Hungary are closely tied 
to  educational  attainment.  The  employment  rate 
for  people  with  at  most  lower  secondary  (59.9%) 
was over 20 pps lower than for people with upper 
secondary  or  post-secondary  education  in  2024. 
Among 15-64-year-olds, only 48.7% of Roma (203) 
people were in work in 2023, as opposed to 75.5% 
of those not from Roma communities, and 20.6% 
of  Roma  people  were  unemployed  (vs  3.8%  of 
non-Roma people). The disability employment gap 
decreased by 2.4 pps in 2024 but remains high, at 
27.2  pps.  Almost  40%  of  young  persons  with 
disabilities are NEETs (2022)  (204). To improve the 
situation,  Hungary  recently  set  an  employment 
target for persons with disabilities.  

longer.  Since 

Vulnerable  groups  also  tend  to  remain 
unemployed  for 
the  2021  
legislation  on  the  public  employment  service, 
ALMP  has  focused  on  re-employment  via  wage 
subsidies, and there is reduced access to reskilling 
and upskilling measures, which could ensure long-
term  labour  market  integration.  The  recent  2024 
legislative amendment now enables PES to play a 
more  prominent  role  in  the  provision  of  labour 
market trainings. Insufficient availability of quality 
training  providers  might  appear  as  a  challenge. 
Given  that  fewer  than  one  in  three  long-term 
unemployed  people  who  get  a 
remain 
employed  after  six  months  there  is  room  for 
improvement  in  providing  tailor-made,  complex 
skills(205) 
services 
development,  health  and  psychological  services 
and  support  in  job-seeking  to  address  needs  of 
Economic 
long-term 

unemployed-. 

transversal 

such 

the 

job 

as 

In 

(203) National Statistical Office. Indicators to the National Social 

Inclusion Strategy, 2024. 

(204) European comparative data on persons with disabilities - 

data 2022 - European Commission 

(205) Transversal skills like critical thinking, teamwork, and learning 

skills are essential for work, education and daily life. 
Developing and recognising these skills play an important 
role in promoting sustainable economic growth, social 
inclusion, and competitiveness. 

88 

and 

Innovation 

Development 
Operational 
Programme  Plus  (EDIOP  Plus),  Hungary  allocated 
EUR 787 million (HUF 295 billion) of ESF+ funds to 
labour  market  measures  –  of  which  40%  goes  to 
people over 30 and 60% to people under 30. The 
planned  measures  were  launched  during  2024 
with  the  aim  of  helping  300 000  people  to  find 
work  and  are  primarily  targeted  at  vulnerable 
groups and the long-term unemployed. 

Graph A10.2: Labour market slack 

Source: Eurostat. 

Historically  low  unemployment  rates  have 
been  rising  since  2022,  while  the  overall 
labour market slack remains low. In 2024, the 
unemployment rate (4.5%) remained below the EU 
average  (5.9%),  as  it  has  been  since  2012. 
However,  unemployment  in  Hungary  has  been 
rising since 2022, in contrast with a broadly stable 
trend in the EU. Labour market slack (206) increased 
from  6%  in  2023  to  6.3%  in  2024  but  remained 
well  below  the  EU  average  of  11.7%.  This  slight 
increase  was  driven  by  an 
in 
unemployment,  while 
the  other  components 
remained  stable.  The  rates  of  under-employed 
people  working  part  time  in  Hungary  are  among 
the  lowest  in  the  EU.  The  labour  reserve  is  more 
than  10  times the  number  of  vacant  posts in  the 

increase 

(206) Labour market slack refers to all unmet needs for 

employment, namely it represents the extent to which labour 
supply exceeds labour demand in the short run. It 
encompasses four components: under-employed people 
working part-time, unemployed people, people seeking work 
but not immediately available, and people available to work 
but not seeking. 

0123456782018201920202021202220232024% of extended labour forceHUUnemployedAvailable but not seekingUnderemployedSeeking but not available 
 
   
 
three  least  developed  of  Hungary’s  counties.  The 
government  announced  urgent  measures  in  2024 
to  harness  this  untapped  labour  potential  of 
around  300 000  people,  although  specific  details 
are still to be provided. 

Labour  shortages  remain  a  challenge,  in 
certain  sectors.  The  job-vacancy  rate  has  been 
on a downward trend since 2022. At 2.1%, it was 
below  its pre-pandemic  level  (2.5% in  2019),  and 
slightly below the EU average (2.4%) in 2024. The 
decrease  in  vacancies  is  most  prominent  in  the 
private  sector,  while  the  largest  shortages  were 
reported  in  the  administrative,  healthcare,  social 
work, public administration and defence - sectors. 
The  job-vacancy  rates  were  between  3%  and  4% 
for all of these sectors in 2024. The low number of 
employees  in  the  public  and  health  sectors  is 
partly due to the low level of salaries and working 
conditions  (see  Annex  11).  According  to  recent 
CEDEFOP-EURES  data  (207),  employers  indicated  a 
office 
need 
professionals, 
In 
the  proportion  of  employers 
October  2024, 
their 
to 
shortages 
expecting 
production  was  relatively  high  in  the  service 
(33.5%  vs  26.8%  in  the  EU)  and  construction 
(29.3% vs 28.0% in the EU) sectors (208).  

office  associates, 
researchers  and  engineers. 

for  more 

labour 

limit 

country’s 

energy-intensive 

There is a growing need for skilled workers in 
emerging  sectors  that  are  key  to  the  green 
and digital transitions. In 2024, employment in 
the 
industries 
accounted for 5.0% of total employment, while job 
creation in the green economy remained limited. In 
2022,  employment  in  the  environmental  goods 
and  services  sector  was  among  the  lowest  in  the 
EU,  at  1.0%  of  total  employment  (vs  3.3%  in  the 
EU).  At  the  same  time,  the  job-vacancy  rate  in 
manufacturing, electricity, gas  and  water  supply  - 
key  sectors  for  the  green  transition  -  was  above 
the  EU  average.  The  greenhouse  gas  emission 
intensity  of  Hungary’s  workforce  has  improved, 
decreasing  from  12.2  tonnes  per  worker  in  2015 
to  9.7  tonnes  in  2023  (vs  12.3  in  the  EU), 
reflecting progress in the green transition.  

remains 
By  contrast, 
underdeveloped,  with 
specialists 
accounting  for  4.5%  of  total  employment  in 

ICT  sector 
ICT 

the 

(207) EURES - Countries and occupations | CEDEFOP 

(208) Source: European Business and Consumer Surveys. 

89 

2024,  compared  to  5.0%  in  the  EU.  This  is 
partly  due  to  a  high  drop-out  rate  from  higher 
education  programmes  preparing  ICT  specialists 
(see  Annex  12)  and  graduates  not  entering  ICT 
employment  in  Hungary.  Women  are  particularly 
underrepresented, at only 15.2% of ICT specialists 
(vs  19.5%  in  the  EU).  The  proportion  of  the 
population  with  at 
least  basic  digital  skills 
increased by 10 pps to 58.9% in 2023, compared 
to  an  EU  average  of  55.6%  (see  Annex  12). 
However,  this  proportion  is  much  lower  for  the 
inactive (209) (aged 25-64 and excluding students) 
(32.4%),  those  with  lower  levels  of  educational 
attainment  (33.4%)  and the  unemployed (44.1%). 
This indicates that those who are more vulnerable 
in  the  labour  market  lag  significantly  behind  in 
digital skills, further hampering their ability to find 
work. 

of  workers  with 

Overall, Hungary has almost halved its skills 
mismatches  during  the  last  decade.  The 
macroeconomic  skills  mismatch  (210)  decreased 
consistently  from  30.0  in  2013  to  17.5  in  2023, 
then  increased  slightly  to  17.7  in  2024.  In  2024, 
despite  the  low  overall  tertiary  graduate  rate, 
14.5% 
higher-education 
qualifications  were  employed  in  occupations  that 
did not require that level of qualification, while the 
EU average for the same year was 21.5%. Sectors 
food  service 
such  as  accommodation  and 
activities,  agriculture, 
fishing, 
transport,  and  administrative  and  support  service 
activities have the highest over-qualification rates. 
However, they are lower than the EU levels for the 
same sectors. 

forestry  and 

In  Hungary,  wage  growth  has  been  strong. 
Nominal  wages  are  expected  to  grow  by  7.8%  in 
2025,  after  reaching  the  highest  growth  rate 
(17.2%)  in  the  EU  in  2022  and  remaining  among 
the  highest  in  2023  (14.4%)  and  2024  (12.5%). 
Nominal  wage  growth  in  Hungary  is  expected  to 
fall to EU average levels (3.4%), following a period 
marked  by  great  divergence  (2022-2024).  In 

(209) A person who is neither employed nor unemployed is 

economically inactive. This means that they are not in paid 
work,and are not looking for work. This may be because 
someone is retired, looking after family or home, or a 
student, among other reasons. The set of people outside the 
labour is also called the "inactive population"   

(210) The macroeconomic skills mismatch indicator measures the 

dispersion of employment rates across skill groups 
(represented by qualification levels, with ISCED 0-2 low; 3-4 
medium and 5-7 high). 

 
 
 
parallel, real wages have been growing at a rapid 
(yet  volatile)  pace,  reaching  8.5%  in  2024  and 
expected at 4.0% in 2025. This is also significantly 
above  the  EU  average.  Real  wages  increased  in 
2022  (3.7%)  but  declined  by  2.1%  in  2023  (211). 
The  rise  in  real  wages  is  due  to  both  persistent 
nominal wage growth and steep disinflation (from 
17.0%  in  2023  to  3.8%  in  2024).  The  statutory 
minimum  wage  increased  by  more  than  45.4% 
between  January  2022  and  January  2025,  an 
increase  of  around  5.1%  in  real  terms.  The 
minimum  wage  remains  lower  than  in  almost  all 
other EU Member States, however. 

Graph A10.3: Unit labour costs and productivity 

Source: Eurostat. 

Rapid  wage  growth,  along  with  substantial 
increases  in  unit  labour  costs  (ULCs)  may 
undermine 
not 
competitiveness 
accompanied  by  productivity  growth.  Wage 
growth over the period from 2014-2022 has been 
slightly  below  what  could  be  expected  based  on 
developments 
the  usual  macroeconomic 
drivers(212)  in  Hungary.  By  contrast,  wage  growth 

if 

in 

(211) For nominal wage growth, pay per employee is considered. 
This includes: i) Wages and salaries payable in cash or in 
kind; and ii) Social contributions payable by employers. For 
real gross wages, the deflator used is HICP. Real wages using 
this deflator may differ from real wages shown in AMECO 
(that uses private consumption as deflator). Data for 2024 
and 2025 are based on the European Commission Autumn 
2024 economic forecast. 

(212) Wage benchmarks are predicted by developments in 
inflation, productivity, the trade balance and the 
unemployment rate. 

90 

surpassed the  expected  levels  in  2023  and  2024. 
In  recent  years,  ULCs  increased  by  considerably 
more  than  in  most  EU  Member  States:  14.2%  in 
2022, 15.7% in 2023 and 12.2% in 2024, and it is 
forecast to increase by 6.0% in 2025. While export 
market  shares  have  still  been  growing  in  recent 
years  (e.g.  over  2021-2023),  continuous  strong 
wage  developments  may 
increasingly  affect 
competitiveness 
if  not  backed  by  higher 
productivity. 

to 

remains  weak  due 

Social dialogue remains limited, especially in 
the  public  sector.  The  overall  framework  of 
social  dialogue 
the 
fragmentation  of  employers’  and  employees’ 
representations,  with  different  memberships  and 
functions.  Following  the  establishment  of  an  ad 
hoc  group  to  discuss  ALMPs 
in  2023,  the 
government  adopted  a  legal  basis(213)  for  the 
institutional  framework for the tripartite forum of 
the private sector (VKF) in autumn 2024. The VKF 
has  consultancy  powers  on  questions  on  the 
minimum  wage 
tripartite 
and 
negotiations,  in  line  with  the  minimum  wage 
directive  and  its  transposition  into  Hungarian  law. 
This 
the  previous 
improvement  on 
arrangement:  whereas  previously  the  VKF  was 
governed only by the rules of procedure signed by 
the  parties;  there  is  now  a  more  transparent  and 
legally binding framework.  

national 

is  an 

In  parallel,  the  public  sector  has  seen  a 
gradual  erosion  of  workers’  rights  in  recent 
years, including restricting teachers’ right to 
strike  and  abolishing  the  army  trade  union. 
The  establishment  of  a  separate  employment 
status for certain groups of public employees has 
weakened  their  ability  to  defend  their  collective 
interests:  in  some  cases,  collective  agreements 
to  be 
have  become  void  and  have  had 
renegotiated. The two relevant groups in the public 
sector  are  barely  still  in  existence  and  only  OKÉT 
had one meeting in October 2024. There is little to 
no  consultation  with  social  partners  on  major 
challenges  and  reforms  to  the  labour market  and 
social  policy,  for  example  on  pensions  or  the 
minimum  income.  Hungary  is  supporting  social 
partners  in  building  capacity,  mainly  through  the 

(213) Government Regulation 308/2024 (X. 25.) entered into force 
on 26 October 2024: https://njt.hu/jogszabaly/2024-308-20-
22.2#SZ10@BE0@POB   

6080100120140160180200220240260200720082009201020112012201320142015201620172018201920202021202220232024index 2007=100HUNominal compensation per employeeReal productivity per personNominal unit labour cost 
   
 
 
 
-  with  an  allocation  of  0.32%  or 

ESF+ 
EUR 17 million in ESF+ funding for this purpose. 

91 

 
ANNEX 11: SOCIAL POLICIES 

improvements 

Despite 
in  overall  social 
conditions  over  the  last  decade  in  Hungary, 
certain  vulnerable  groups  benefited  much 
less  and  continue 
to  face  significant 
challenges  related  to  poverty  and  social 
exclusion. Poverty or social exclusion risks are on 
the  rise  and  expected  to  rise  further  due  to 
in  basic  commodities,  a  decade  of 
inflation 
lack  of 
inadequate  social  assistance  and  a 
targeted  mainstream  social  policy  measures. 
Socially  disadvantaged  people,  such  as  Roma, 
persons  with  disabilities  and  the  low-skilled,  face 
barriers to accessing quality education, the labour 
market  and  social  mobility  overall.  The  limited 
capacity  of  the  social  protection  system  and 
unequal  access to quality  services also pose risks 
for Hungary’s sustainable and inclusive growth. 

After a decade of improvement, poverty and 
social  exclusion  is  on  the  rise  again  in 
Hungary.  The  people  at-risk-of-poverty  or  social 
exclusion  (AROPE)  rate  saw  a  gradual  decline 
between  2015  and  2022,  but  increased  for  two 
years in a row by 1.3 pps to 19.7% in 2023 and by 
further 0.5pps to 20.2% in 2024. It remained still 
below  the  EU  average  of  21.0%  in  2024.  The 
increasing  AROPE  rate  is  mainly  driven  by  a  high 
severe  material  and  social  deprivation  (SMSD) 
rate,  which  rose  in  2023  and  decreased  in  2024 
(by  1.1 pps  to  9.3%  vs  6.4%  in  the  EU)  and  an 
increasing (though still below EU average) at-risk-
of  poverty  (AROP)  rate  (+1.6  pp.  to    14.7%  vs 
16.2%  in  the  EU).  Progress  towards  the  2030 
poverty  reduction  target  has  stopped.  The 
number  of  people  at-risk-of-poverty  or  social 
exclusion  further  increased  by    42  000  in  2024, 
following  an increase  of  122 000 in  2023.  At the 
current  pace  (-9 000  since  2019),  Hungary  risks 
not  reaching  its  2030  target(214)  of  reducing  the 
number  of  people  at-risk-of-poverty  or  social 
exclusion by 292 000. To combat poverty, Hungary 
would benefit from taking further steps, especially 
since the country has one of the highest depths of 
poverty  in  the  EU.  Described  by  the  gap  between 
the  median  income  of  those  at  risk  of  poverty  or 
the  national  poverty  threshold,  it  was  29.7%  in 
2024.  .  The  poverty  gap  for  children  was  one  of 

(214) HU  expresses  its  national  poverty  reduction  target  as  a 
reduction in the material and social deprivation rate for 

families  with  children  (to  13%  by  2030)  that  can  be  translated 

into a reduction by 292 000 of people at risk of pov- 

the  highest  in  the  EU  in  2023  after  climbing  by 
343%  (by  49.8 pps)  to  64.3%,  from  one  of  the 
lowest rates in 2022., and then falling to 28.2% in 
2024. 

Graph A11.1: At-risk-of-poverty-or-social-
exclusion rate and its component rates 

Source: Eurostat. 

Rural  areas  and  some  specific  groups  are 
particularly  affected  by  poverty  or  social 
exclusion. In 2024, the AROPE rate in rural areas 
(25.8%) was 11.37pps higher than in urban areas. 
Partly related to the degree of urbanisation, there 
are  significant  differences  in  AROPE  rates  across 
regions.  In  Central  Transdanubia,  the  AROPE  rate 
was  at  11.6%,  and  29.9%  in  northern  Hungary  in 
2024.  The  AROPE  rate  also  increased  among 
persons  with  disabilities  (by  2.4 pps  to  32.4%,  vs 
28.8%  in  the  EU),  and  is  18 pps  higher  than  for 
persons without disabilities. This is linked to lower 
employment  and  high  disability  employment  gap 
in Hungary (see Annex 10). Roma people were over 
three  times  more  likely  to  be  AROPE  than  non-
Roma  people  in  2023  (61.7%  vs  18.7%)  (215).  , 
Households with three or more children (28.1.1%) 
and  single  households  (over  30%),  especially 
single  parents,  older  people  on  their  own  and 
single  female  households  were  also    much  more 
affected by poverty or social exclusion in 2024. To 
tackle  social  exclusion  and  deprivation,  in  2024, 
Hungary  amended  its  National  Social  Inclusion 
Strategy  2021-2030,  mainly  aiming  to  prevent 
and  combat  segregation.  The  strategy’s  action 

erty or social exclusion by 2030. 

(215) Helyzetkép | 2023 

92 

051015202530352015201620172018201920202021202220232024% of populationHUAt-risk-of-poverty-or-social-exclusion rateAt-risk-of-poverty rateSevere material and social deprivationPeople living in low work intensity households 
 
 
   
 
 
 
plan for 2021-2024 (extended until June 2025) is 
complemented  with  actions  to  map  segregated 
neighbourhoods  and  monitor  the  supply  of  social 
housing.  A  new  strategy  action  for  2025-2027  is 
under preparation. The new actions and monitoring 
framework can help improve transparency and the 
effectiveness of the actions. 

Educational  attainment  and  employment 
status play an important role in determining 
poverty  risks.  The  AROPE  rate  among  the  low-
skilled increased by 4.6 pps, to 45.6% in 2023 and 
by  further  0.9pps  to  16.5%  in  2024,  which  were 
above  the  EU  average  ,  the  highest  rates  since 
2017.  This  was  driven  by  increased  monetary 
poverty  (31.6%).  Adults  with  a 
low-level  of 
education  also  faced  above  the  EU  average  in-
work poverty (2439% vs 17.4% in the EU) in 2024, 
in contrast with a below average rate and a minor 
decline  among  those  with  at  least  secondary 
education  attainment.    People  not  employed  (216) 
(18-64 age group) were three times (27.1%), and 
those  unemployed  seven  times  (47.1%)  more 
likely  than  the  employed  (6.5%)  to  face  poverty 
risks. 

The risk of poverty or social exclusion among 
children  after  a  sharp  increase  returned  to 
slightly  below  EU  average    in  2024.  Between 
2023  and  2024  the  AROPE  rate  for  children  fell 
back  by  3.3 pps  to  21.1%,  which  is  below  the  EU 
average  (24.2%).  The    AROPE  rate  of  children 
whose  parents  have  low  educational  attainment 
decreased  by  7.5 pps  in  2024  to  reach  67.9%%, 
and remained above EU average (61.2%). Hungary 
has  not  set  a  complementary  child  poverty 
reduction  target.  To  mitigate  the  impact  of  child 
poverty,  Hungary  is  implementing  the  European 
Child Guarantee (ECG) under its action plan of May 
2023. The 2024 progress report shows progress in 
some  areas,  including  improving  affordability  of 
transport and free eye screening in disadvantaged 
neighbourhoods.  More  effort  to  ensure  better 
to  quality  early 
access  of  children  AROPE 
childhood  education  and  care  would  be  beneficial 
for children’s early development and their parents’ 
access  to  the  labour  market.  The  implementation 
of  the  ECG  is  supported  by  EU  cohesion  policy 
funds  and  the  Recovery  and  Resilience  Facility. 
This  includes  the  creation  of  creches,  material 
assistance to the most deprived children and their 
families,  and  educational,  housing  and  social 

(216) Not employed: unemployed, retired and other inactive. 

services 

assistance 
300  most 
funding 
disadvantaged  municipalities. 
amounts to a total of EUR 413 million of RRF and 
social cohesion policy funding. 

The 

the 

in 

Income  inequalities  increased  despite  recent 
significant  income  growth.  The  real  gross 
disposable  household  income  (GDHI)  per  capita  is 
at 161.0% of its 2008 level compared to 113.6% 
in  the  EU,  highlighting  the  strong  wage  growth  in 
recent  years.  However,  the  income  of  the  richest 
20% of the population was 4.3 times higher than 
that of the poorest 20% in 2023 (vs 4.7 in the EU), 
compared to 4.5 in 2023. This suggests that lower 
income  quintiles  benefited 
less  from  recent 
income  growth  than  higher  income  quintiles.  The 
income  share  of  the  lowest  income  decile  fell 
below  the  EU  average  in  2023  and  remained 
below in 2024, at 3.0%. In recent years, taxes and 
social benefits lowered income equality to a much 
lower extent in Hungary than in most EU countries 
(34%  vs  49%  in  the  EU  in  2024).  According  to 
national  data  in  2024,  the  gross  average  social 
income  per  person  in  the  lowest  income  quintile 
was HUF 421 000, while it was HUF 1 269 million 
for the top income quintile. 

factors 

the  key 

Some  of 
influencing 
inequalities  are  a  weak  social  benefit 
system,  lacking  targeted  support  measures 
to low-income households as well as barriers 
to  enter  the  labour  market  for  the  most 
vulnerable (see Annex 10). The very high inflation 
rate in 2022 and 2023, with persistently high food 
prices  (even  in  2024),  notably  affected  and 
continues  to  affect  low-income  households,  who 
spend a higher share of their budget on food than 
higher-income households. Other important drivers 
include the insufficient access to quality education, 
socio-economically 
especially 
disadvantaged,  families, including those  at  risk  of 
poverty  or  social  exclusion.  There  is  scope  for 
improving the effects of taxes and social transfers 
on reducing inequalities (217). 

among 

The  adequacy  of  social  protection  further 
deteriorated.  Social  protection  expenditure  is 
among  the  lowest  in  the  EU  (12.3%  vs  19.2%  of 
GDP in 2023), especially for social assistance and 
unemployment  benefits.  In  2022,  households  on 

(217) Economic inequalities in the EU - Key trends and policies, 

p. 33 Publications catalogue - Employment, Social Affairs & 
Inclusion - European Commission. 

93 

 
 
 
minimum  income  benefits  had  a  net  income  of 
only 18.9% of the at-risk-of-poverty threshold and 
only 7.8% of the net income of a low-wage worker 
(vs respectively 55.6% and 46.1% in the EU). The 
adequacy of the minimum income is therefore one 
of the lowest in the EU (59%) and even continues 
to decrease, as the nominal value of the minimum 
income  (HUF  28  500  or  EUR 74  per  month)  has 
not  changed  since  2012,  while  consumer  prices 
have  increased  by  75%  since  then.  Similarly,  the 
adequacy of the unemployment benefit is also one 
of the lowest in the EU (see Annex 10). 

The 
limited  capacity  of  the  system  to 
alleviate  poverty  risks  points  to  further 
scope  for  increasing  both  the  efficiency  and 
effectiveness  of  social  transfers.  Following  a 
steep  decline  from  above  EU  average  (50.6%  vs 
37.1%)  in  2021  to  36.7%  in  2022,  the  impact  of 
social  transfers  (excluding  pensions)  on  poverty 
reduction  remained  fairly  stable  at  EU  average 
(35.0%  vs  34.4%  in  the  EU)  in  2024  after  a 
further  decrease    in  2023).  The  impact  of  social 
transfers  on  reducing  poverty  among  children  fell 
from 70.2% in 2021 to 36.1% in 2023 (vs 43.1% 
in the EU) before recovering to 48.4% 2024. Social 
transfers  are  also  less  effective  at  alleviating 
poverty  in  the  most  disadvantaged  regions,  such 
as  the  northern  Great  Plain  (30.2%).  Linking  the 
adequacy  of  minimum  income  schemes  to  the 
minimum  wage  or  indexing  it  to  inflation  would 
help  secure  its  adequacy  and  reduce  Hungary’s 
high SMSD rate. 

Graph A11.2: Impact of social transfers on poverty 
reduction (%) 

Source: Eurostat. 

94 

casual, 

The  social  protection  system  also  presents 
coverage  gaps.  Workers  in  non-standard  forms 
of  employment 
seasonal 
(including 
workers, trainees and apprentices) are not covered 
by  sickness  and  invalidity  benefits.  The  self-
employed and temporary contract workers are less 
likely to receive social benefits than their EU peers 
(7.9. and 18.0% vs EU 12.7% and 39.2%.) There is 
scope  for  further  actions  to  strengthen  access  to 
social  protection,  in  line  with  the  related  2019 
Council Recommendation (218). 

House prices increased significantly over the 
last  decade  and  continue  to  grow  strongly. 
House  prices  have  sharply  risen  by  160%  since 
2015.  They  rose  by  more  than  20%  in  2022  and 
by  7%  in  2023  despite  the  higher  interest  rate 
environment.  They  have  risen  further  in  2024 
(+13%  year-on-year  in  2024-Q3).  Mortgage  rates 
increased from 4.2% in 2021 to 9.8% in 2023. The 
adjustment  to  higher  interest  rates  has  reduced 
housing  transactions  and  building  activity.  The 
number of housing transactions reduced 9.9% and 
27.0%  in  2022  and  2023,  respectively  while 
building  permits  fell  sharply  by  nearly  40%  in 
2023,  which  may  suggest  a  lower  supply  in  the 
future  and  subsequent  risks  of  lingering  price 
pressures.  Despite  the  decline  in  transactions, 
mortgage  credit  increased  in  2023,  after  some 
stagnation  in  2022,  driven  by  mortgage  subsidy 
schemes and lower lending rates. 

Overall  the  affordability  of  housing  has 
deteriorated  on  the  back  of  strong  demand 
and  limited  supplyHouse  prices  have  grown 
faster than incomes over the past decade and the 
standardised  house  price-to-income  ratio  sharply 
rose  from  2015  to  2022  before  easing  in  2023, 
still  attaining  15%  overall  increase  since  2015. 
The  number  of  dwellings  has  increased  by  4% 
since  2015  while  population  has  decreased 
slightly.  Hence,  the  ratio  of  dwellings  per  capita 
has  increased  by  6%  since  2015  but  it  remains 
low  compared  to  other  EU  countries.  The  ratio  of 
house  completions  per  capita  has 
increased 
strongly  since  2015  but  also  remains  low  in  EU 
comparison. Recent developments suggest that the 
mismatch  between  supply  and  demand  will 
remain. Generous  housing  policies  focused  on  the 
demand  side  fuel  house  price  increases  in  the 

(218) Council adopts recommendation on adequate minimum 

income - Employment, Social Affairs & Inclusion - European 
Commission 

3035404550556065702015201620172018201920202021202220232024% of populationHUHU TotalHU ChildrenEU TotalEU Children 
  
 
context  of  constrained  supply  At  the  same  time, 
taking  into  account  the  cost  of  mortgages,  the 
borrowing  capacity  of  households 
remained 
broadly  stable  over  the  past  decade.    While  the 
rental  market  is  rather  small,  the  ratio  of  new 
rents  to  incomes  increased  over  the  last  decade 
especially in the city centres. Rents also increased 
by  85%,  and  by  25%  only  between  2021  and 
2023. 

risks, 

increase 

High  housing  costs  negatively  impact  living 
standards.  In  2024,  8.5%,  (EU:  8.2%)  of  the 
population  faced  housing  costs  higher  than  40% 
of  their  total  disposable  household  income  –  a 
from  2023.  For  people 
0.2 pps 
experiencing  poverty 
the  housing-cost 
overburden  rate  rose  sharply  in  recent  years, 
driven by limited access to affordable housing, and 
at 33.5% remained above Eu average in 2024 (EU: 
31.1%),  .  Sharply  increased  rent  prices  can  partly 
explain  the  very  high  housing  overburden  rate 
among tenants with rent at market prices in 2024 
(40.5%).  Poor  housing  conditions  are  widespread 
among  marginalised 
communities.  Transport 
poverty  in  Hungary  is  widespread,  particularly  in 
rural  regions  where  rail  accessibility is  low, public 
transport  options  are  limited  or  non-existent,  and 
one in four residents is at risk of social exclusion. 
There  is  no  national  policy  targeting  transport 
poverty,  and  structural  measures  remain  limited. 
Rural  mobility  would  benefit  from  expanding 
affordable,  zero-emission  bus  and  rail  services, 
and enhancing multimodal connectivity. 

Low-income  households  have  limited  access 
to the available housing support measures. In 
recent  years,  Hungary  has  provided  generous 
financial support for families to buy, renovate and 
build  homes,  often  on  condition  of  committing  to 
having  children  in  the  future.  These  measures 
mostly  require  own  resources  and  are  based  on 
loans. Low-income households are rarely awarded 
such loans as they are considered high-risk clients 
by  banks.  Although  EU  funds  have  supported 
creating  and  renovating  social  housing  units  in 
recent  years,  the  total  number  of  social  housing 
units  in  Hungary  fell  from  59 000  to  38 000  in 
2023,  or  from  1.3%  to  0.9%  of  the total  housing 
stock.  The  decline  in  the  availability  of  social 
housing has come about as a result of the lack of 
government  policy  as  well  as  a  lack  in  incentives 
for  municipalities  to  maintain  their  social  housing 
stock.  Municipalities  also  seem  to  have  more 
opportunities  to  rent  out  their  housing  stock  at 
market  value.  The  RRF  allocated  financing  to  the 

building of 400 new and the refurbishing of 1 000 
social  housing  units  by  2026  in  the  300  most 
disadvantaged municipalities. In addition, in 2024, 
the  government  announced  measures  to  promote 
affordable  housing.  Only  some  elements  of  this 
plan have been presented, including narrowing the 
conditions  of  an  ongoing  large-scale  incentive  for 
home ownership of young families (age limitation). 
A  new  programme  of  HUF  20-30  billion  for  the 
construction of rental housing and student housing 
have  also  been  announced,  but  its  allocation  is 
limited compared to the 2025 budget of HUF 300-
400  billion  for  non-means-tested  support  for 
home  ownership,  and  its  details  are  still  to  be 
presented.  

and 

poverty 

environmental 
Energy 
inequalities pose challenges to the fair green 
transition.  The  percentage  of  the  population 
unable  to  keep  their  home  sufficiently  warm  fell 
sharply  from  15%  in  2012  to  4.7%  in  2022,  due 
to  a  cap  on  gas  and  electricity  prices  since  2013. 
However, after the partial removal of the cap mid-
2022, energy poverty surged by more than 50% to 
in  2023  (though  remaining  below  EU 
7.2% 
average of 10.6%) but decreased to 6.1% in 2024. 
For  people  at-risk-of-poverty  or  social  exclusion, 
however  the  share  of  the  population  unable  to 
keep  their  home  sufficiently  warm  is  16.8%  in 
2024.  A  two-band  pricing  was  introduced  for 
residential consumers and the price caps remained 
up to the level of average consumption (and up to 
a  higher  level  for  natural  gas  for  large  families). 
Gas  prices  increased  by  62%  and  firewood  prices 
by  90%  between  2021  and  2023,  then  slightly 
decreased in 2024. The carbon footprint inequality 
between  the  wealthiest  and  the  poorest  20%  of 
the population is one of the highest in the EU (2.3 
vs 1.9). 

The root causes of energy poverty among the 
poorest  households are  yet  to  be addressed. 
Hungary  has  adopted  a  range  of  measures, 
including a focus on energy efficiency and support 
for  renewable  energy  projects.  Notable  initiatives 
in  the  Hungarian  RRP  include  support  for  the 
installation  of  residential  solar  panels,  heating 
for 
modernisation,  and 
vulnerable households. Hungary is also focusing on 
improving  energy  efficiency 
in  disadvantaged 
areas,  with  a  particular  emphasis  on  rural  and 
eastern  regions.  However,  structural  measures 
aimed  at  addressing  the  root  causes  of  energy 
poverty remain limited. Currently, national policies 
regulated  energy  prices  and  consumer 
of 

financial  assistance 

95 

 
protection  schemes  continue,  though  Hungary 
would  benefit  from  more  comprehensive  and 
targeted  measures  to  address  energy  efficiency 
and social inclusion at a broader scale. 

96 

 
ANNEX 12: EDUCATION AND SKILLS 

in 

quality 

providing 

Hungary’s competitiveness is limited by early 
school  leaving, low levels of basic  skills  and 
educational attainment, and skills shortages. 
Challenges 
education 
combined  with  strong  inequalities  in  education 
leave  one  in  two  disadvantaged  pupils  with  low 
basic  skills,  often  resulting  in  fewer  upskilling 
opportunities  and  employment  prospects  later  in 
life.  Moreover,  the  high  number  of  early  leavers 
from education and training and the relatively low 
number  of  higher  education  graduates  does  not 
meet  employers’  demand  for  highly  skilled 
workers.  The  low  share  of  science,  technology, 
engineering  and  mathematics  (STEM)  graduates 
further  exacerbates  skills  shortages  and  hinders 
Hungary’s  potential  for  research  and  innovation, 
productivity  growth  and  competitiveness.  The 
above  average  participation  of  adults  in  training 
might  be  an  important  window  of  opportunity  to 
reskill  and  upskill  the  working  age  population  for 
better  employability.  Vulnerable  groups,  however, 
deserve special attention. 

Participation of children as of age 3 in early 
childhood education and care (ECEC) is in line 
with  the  EU  average,  but  lowering  staff 
qualification  requirements  impacts  service 
quality for building the foundations for basic 
skills.  From  the  age  of  three,  92.6%  of  children 
participate in ECEC (vs 93.3% in the EU). Regional 
coverage  of  kindergartens  remains  uneven:  in 
no 
2022, 
had 
kindergarten (219). 
the  government 
In  2020, 
changed 
in 
employment 
kindergartens,  reducing  the  required  number  of 
In  January  2024, 
qualified 
qualification  requirements  were  eased  further, 
allowing  secondary  vocational  education  and 
training (VET) graduates in kindergarten education 
to  work  as  ECEC  teachers,  which  was  previously 
only possible with a higher education diploma. 

of  municipalities 

teaching  staff. 

conditions 

31% 

the 

There  are  large  inequalities  in  educational 
outcomes,  leaving  significant  parts  of  the 
population  behind.  More  than  half  of  students 
from  the  bottom  quarter  of  the  socio-economic 
distribution  underachieve  in  mathematics  (54.9% 
vs 48.0% in the EU). Inequalities are rooted in the 
way  the  education  system  is  organised:  of  all 
students  in  the  EU,  disadvantaged  students  in 
Hungary most often attend separate schools from 

(219) Varga, J. (ed): A közoktatás indikátorrendszere 2023. 

97 

their  advantaged  peers.  The  concentration  of 
disadvantaged  students  in  certain  schools  and 
insufficient  support  for  low-achieving  students 
also  lead  to  a  high  level  of  separation  based  on 
performance.  Of  all  students  in  the  EU,  low-
achieving  students  in  Hungary  are  the  second 
most  separated  from  their  high-achieving  peers. 
Performance-based  selection  starts  at  age  10, 
when  best-achieving  students  can  apply  to  eight-
year general secondary schools.   

at 

for 

teachers 

schools  with 

Teacher shortages are a pressing concern.  In 
2018,  one  third  of  schools  participating  in  the 
OECD  Programme 
International  Student 
Assessment  (PISA)  had  reported  a  shortage  of 
qualified teachers, but this rose to more than 40% 
in 
by  2022.  The  biggest  teacher  shortages 
Hungary  are  in  rural  areas,  and  the  proportion  of 
unqualified 
a 
disadvantaged profile is two to three times higher 
than  at  schools  with  a  normal  profile (220).  A 
growing  number  of  students  in  initial  teacher 
education  are  admitted  with 
low 
application  scores.  In  a  recent  survey,  teachers 
lack  of 
cited 
professional  autonomy,  the  composition  of  the 
curriculum,  and  administrative  burden  as  the 
biggest  problems  in  their  work (221).  There  is  no 
system  to  forecast  teacher  supply  and  demand, 
which  could  support  planning.  The 
teaching 
workforce  is  also  ageing:  in  2021,  29.5%  of 
teachers were aged 55 or older (EU: 24.5%). 

low  wages,  high  workload,  a 

relatively 

skills.  Hungary 

Further  efforts  are  needed  to  build  a  highly 
skilled  teaching  workforce  that  can  improve 
started 
young  people’s 
implementing a major reform of teachers’ salaries 
in 2024, co-financed by the European Social Fund 
Plus (ESF+), as part of a programme to make the 
teaching  profession  more  attractive.  In  2022,  the 
actual  salaries  of  lower  secondary  teachers  were 
equivalent to just 57% of other tertiary graduates’ 
salaries (222). The aim of the reform is to increase 
this percentage to at least 80% by January 2025 
and to keep it at this level until at least December 
2030. As a first step, a 32% average increase was 
implemented in January 2024, followed by a 21% 

(220) Varga, J. (ed): A közoktatás indikátorrendszere 2023. 
(221) Társadalomtudományi Kutatóközpont Politikatudományi 
Intézete: Pedagóguskutatás 2023 - Gyorsjelentés. 
Társadalomtudományi Kutatóközpont Politikatudományi 
Intézete: Pedagóguskutatás 2023 - Gyorsjelentés. 
(222) OECD: Teachers' and school heads' actual salaries relative to 
earnings of tertiary-educated workers, by age group and by 
gender. 

 
 
 
 
 
 
increase  in  January  2025.  In  addition,  teachers 
working in disadvantaged municipalities or schools 
with  a  high  share  of  disadvantaged  pupils  and 
applying  inclusive  methods  receive  a  20%  salary 
top-up.  Novice  teachers  have  seen  their  salaries 
rise  even  faster,  with  increases  at  least  10 
percentage points (pps) higher between 2023 and 
2025. 

Early school leaving and a lack of basic skills 
among young people are the main barriers to 
skills  development  later  in  life.  4.1%  of  14-
year-olds  and  3.4%  of  15-year-olds  were  out  of 
school  in  2023,  well  above  the  EU  averages  of 
1.7%  and  2.6%,  respectively.  Early  school  leaving 
decreased for two consecutive years, in 2023 and 
2024, and stands now at 10.3%, still above the EU 
average  of  9.3%.  The  rate  is  higher  in  villages 
(16.9%),  in  the  least-developed  regions  (+3.1pps 
up  to  21.6%  in  Northern  Hungary),  for  persons 
with  disabilities  (at  41.2%  one  of  the  highest  in 
the  EU)  in  2024,  and  among  Roma  (58.7%;  non-
Roma:  9.3%  in  2023) (223).  Despite  the  persisting 
challenge  and  extensive  data  on  student 
national 
performance 
competency  tests  and  the  school  drop-out  early 
warning system, there are no effective large-scale 
programmes  in  place  to  support  low-performing 
primary  and  secondary  schools  to  reduce  the 
number  of  school  dropouts  or 
improve 
education  outcomes.  In  addition,  the  low  level  of 
basic  skills  of  15-year-olds  remains  a  cause  for 
concern (224).  In  PISA  2022,  around  one  third  of 
Hungarian 
in 
mathematics  and  one  quarter  in  reading  and 
science. 

underperformed 

collected 

students 

through 

to 

Since 2012, the share of top performers has 
not changed significantly, limiting the pool of 
innovative  talent.  Despite  being  below  the  EU 
average in the previous PISA rounds, the country’s 
proportion of top-achieving students is now on par 
with  the  EU  average  in  mathematics,  and  slightly 
below  average  in  science  and  reading.  However, 
this  is  only  because  the  EU  average  gradually 
decreased  in  all  three  domains  while  Hungary’s 
performance remained stable.  

(223) Government of Hungary: Hungarian National Social Inclusion 
Strategy 2030. 2024 data. 
(224) Compared to 2012, the shares of low achievers increased to 
29.5% in mathematics (EU: 29.5%), 25.9% in reading (EU: 
26.2%) and 22.9% in science (EU: 24.2%). 

98 

competitiveness  and 

The lack of excellence at school level is a key 
driver behind low participation in STEM fields 
in higher education and remains a key barrier 
to  boosting 
the 
economy’s  innovation  capacity.  Among  pupils 
in  the  eighth  grade,  37%  were  low  achievers  in 
computer and information literacy – below the EU 
average  of  43%  but  far  above  the  EU  target  of 
less  than  15%.  This  may  be  linked  to  challenges 
stemming  from  curricula,  teachers’  digital  skills 
and  the  digital  education 
infrastructure.  The 
recovery and resilience facility and cohesion policy 
programmes  are  funding  digital  equipment  for 
pupils  and  aim  to  improve  teachers’  digital  skills 
and  pedagogical  skills  in  a  digital  environment 
through specialised training. 

Graph A12.1: Underachievement in mathematics, 
reading and science by students' socio-economic 
background (%) 

Source: PISA 2022 

In 

to 

intention 

line  with 
promote 

VET  participation  is  increasing,  but  barriers 
to  progression  to  higher  educational  levels 
put three-year VET students in a particularly 
the 
disadvantaged  position. 
government’s 
VET, 
participation in upper secondary VET has increased 
in  recent  years,  with  about  50.9%  of  pupils  in 
secondary  VET  programmes  in  2023  (3 pps  down 
from  2022).  This  is  due  to:  (i)  higher  enrolment 
rates  among  young  people  in  five-year  VET 
courses, which lead to an upper secondary  school 
leaving  certificate  giving  access 
to  higher 
education;  and  (ii)  the  possibility  of  obtaining  a 
second  VET  qualification  free  of  charge,  which 
attracts more adults to VET (over a quarter of all 
VET  students  studied  in  adult-learning  status  in 
2023/2024).  About  a  quarter  of  all  VET  pupils 
(25,1%) in medium-level VET are enrolled in STEM 
fields  in  Hungary  in  2022  (36,2%  EU  wide). 
Though decreasing in number, almost 25% of VET 
students  (and  13%  of  all  upper  secondary  full-
time  students)  were  enrolled  in  three-year  VET 

0102030405060MathematicsReadingScience%Advantaged studentsDisadvantaged studentsTotal 
 
  
programmes,  which  do  not  give  direct  access  to 
any further formal full-time studies.  

educational  participation  could  promote  social 
mobility and increase earning levels. 

Average performance in basic skills tends to 
be  weaker  among  VET  students,  which 
creates  challenges  for  the  labour  market.  In 
PISA  2022,  Hungarian  students  had  one  of  the 
largest gaps in average mathematics performance 
between  general  and  vocational  programmes, 
largely  due  to  differences  in  the  socio-economic 
composition  of  schools.  Despite  low  educational 
outcomes,  the  employment  rate  of  recent  VET 
graduates aged 20-34 at 84.2% was above the EU 
average in 2023, pointing to a tight labour market. 
Increasing the taught time dedicated to basic skills 
and 
additional 
pedagogical  support  to  low-achievers,  co-funded 
from  ESF+,  could  help  Hungary 
the 
challenge of low achievement in VET. 

continuing  mentoring 

tackle 

and 

The  declining  number  of  higher  education 
graduates is driving skill shortages. Despite a 
growing  demand  for  higher  education  graduates, 
in  2024  only  32.3%  of  Hungarians  aged  25-34 
had  a  tertiary  education  degree  (vs  44.2%  in  the 
EU).  The  employment  rate  of  recent  tertiary 
graduates 
(94.7%)  exceeds  the  EU  average 
(87.7%), indicating high demand.  

by 

is 
low  educational  attainment  rate 
The 
compounded 
intergenerational 
low 
educational  mobility (225).  Hungary  has  the 
fourth-lowest  share  of  first-generation  graduates 
among OECD countries, according to data recorded 
between 2011 and 2018. Children of parents with 
no higher education qualifications are less likely to 
obtain a tertiary degree than those whose parents 
have a degree (with a 27-percentage point gap in 
tertiary degree attainment compared to their peers 
from  more  educated  families).  Less  than  1%  of 
Roma  aged  15-24-year-olds  were  enrolled  in 
higher  education  in  2023 (226).  Data  show  a  high 
correlation  between  total  net  earnings  and  the 
share  of  graduates.  The  share  of  graduates 
explains 
the  61%  earnings  gap  between 
municipalities (227).  Therefore,  improving  equity  in 

(225) Első generációs diplomások Magyarországon. In: Szabó-
Morvai, Á. & Pető, R. (Eds.). Munkaerőpiaci Tükör 2022. 
Társadalmi egyenlőtlenség és mobilitás. 
(226) Government of Hungary: Hungarian National Social Inclusion 
Strategy 2030. 2024 data. 
(227) Gazdaságkutató Zrt.: A települési jövedelmek közötti 
különbségek főleg a diplomások eltérő arányára vezethetők 
vissza 

Hungary 

implemented 

The number of higher education graduates in 
STEM  remains  low,  despite  policy  efforts. 
Graduate  tracking  data  show  high  employment 
rates  among  STEM  graduates,  particularly  from 
ICT  and  engineering  programmes,  and  they  also 
earn significantly more than graduates from other 
fields (228). 
several 
measures to increase participation in STEM priority 
areas. However, in 2022, only 24.1% of all tertiary 
students were enrolled in STEM subjects (vs 27.1% 
in the EU). However, the share of students enrolled 
in  ICT  subjects  (8.3%)  was  well  above  the  EU 
average  (5.2%).  The  share  of  female  students 
enrolled in ICT was low, at 15.3% (vs 20.2% in the 
EU).  In  school  education,  the  low  number  of 
teaching  hours  in  science  and  a  shortage  of 
science  teachers (229)  contribute  to  students  not 
pursuing studies in STEM-related fields. 

Some sectors are affected by lingering skills 
shortages.  Hungarian  small  and  medium-sized 
enterprises  (SMEs)  claimed  that  skills  shortages 
hampered  their  general  business  activities  more 
than  their  EU  counterparts  did.  A  lack  of  digital 
skills  prevented  the  effective  use  of  digital 
technology in business and lacking skills was also 
a  barrier  to  a  more  environmentally  friendly  way 
of  working (230).  Job  vacancy  rates  have  been 
decreasing  and  are  now  below  the  EU  average 
(2.1%  vs  2.4%  in  the  EU  in  2024).  While  this  is 
partly  related  to  the  economic  slowdown,  the 
share of unfilled jobs is high in some sectors, such 
as  health  and  social  work,  administrative  and 
support  services  and  public  administration. 
Hungary  has  been  developing  skills  forecasting 
tools,  but  they  are  not 
linked  together  or 
coordinated,  the  set  of  data  published  is  limited, 
and  the  involvement  of  social  partners  in  its 
management could be improved. 

Low basic skills among adults and persistent 
inequalities  present  serious  challenges  to 
competitiveness.  The  2022  Programme  for  the 
International  Assessment  of  Adult  Competencies  
survey,  which  measures  adult  performance  in 

(228) https://www.diplomantul.hu/adminisztrativ-adatbazisok-
egyesitese. 
(229) Varga, J. (ed): A közoktatás indikátorrendszere 2023. 
(230) Eurobarometer survey 2023: 
Skills_shortages_recruitment_retention_trategies_in_SMEs_fl_5
29_factsheet_HU_hu.pdf. 

99 

 
 
 
literacy,  numeracy  and  problem  solving,  showed 
the  EU 
Hungarian  adults  performing  below 
average in all domains. The 16-24 age group who 
are  still  enrolled  in  initial  education  or  have 
recently  completed  it  scored  significantly  below 
average,  signalling  potential  issues  in  the  quality 
of  education.  Almost  one  in  four  adults  are  low 
achievers  both  in  numeracy  and  literacy  (24.1% 
compared to 21.8% in the EU), and the impact of 
the  family’s  educational  background  remains 
significant  in  adulthood.  Educational  attainment 
also 
labour  market 
outcomes and wages. 

significantly 

influences 

Graph A12.2: Adult learning participation and 
digital skills of some vulnerable groups 

Source: Eurostat; Adult Education Survey 2022 (excluding 
guided on-the-job training). 

The adult population’s digital skills are above 
the  EU  average,  but  some  vulnerable  groups 
lag behind. In 2023, 58.9% of the population had 
at  least  a  basic  level  of  digital  skills,  a  sharp  rise 
from  49.1%  in  2021  and  surpassing  the  EU 
average  of  55.6%.  Those  most  vulnerable  in  the 
labour  market  –  namely  those  outside  the  labour 
force,  adults  with  lower  secondary  education  or 
less, and unemployed people – still lag behind the 
average  (29.4%,  33.4%  and  44.1%,  respectively). 
Those  working  in  agriculture,  forestry  and  fishery 
as  well  as  manual  workers  also  perform  well 
below  the  national  average  (41.4%  and  45.5% 
respectively). Looking at high levels of digital skills, 
the  share  of  ICT  graduates  was  above  the  EU 
average  in  Hungary,  including  among  women 
(6.8%  and  1.2%  vs  4.5%  and  1.0%  in  the  EU). 
However,  the  low  share  of  ICT  specialists  in 
employment  (4.2%  vs  4.8%  in  the  EU  in  2023), 
with  one  of  the  lowest  shares  of  female  IT 
specialists,  suggests  that  the  Hungarian  labour 

market is not able to keep its highly specialised IT 
experts. 

The  high  energy  intensity  of  the  Hungarian 
economy  will  require  substantial  investment 
in  reskilling  and  upskilling  to  ensure  a  fair 
green transition. In 2024, labour shortages were 
reported 
in  Hungary  for  several  occupations 
requiring  specific  skills  related  to  the  green 
transition, 
insulation 
including  refuse  sorters, 
workers and mixed crop growers (231). The share of 
employees  who  participated  in  education  and 
training  in  energy  intensive  industries  slightly 
increased,  from  6.3%  in  2022  to  8.4%  in  2024, 
but  was  still  below  the  EU  average  of  11.7%. 
Nevertheless, many Hungarians consider that their 
skills  enable  them  to  contribute  to  the  green 
transition (66% vs 54% in the EU) (232). 

Maintaining a high adult participation rate in 
learning  could  be  an  opportunity  to  increase 
the competitiveness of Hungary’s workforce, 
but vulnerable groups need targeted support. 
In 2022, Hungary was among the best performers 
in the EU (39.5%) in adult participation in learning, 
with  62.2%  of  adults  participating  in  learning  in 
the  previous  12  months.  This  is  higher  than  the 
national target of 60% by 2030. Adults with a low 
level  of  educational  attainment,  unemployed 
people,  and  people  outside  the  labour  force 
participate  less  in  learning  (42.1%,  20.7%  and 
18.6%, respectively). A regulation on short courses 
leading to micro-credentials and their certification 
was published at the end of 2024 to address skills 
shortages,  and  the  piloting  of  individual  learning 
accounts  between  2025  and  2027  has  been 
announced.  The  law  on  adult  training  and  its 
implementing decree sets out the main features of 
a  new  adult  learning  fund  (to  be  operational  as 
finance  policy 
from  2027),  which 
development, labour market forecasting and large-
scale 
individuals, 
especially  the  most  vulnerable,  can  benefit  from 
the fund as well as the source of funding are not 
yet available. 

training.  Details  on  how 

should 

(231)  Source: European Labour Authority, EURES Report on 
labour shortages and surpluses 2024, 2025, based on data 
from EURES National Coordination Offices. Skills and 
knowledge requirements align with the ESCO taxonomy on 
skills for the green transition, with examples analysed using 
the ESCO green intensity index. 
(232)  Eurobarometer - 97.4. 

100 

010203040506070TotalPersons with loweducationalattainmentPersons outsidethe labour forceUnemployedpersonsParticipation rate in education and training in the past 12 months (2022, %)Individuals with basic or above basic overall digital skills (2023, %) 
  
 
ANNEX 13: SOCIAL SCOREBOARD 

Table A13.1:Social Scoreboard for Hungary 

(1) Update of 5 May 2025. 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 2025 for details on the 
methodology (https://employment-social-affairs.ec.europa.eu/joint-employment-report-2025-0). 
Source: Eurostat 

101 

62,210,358,910,97,94,2681,14,51,5161,020,221,135,027,28,516,51,0Critical situationTo watchWeak but improvingGood but to monitorOn averageAdult participation in learning (during the last 12 months, excl. guided on the job training, % of the population aged 25-64, 2022)Equal opportunities and access to the labour marketSocial Scoreboard for HungaryBest performersBetter than averageEarly leavers from education and training(% of  the population aged 18-24, 2024)Young people not in employment, education or training(% of the population aged 15-29, 2024)Gender employment gap(percentage points, population aged 20-64, 2024)Income quintile ratio (S80/S20, 2024)Dynamic labour markets and fair working conditionsSocial protection and inclusionShare of individuals who have basic or above basic overall digital skills(% of the population aged 16-74, 2023)Impact of social transfers (other than pensions) on poverty reduction(% reduction of AROP, 2024)Children aged less than 3 years in formal childcare (% of the under 3-years-old population, 2024)Self-reported unmet need for medical care (% of the population aged 16+, 2024)Disability employment gap (percentage points, population aged 20-64, 2024)Housing cost overburden (% of the total population, 2024)At risk of poverty or social exclusion (AROPE) rate (% of the total population, 2024)Employment rate(% of the population aged 20-64, 2024)Unemployment rate(% of the active population aged 15-74, 2024)Long term unemployment(% of the active population aged 15-74, 2024)Gross disposable household income (GDHI) per capita growth(index, 2008=100, 2023)At risk of poverty or social exclusion (AROPE) rate for children(% of the population aged 0-17, 2024) 
 
 
 
  
 
 
ANNEX 14: HEALTH AND HEALTH SYSTEMS 

competitiveness  of 

Hungary’s  health  system  faces  significant 
challenges. These need to be addressed if the 
country  is  to  improve  the  health  of  its 
fairness,  while 
population  and 
social 
the 
the 
boosting 
low 
economy.  These  challenges 
life 
expectancy, 
treatable  and 
preventable mortality, and geographical disparities 
in  the  accessibility  of  healthcare.  Both  issues  are 
associated with suboptimal cost-effectiveness and 
funding of the health system, an insufficient focus 
on  disease  prevention  and  outpatient  care,  and 
shortages of healthcare workers.  

to  high 

include 

linked 

Life  expectancy  at  birth 
in  Hungary 
rebounded  above  its  pre-COVID-19  level  but 
was still among the lowest in the EU in 2023. 
Women are expected to live 6.5 years longer than 
men. That said, they can only expect to live around 
2.6  years 
in  good  health. 
Mortality  rates  due  to  preventable  and  treatable 
causes  are  among  the  highest 
in  the  EU, 
suggesting  shortcomings  in  the  effectiveness  of 
the health system (see Annex 15).  

longer  than  men 

Graph A14.1: Life expectancy at birth, years 

Source: Eurostat (demo_mlexpec) 

Shortcomings  in  the  effectiveness  of  the 
health  system  also  negatively 
impact 
productivity  and 
Hungary’s  workforce, 
competitiveness. 
In  Hungary,  mortality  at 
working  age  as  a  proportion  of  total  mortality  is 
significantly  higher 
the  EU  average, 
than 
exacerbating the effects of population ageing on a 
shrinking  labour  force.  The  rate  of  potential 
to  non-
productive 
communicable  diseases  such  as  cancer  and 
diseases of the circulatory system (‘cardiovascular 
diseases’) is  high  compared  to  the  rest  of  the  EU 

lost  due 

years 

life 

cardiovascular  diseases, 

(233).  Hungary  participates  in  several  joint  actions 
funded  by  EU4Health  aimed  at  reducing  the 
burden  of 
cancer, 
diabetes  and  respiratory  diseases.  Between  2022 
and  2040,  Hungary’s  working  age  population  is 
forecast  to  shrink  by 0.4%  every  year  as  a  result 
of lower birth rates (EU-level projection: 0.3%).  

Graph A14.2: Treatable mortality 

Age-standardised death rate (mortality that could be 
avoided through optimal quality healthcare) 
Source: Eurostat (hlth_cd_apr) 

the 

suggesting 

opportunities 

Hungary’s health system is strongly hospital 
centred.  In  2022,  health  spending  per  inhabitant 
was  one  of  the  lowest in the  EU,  with  the largest 
share going to hospital care (around 34% of total 
health  expenditure).  This,  together  with  a  high 
number  of  hospital  beds  (590  per  100 000 
population  in  2022,  much  higher  than  the  EU 
average),  illustrates  Hungary’s  strongly  hospital-
centred  care  model.  Over-reliance  on  hospitals 
within  a  health  system  can  hamper  healthcare 
accessibility, 
for 
optimising 
cost-effective  allocation  of 
resources.  Out-of-pocket  payments  account  for  a 
greater  proportion  of  spending  on  health 
in 
Hungary than the EU average (234). More than half 
of  all  out-of-pocket  payments  are  for  outpatient 
pharmaceuticals. Historically, the health system in 
Hungary  has  been  underfunded:  both  capital 
spending annually 0.2% of GDP (EU average: 0.5% 
average 2016-2022) and public share of spending 
on healthcare (72.6%) are among the lowest in the 
EU  (EU  average:  81.3%).  This  is  reflected  in  the 
low  availability  of  key  diagnostic  technology: 
Hungary  has  among  the  fewest  medical  imaging 
devices per capita in the EU. Under the Hungarian 
(RRP),  around 
resilience  plan 
recovery  and 

(233) Update to 2022 data of analysis presented by Health at a 

Glance: Europe 2016 - © OECD 2016. 

(234) OECD/European Commission (2024), Health at a Glance: 

Europe 2024: State of Health in the EU Cycle, pp. 186-187. 

102 

76.575.574.176.076.781.380.480.180.681.420192020202120222023HungaryEU176.0173.2179.6188.9178.491.389.291.793.389.720182019202020212022per 100 000 populationHungaryEU 
 
        
        
 
 
 
Table A14.1:Key health indicators 

*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 based on 2022 (or latest 2021) data except for Luxembourg (2017). Doctors’ density data refer to practising 
doctors in all countries except Greece, Portugal (licensed to practise) and Slovakia (professionally active). Density of nurses: data 
refer to practising nurses (EU recognised qualification) in most countries except France and Slovakia (professionally active) and 
Greece (hospital only). **‘Available hospital beds’ covers somatic care, not psychiatric care. ***The EU median is used for patents. 
Source:  Eurostat database; European Patent Office; ****European Centre for Disease Prevention and Control (ECDC) for 2023. 

for 

funding 

is  planned  under 

EUR 1.3 billion  is  planned  for  health  reforms  and 
supporting  investments.  In  addition  to  the  RRP, 
significant 
healthcare 
the  EU 
(EUR 154 million) 
cohesion  policy  funds  in  2021-2027.  These  funds 
aim  to  strengthen  and  modernise  inpatient  care 
and  its  infrastructure,  bolstering  the  provision  of 
and 
services 
strengthening  the  integration  of  primary  and 
preventive  care  by  setting  up  group  practices  of 
general practitioners.  

network, 

hospital 

the 

by 

Hungary places insufficient focus on disease 
prevention. Spending on prevention in Hungary is 
low.  In  2022,  it  accounted  for  2.9%  of  total 
spending  on  health,  much  lower  than  the  EU 
average  of  5.5%.  Cardiovascular  diseases  and 
cancer  remain  the  leading  causes  of  death,  with 
mortality  rates  among  the  highest  in  the  EU.  In 
2022, breast cancer, cervical cancer and colorectal 
cancer  screening  rates  were  below  30%  (235). 
Suicide rates have decreased over time in Hungary 
but  are  still  among  the  highest  in  the  EU.  Long 
waiting  lists  have  been  reported,  delaying  access 
to mental health services and other types of care. 
Behavioural  risk  factors  are  a  key  driver  of 
is 
mortality 
above  the  EU  average,  smoking  rates  among  the 
highest  in  the  EU,  and  consumption  of  fruit  and 
vegetables,  and  levels  of  physical  activity  outside 
working  time  among  the  lowest  in  the  EU  (236).  A 
public health policy strategy for the period 2023-
2033 has been adopted setting key objectives and 
tasks. 

in  Hungary.  Alcohol  consumption 

(235) Health at a Glance: Europe 2024,  pp. 162. 
(236) Health at a Glance: Europe 2024, Chapter 4. 

Persistent  shortages  of  health  professionals 
limit  the  provision  of  healthcare.  For  several 
years,  the  density  of  doctors  in  Hungary  (3.5  per 
1 000 population in 2021) has been below the EU 
average of 4.2 per 1 000. Hungary has one of the 
lowest  shares  of  general  practitioners  in  the  EU 
(12%  vs  an  EU  average  of  21%).  Moreover,  the 
uneven  geographical  distribution  of  doctors  is  a 
major  barrier  to  access  to  care  in  peripheral 
regions (see Annex 17). The Hungarian government 
has  incentivised  doctors  to  work  in  the  public 
sector, granting them a 120% salary increase over 
three  years  (2021-2023)  (237).  It  also  banned 
Informal payments.  

Hungary  had  only  4.4  practising  nurses  per 
1 000 population  in  2022,  one  of  the  lowest 
rates  in  the  EU  (EU  average:  7.6  per  1 000 
population), posing a significant challenge to 
the health system and more broadly, the care 
system (see Annexes 10 and 12) (238). Hungary 
has among the EU’s lowest shares of nurses aged 
between  25  and  34  and  the  highest  shares  of 
nurses aged between 45 and 54, raising concerns 
long-term  accessibility  of  health 
about 
has 
services. 
substantially improved the remuneration of nurses 
in  recent  years  to  increase  attractiveness  and 
retention  in  the  profession.  It  announced  further 
remuneration increases in 2024 - 20% in nominal 

The  Hungarian 

government 

the 

(237) Health at a Glance: Europe 2024, pp. 190-191. 
(238) Under the newly adopted Eurostat definition of nurses (in line 
with Directive 2005/36/EC on the recognition of professional 
qualifications) nurse density numbers are significantly lower 
than those arrived at when using a broader definition, for 
example that used for OECD health statistics. 

103 

20192020202120222023EU average* (latest year) Cancer mortality per 100 000 population327.7320.9309.9312.2n.a.234.7 (2022)Mortality due to circulatory diseases per 100 000 population 714.8 731.4 722.8 732.1n.a.336.4 (2022)Current expenditure on health, purchasing power standards, per capita1 4831 6891 8661 867n.a.3 684.6 (2022)Public share of health expenditure, % of current health expenditure 68.7 70.8 72.5 72.6 71.581.3 (2022)Spending on prevention, % of current health expenditure 3.23.77.62.9n.a.5.5 (2022)Available hospital beds per 100 000 population** 606 601 601 590n.a.444 (2022)Doctors per 1 000 population*3.53.13.33.5n.a.4.2 (2022)*Nurses per 1 000 population* 4.2 4.2 4.3 4.4n.a.7.6 (2022)*Mortality at working age (20-64 years), % of total mortality21.119.921.019.118.614.3 (2023)Number of patents (pharma / biotech / medical technology)122558829 (2023)***Total consumption of antibacterials for systemic use,                    daily defined dose per 1 000 inhabitants****14.411.211.914.414.220.0 (2023) 
 
 
 
        
 
terms. The aim is to have the average basic salary 
of  nurses  reach  37%  of  the  average  basic  salary 
of  doctors  (239).  Nevertheless,  between  2020  (Q1) 
and 2024 (Q3) employment in healthcare services 
dropped  by  3.4%  (compared  to  an  EU-level 
increase  of  11.4%).  Hungary  participates  in  the 
HEROES joint action (240) under EU4Health, through 
which  EU 
countries  share  knowledge  and 
experience on health workforce planning. 

foster 

innovation  and 

The  Hungarian  health  system’s  potential  to 
drive 
industrial 
development  in  the  EU  medical  sector  is  not 
being fully exploited. Hungary is among the EU 
countries that report the lowest public spending on 
health research and development. This is reflected 
in the low number of European patents generated: 
eight 
the  combined  areas  of 
pharmaceuticals,  biotechnologies  and  medical 
devices  (vs  an  EU-level  median  of  29)  (241).  A 
moderate  amount  of  clinical  trials  are  held  in 
Hungary (242).  

in  2023 

in 

Hungary  aims  to  scale  up  the  digitalisation 
of  its  health  system,  with  support  from  EU 
programmes.  The  shares  of  people  accessing 
their personal health records online and of people 
using  online  health  services  (excluding  phone) 
instead  of  in-person  consultations  increased  in 
2024 compared to 2020, yet there is still room for 
further deployment (see Annex 6). Moreover, major 
differences  in  patient  use  have  been  observed 
depending  on  their  socio-economic  background. 
Significant planned investments under the RRP aim 
to  boost 
the 
healthcare  sector  in  Hungary.  Measures  focus  on: 
(i)  the  development  of  information  technology 
infrastructure  in  healthcare  institutions;  (ii)  the 
development  of  telemedicine  solutions;  (iii)  the 
rollout  of  enhanced  mobile  health  applications; 
and  (iv)  a  remote  health  monitoring  system  for 
older  people.  Hungary  participates 
in  several 
EU4Health-funded  projects  which  facilitate  the 
implementation  of  the  European  Health  Data 
Space  and  strengthen  digital  infrastructure  in 
Hungary (243).  

transformation  of 

the  digital 

(239) Health at a Glance: Europe 2024, pp. 196-197. 
(240) JA HEROES | Health workforce planning project. 
(241) European Patent Office, Data to download | epo.org. 
(242)EMA (2024), Monitoring the European clinical trials 

environment, p. 9. 

(243) DQ4HDAB - Enhancing Data Quality for Use by the Health 
Data Access Body, Xt-EHR - Extended EHR@EU Data Space 

for Primary Use, EHDS2 Pilot - Pilot for a European Health 
Data Space on secondary use of health data, TEHDAS2 - 
Second Joint Action Towards the European Health Data 
Space 

104 

 
 
 
 
 
 
 
 
 
HORIZONTAL 
ANNEX 15: SUSTAINABLE DEVELOPMENT GOALS 

social 

fairness 

This  Annex  assesses  Hungary’s  progress  on 
the  Sustainable  Development  Goals  (SDGs) 
along  the  dimensions  of  competitiveness, 
and 
sustainability, 
macroeconomic stability. 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 
inequalities  and  tackle  climate 
poverty,  fight 
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 
the EU. 

well  on  sustainable 
infrastructure  but  being 
outperformed  on  R&D  indicators,  in  particular  on 
patent  applications  to the  European  Patent  Office 
(29  per  million  inhabitants  in  2024;  EU  average: 
156)  and  expenditure  on  R&D  (1.38%  of  GDP  in 
2023; EU average: 2.24%). Its investment share of 
GDP  (SDG 8;  25.6%  in  2023)  continues  to  be 
above the EU average (21.7%). 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 (1.70 out of every 100 000 
workers in 2022). The recovery and resilience plan 
(RRP) 
the 
research  and  development 
development  of 
cooperation  and  boosting  digitalisation 
in 
education,  public  administration,  and  the  health, 
transport and energy sectors. 

includes  measures 

supporting 

In relation SDGs on competitiveness, Hungary 
is  improving  but  needs  to  catch  up  with  the 
EU average on all of them (SDGs 4, 8 and 9). 
The country is achieving mixed results on industry, 
innovation  and  infrastructure  (SDG 9),  performing 

Graph A15.1: Progress towards the SDGs in Hungary 

While  Hungary  is  improving  (SDGs  7,  9,  13 
and  15)  or  is  performing  well  (SDGs 15  and 
11) on some SDGs related to sustainability, it 
is moving away from others (SDGs, 2, 11 and 

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 
five 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 28 April 2025. Data refer mainly to the period 2018-2023 or 2019-2024. Data on SDGs may 
vary across the report and its annexes due to different cut-off dates. 

105 

 
 
 
 
 
 
 
and 

consumption 

12)  and  needs  to  catch  up  with  the  EU 
average (SDGs 2, 7, 9, 12 and 13). On SDG 12 
(Responsible 
production), 
Hungary  is  moving  further  away  from  the  EU 
average.  There  is  room  for  improvement  on  the 
circular  economy,  where  the  circular  material  use 
rate  is  low  (HU:  5.9%,  EU:  11.8%;  see  also  Annex 
9)  and  has  decreased  from  6.9%  in  2018.  Other 
contributing  factors  are  the  small  environmental 
goods  and  services  sector,  passenger  car 
emissions  (decreasing  more  slowly  than  the  EU 
average)  and 
low  energy  productivity.  On  a 
positive  note,  Hungary’s  net  greenhouse  gas 
emissions (SDG 13; 5.1 tonnes per capita in 2023) 
continue  to  be  below  the  EU  average  (6.8 tonnes 
per  capita).  Moreover,  the  net  greenhouse  gas 
land  use  and  forestry  have 
emissions  from 
decreased and remain below well the EU average. 
The  RRP  includes  measures  to  facilitate  the 
development of renewable energy and improve the 
sustainability of transport, water management and 
the circular economy. 

(Peace, 

Hungary is improving only on SDG 8 and 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 
justice  and  strong 
EU  on  SDG 16 
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  includes  reforms  to  improve 
public  finances,  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. 

On social fairness, Hungary needs to catch up 
with  the  EU  average on  all  SDGs (SDGs  3,  4, 
5,  7,  8  and  10)  apart  from  SDG  1  where 
Hungary 
is  only  slightly  above  the  EU 
average. While Hungary is moving away from 
SDG  10,  Hungary  is  improving  on  several 
SDGs  (SDGs  1,  3,  4,  5,  7  and  8)  on  fairness. 
While  Hungary  has  made  progress  on  most 
indicators related to SDG 1 (No poverty), Hungary 
is still below EU average on severe material, social 
and  housing  deprivation  rate.  On  SDG 3  (Good 
health and well-being), Hungary needs to catch up, 
primarily  by  reducing  the  obesity  rate  and 
avoidable  mortality.  While  the  unadjusted  gender 
pay gap (SDG 5) decreased, on average, to 12.0% 
of men’s average gross hourly earnings in the EU 
as a whole, it widened by 3.6 percentage points to 
17.8%  in  Hungary  in  the  five  years  preceding 
2023.  Moreover,  Hungary  continues  to  lag  far 
behind  the  EU  average  on  indicators  related  to 
(senior 
women 
management  positions  and  seats  in  the  national 
parliament).  The  negative  progress  on  SDG  10 
(Reduced  Inequalities)  is  mainly  driven  by  the 
worsened 
inequalities  within  the  country,  as 
evidenced  by  the  increase  in  the  urban-rural  gap 
for  risk  of  poverty  or  social  exclusion.  The  RRP 
supports  social  development  in  disadvantaged 
settlements  and  aims  to  improve  higher  and 
vocational  education  and  modernise  the  health 
sector. 

leadership 

positions 

in 

106 

 
 
 
ANNEX 16: CSR PROGRESS AND EU FUNDS IMPLEMENTATION 

Hungary  faces  structural  challenges  in  a 
wide  range  of  policy  areas,  as  identified  in 
the country-specific recommendations (CSRs) 
addressed  to  the  country  as  part  of  the 
European  Semester.    They  refer,  among  other 
things,  to  the  budgetary  framework,  long-term 
sustainability  of  the  pension  system,  business 
environment, 
efficiency, 
renewable energy generation, fossil fuel subsidies, 
water  resilience,  education,  skills,  social  policy, 
healthcare and housing. 

taxation, 

energy 

The Commission has assessed the 2019-2024 
CSRs  considering  the  policy  action  taken  by 
Hungary to date and the commitments in its 
recovery  and  resilience  plan  (RRP).  At  this 
stage, Hungary has made at least ‘some progress’ 
on 20% of the CSRs (244), and ‘limited progress’ on 
65% (Table A16.2). 

by 

to  Hungary 

competitiveness, 

EU funding instruments provide considerable 
resources 
supporting 
investments  and  structural  reforms  to 
environmental 
increase 
sustainability  and  social  fairness,  while 
helping  to  address  challenges  identified  in 
the CSRs. In addition to the EUR 6.5 billion grant 
and 3.9 billion loan funding from the Recovery and 
Resilience  Facility 
in  2021-2026,  EU 
(RRF) 
cohesion policy funds (245) have allocated EUR 21.7 
billion  (246)  to  Hungary  (amounting  to  EUR 26.1 
billion  with  national  co-financing)  for  2021-2027 

(244) 2% of the 2019-2024 CSRs have been fully implemented, 

2% substantially implemented, and some progress has been 
made on 16%. 

(245) In 2021-2027, cohesion policy funds include the European 
Regional Development Fund, the Cohesion Fund, the 
European Social Fund Plus and the Just Transition Fund. The 
information on cohesion policy included in this annex is 
based on adopted programmes with the cut-off date of 5 
May 2025. 

(246) EU 21.7 billion is the initial EU allocation to Hungary, 

reflecting decisions adopted on 22 December 2022. This 
amount has been reduced by EUR 1.04 billion, corresponding 
to commitments suspended in 2022 that could not be 
entered in the EU general budget by the end of 2024. This 
was due to the application, in the absence of remedies taken 
by Hungary, of Article 2(1) of Council Implementing Decision 
(EU) 2022/2506 of 15 December 2022 and pursuant to 
Article 7(3) of Regulation (EU, Euratom) 2020/2092 on a 
general regime of conditionality for the protection of the 
Union budget. As of 1 January 2025, the total EU funding 
available to Hungary under cohesion policy 2021-2027 
programmes is EUR 20.7 billion. 

from 

these 

instruments 

(247) to boost regional competitiveness and growth. 
combined 
Support 
represents around 16.25% of 2024 GDP (248). The 
contribution  of  these  instruments  to  different 
policy  objectives  is  outlined  in  Graphs  A16.1  and 
A16.2.  This  substantial  support  comes  on  top  of 
financing  provided  to  Hungary  under  the  2014-
2020  multiannual  financial  framework,  which 
financed  projects  until  2023  and  has  had 
the  economy  and 
for 
significant  benefits 
Hungarian  society.  Project  selection  under  the 
2021-2027  cohesion  policy  programmes  has 
progressed,  however  significant  volumes  of 
investment  are  yet  to  be  mobilised.  Access  to 
limited  by  non-fulfilled  enabling 
funding 
conditions  and  pending 
the 
conditionality procedure. Solving these outstanding 
issues  is key  to the  successful  implementation  of 
cohesion  policy  programmes  in  Hungary.  Hungary 
has  still  not  fulfilled  the  horizontal  enabling 
condition on the Charter of Fundamental Rights in 
regard  to  academic  freedom,  LGBTI  issues  linked 
to  the  so-called  child  protection  law  and  the 
treatment of asylum seekers. There are also three 
thematic  enabling  conditions  which  are  not  yet 
fulfilled, blocking payments to Hungary.  

issues  under 

is 

implemented 

The  Hungarian  RRP  contains  93  investments 
and  73  reforms  to  stimulate  sustainable 
growth  and  address  social  and  regional 
divides.  A  year  before  the  end  of  the  RRF 
timespan, no disbursements have taken place and 
targets  have  been 
no  RRP  milestones  and 
(249).  Progress 
confirmed  as 
is 
hindered,  in  particular,  by  the  lack  of  effective 
mechanisms to protect the EU’s financial interests, 
persistent  problems  related  to  the  anti-corruption 
framework, weaknesses in control procedures, and 
competition  in  public  procurement,  and  a  lack  of 
clarity  in  investment  objectives,  and  uncertainty 
and  delays in  the implementation  of investments. 
Hungary  needs  to  urgently  accelerate  efforts  to 
ensure completion of RRP measures by 31 August 
2026. 

Hungary  also  receives  funding  from  several 
other  EU  instruments,  including  those  listed  in 

(247) European territorial cooperation (ETC) programmes are 

excluded from the figure. 

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

applicable. GDP figures are based on Eurostat data for 2024. 

(249) As of mid-May 2025, Hungary has not yet submitted any 

payment requests. 

107 

 
 
 
 
 
 
the 

Table  A16.1.  Most  notably, 
common 
agricultural policy (CAP) provides Hungary with an 
EU  contribution  of  EUR 8.5  billion  under  the  CAP 
(250).  Operations 
strategic  plan  2023-2027 
amounting to EUR 1.1 billion (251) have been signed 
under  the  InvestEU  instrument  backed  by  the  EU 
guarantee,  improving  access  to  financing  for 
riskier operations in Hungary. 

Graph A16.1: Distribution of RRF funding in 
Hungary by policy field 

(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 circle 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. 
Source: European Commission 

Graph A16.2: Distribution of cohesion policy 
funding across policy objectives in Hungary 

Source: European Commission 

Cohesion  policy  funds  aim  to  increase  the 
productivity 
of 
Hungarian  firms  and  improve  the  business 

competitiveness 

and 

(250) An overview of Hungary’s formally approved strategy to 

implement the EU’s common agricultural policy nationally 
can be found at: https://agriculture.ec.europa.eu/cap-my-
country/cap-strategic-plans/hungary_en   

(251) Data reflect the situation on 31.12.2024. 

are 

The 

Fund 

(ERDF) 

supporting 

European 
is 

Regional 
environment. 
supporting 
Development 
investments 
in  both  productive  assets  and 
intangibles  in  6 600  small  and  medium-sized 
enterprises  (SMEs),  generating  EUR 560  million  in 
private investment. Grants complement significant 
investment-loan  programmes  launched  in  2024. 
The ERDF also supports innovation activities for up 
to  2 500  SMEs  through  calls  published  in  2024, 
including  small-scale  organisational  and  process 
innovation.  Additionally,  targeted  calls  and  loan 
programmes 
digital 
transformation  of  SMEs,  including  in  advanced 
technologies,  thereby  improving  their  level  of 
digital  intensity.  Around  EUR 1  billion  from  the 
European Social Fund Plus (ESF+) supports access 
to the labour market, targeting those most in need 
and young people. This helps SMEs and individuals 
adapt through training, wage subsidies, workplace 
safety  measures  and  health  screening.  Special 
focus  is  placed  on  developing  skills  for  the  green 
and  digital  transition.  Implementation  includes 
improving the quality  of vocational  education and 
training  by 
leaving, 
enhancing key  competencies, modernising teacher 
development  and  promoting  apprenticeships  in 
new sectoral training centres. 

reducing  early  school 

the 

are 

funds 

(TEN-T),  rail 

contributing 

to 
Other 
competitiveness  in  Hungary,  for  instance 
through  open  calls.  The  Connecting  Europe 
Facility  has  financed  strategic  investments  for 
instance  in  enhancing  connectivity,  sustainability, 
and efficiency along the Trans-European Transport 
Network 
infrastructure,  and  the 
development  of  alternative  fuel  infrastructure;  
infrastructure  projects  that  allow  for  energy 
market  integration,  decarbonisation  of  the  energy 
system  and  security  of  energy  supply,  and  the 
diversification of natural gas sources and routes in 
Hungary; and  advancing the deployment and take 
up  of  5G  in  smart  communities.  Horizon  Europe 
has  supported  research  and 
innovation  from 
scientific breakthroughs to scaling up innovations, 
with  Climate,  Energy  and  Mobility  and  Food, 
Bioeconomy  Natural  Resources,  Agriculture  and 
Environment as top priorities in Hungary. In 2024, 
the  TSI  provided  support  to  accelerate  climate 
adaptation  measures  in  water  management,  to 
adapt  its  VAT  digital  reporting  requirements,  to 
operationalise  the  transfer  strategies  for  banking 
resolution,  to  revise  cost  and  finance  parameters 
introduce  data  asset 
in  hospital  care, 
management 
custom 
and 
in 
administration,  and  to  promote the mental  health 

to 
the 

tax 

108 

Green transitionDigital transformationSmart, sustainable andinclusive growthSocial & territorial cohesionHealth & resilienceNext generationSmarter EuropeGreener EuropeConnected EuropeSocial EuropeEurope closer to citizensJTF specific objective 
      
 
   
 
targeted 

8 900  places  across  the  least-developed  regions. 
This will help these regions retain their population, 
especially young people  and families. Importantly, 
the  ESF+  supports 
teacher  salary 
increases,  prioritising  those  disadvantaged  areas, 
at-risk  students,  and  shortage  subjects like  STEM. 
Furthermore, Hungary is dedicating EUR 1.3 billion 
(25%) of its ESF+ to social inclusion and EUR 285 
million  (5.6%)  to  child  poverty.  This  will  benefit 
250 000 disadvantaged people, including 100 000 
children.  Almost  EUR 1.8  billion  will  go  towards 
supporting  quality  education  by  making  teaching 
more  attractive.  A  flagship  initiative  targets  the 
300  most  deprived  villages  with  high  child  and 
Roma populations, implementing integrated social, 
education,  employment  and  healthcare  measures 
locally. 

Hungary’s  RRP  contains  several  reforms  and 
investments  related  to  fairness  and  social 
policies.  Measures  are  being  implemented  to 
upgrade  healthcare  infrastructure  and  equipment, 
improvement  in  health  service  provision.  It  also 
contains  measures 
to 
to 
mainstream education for disadvantaged students, 
improve 
conditions,  and 
envisages expansion of early age childcare places. 
The  plan  also  has  measures  strengthening  the 
lower-income 
adequacy 
pensioners.  

teachers  working 

improve  access 

pensions 

for 

of 

of  youth  in  the  field  of  online  gambling  and 
gaming. 

to 

the 

Hungary’s  RRP  also  contains  ambitious 
measures 
business 
improve 
environment  and  competitiveness.  Measures 
are  being  implemented  to  strengthen  the  anti-
corruption  framework  and  judicial  independence, 
in  public 
improve  competition 
reforms 
procurement,  as  well  as 
the  quality  and 
transparency of decision-making.  

to 

EU  funds  are  playing  a  significant  role  in 
promoting  environmental  sustainability  and 
green  transition 
in  Hungary  during  the 
current  seven-year  EU  budget  (multiannual 
financial  framework).  The  ERDF  will  deliver 
transformative  results by enhancing  sustainability 
and  environmental  protection.  Over  313 000 
residents  of  Hungary  will  benefit  from  improved 
flood protection, while hundreds of thousands will 
gain access to better water supply and wastewater 
treatment. Additionally, the ERDF funding will help 
protect  natural  habitats  and  cut  greenhouse  gas 
tonnes, 
by 
emissions 
demonstrating 
impact  of  EU 
the  significant 
funding.  Furthermore,  the  CAP  strategic  plan 
balance 
2023-2027 
improvement on 1 million hectares of agricultural 
land.  The  plan  allocates  EUR 1.2  billion  of  EU 
funding  to  environmental  and  climate  objectives 
under rural development (EAFRD) and EUR 1 billion 
to eco-schemes under direct payments (EAGF). 

supporting  water 

0.5  million 

over 

is 

Hungary’s  RRP, 
including  the  REPowerEU 
chapter, has a comprehensive set of reforms 
and  investments  for  the  green  transition. 
implemented  to  remove 
Measures  are  being 
regulatory 
grid 
obstacles 
development  to  advance  renewable  energy  use, 
improve  energy  efficiency  in  private  and  public 
building,  and  promote  sustainable  transport.  The 
plan  currently  dedicates  67.1%  of  the  available 
funds to measures that support climate objectives.   

invest 

and 

in 

Promoting  fairness,  social  cohesion  and 
improving  access  to  basic  services  are 
among  the  key  priorities  of  EU  funding  in 
Hungary.  ERDF  support  includes  the  catching-up 
settlements  programme,  which  enhances  basic 
and  educational  services  in  the  country’s  300 
support 
settlements. 
least-developed 
significantly 
the 
to 
availability  and  quality  of  nursery  places,  adding 

contributes 

increasing 

The 

109 

 
  
Table A16.1:Selected EU funds with adopted allocations - summary data (million EUR) 

(1) The cut-off date for data on disbursements under the RRF is 31 May 2025. 
(2) Cohesion policy 2014-2020 allocations include REACT-EU appropriations committed in 2021-2022. 
(3) These amounts relate only to disbursements made from 2021 onwards and do not include payments made to the Member 
State before 2021.  Hence the figures do not comprise the totality of payments corresponding to the 2014-2020 allocation. The 
cut-off date for data on disbursements under EMFAF and EMFF is 29 April 2025.  The cut-off date for data on disbursements 
under cohesion policy funds, AMIF, BMVI and ISF is 5 May 2025. 
(4) AMIF - Asylum, Migration and Integration Fund; BMVI - Border Management and Visa Instrument; ISF - Internal Security Fund. 
(5) Expenditure outside the CAP strategic plan is not included. 
(6) The cut-off date for data on EARDF disbursements is 5 May 2025. The information on EAGF disbursements is based on the 
Member State declarations until March 2025.  Disbursements for the Direct Payments (EAGF) started in 2024. 
Source: European Commission 

110 

Instrument/policyDisbursed since 2021   (1)             RRF grants (including the RepowerEU allocation) 140.1RRF loans 779.5Instrument/policyAllocation 2014-2020 (2)Allocation 2021-2027 Disbursed since 2021 (3)    (covering total payments to the Member State on commitments originating from both 2014-2020 and 2021-2027 programming periods) Cohesion policy (total)22 529.721 730.111 293.7European Regional Development Fund (ERDF)11 380.713 568.25 443.0Cohesion Fund (CF)6 025.42 602.22 710.3European Social Fund (ESF, ESF+) and the Youth Employment Initiative (YEI)5 123.65 298.73 059.3Just Transition Fund (JTF) 261.1 81.0European Maritime, Fisheries and Aquaculture Fund (EMFAF) and the European Maritime and Fisheries Fund (EMFF) 38.4 37.723.1Migration, border management and internal security - AMIF, BMVI and ISF (4) 114.6 224.870.4The common agricultural policy under the CAP strategic plan (5)Disbursements under the CAP Strategic Plan (6)Total under the CAP strategic plan2 773.1European Agricultural Guarantee Fund (EAGF)2 418.5European Fund for Agricultural Development (EAFRD) 354.68 454.96 819.81 635.1FisheriesMigration and home affairsSelected EU funds with adopted allocations - summary data  (million EUR)Allocation 2021-2026 6 511.73 918.3Allocation 2023-2027 
 
 
 
 
 
 
 
   
 
 
Table A16.2:Summary table on 2019-2024 CSRs 

(Continued on the next page) 

111 

HungaryAssessment in May 2025Relevant 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 anymoreSDG 8, 162019 CSR 2Limited progressContinue the labour market integration of the most vulnerable groups, in particular through upskilling, andLimited progressSDG 4, 8, 10improve the adequacy of social assistance and unemployment benefits.Limited progressSDG 1, 2, 10Improve education outcomes and increase the participation of disadvantaged groups, in particular Roma in quality mainstream education.Limited progressSDG 4, 8, 10Improve health outcomes by supporting preventive health measures and strengthening primary healthcare.Limited progressSDG 3, 162019 CSR 3Limited progressFocus investment-related economic policy on research and innovation,Limited progressSDG 9, 10, 11low-carbon energy, Some progressSDG 7, 9, 10, 11, 13transport infrastructure, and Some progressSDG 10, 11waste management and Limited progressSDG 6, 10, 11, 12, 15energy and resource efficiency, taking into account regional disparities.Limited progressSDG 6, 7, 10, 11, 12, 15Improve competition in public procurement.Limited progressSDG 92019 CSR 4Limited progressReinforce the anti-corruption framework, including by improving prosecutorial efforts and access to public information, and Limited progressSDG 16strengthen judicial independence.Some progressSDG 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 progressSDG 8, 16Continue simplifying the tax system, while strengthening it against the risk of aggressive tax planning. Limited progressSDG 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 anymoreSDG 8, 16Addressshortagesofhealthworkersandensureanadequatesupplyofcriticalmedicalproductsandinfrastructure to increase the resilience of the health system.Some progressSDG 3Improve access to quality preventive and primary care services.Limited progressSDG 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 progressSDG 1, 2, 8, 10Improve the adequacy of social assistance and ensure access to essential services andLimited progressSDG 1, 2, 10quality education for all. Limited progressSDG 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 progressSDG 7, 9, 13sustainable transport, Some progressSDG 11water and waste management, Limited progressSDG 6, 12, 15research and innovation, andLimited progressSDG 9digital infrastructure for schools. Some progressSDG 4, 9, 162020 CSR 4 No progressEnsurethatanyemergencymeasuresbestrictlyproportionate,limitedintimeandinlinewithEuropeanandinternationalstandardsanddonotinterferewithbusinessactivitiesandthestabilityoftheregulatory environment. No progressSDG 16Ensure effective involvement of social partners and stakeholders in the policy-making process.No progressSDG 8, 16Improve competition in public procurement.Limited progressSDG 92020 CSR 5Limited progressStrengthen the tax system against the risk of aggressive tax planning.Limited progressSDG 8, 162021 CSR 1Not relevant anymoreIn2022,maintainasupportivefiscalstance,includingtheimpulseprovidedbytheRecoveryandResilience Facility, and preserve nationally financed investment.Not relevant anymoreSDG 8, 16Wheneconomicconditionsallow,pursueafiscalpolicyaimedatachievingprudentmedium-termfiscalpositions and ensuring fiscal sustainability in the medium term.Not relevant anymoreSDG 8, 16At the same time, enhance investment to boost growth potential.Payparticularattentiontothecompositionofpublicfinances,onboththerevenueandexpendituresidesofthenationalbudget,andtothequalityofbudgetarymeasuresinordertoensureasustainableandinclusiverecovery.Prioritisesustainableandgrowth-enhancinginvestment,inparticularinvestmentsupporting the green and digital transition.Not relevant anymoreSDG 8, 16Giveprioritytofiscalstructuralreformsthatwillhelpprovidefinancingforpublicpolicyprioritiesandcontributetothelong-termsustainabilityofpublicfinances,including,whererelevant,bystrengtheningthe coverage, adequacy and sustainability of health and social protection systems for all.Not relevant anymoreSDG 8, 16 
 
 
  
 
Table (continued) 

(Continued on the next page) 

112 

2022 CSR 1Limited progressIn2023,ensurethatthegrowthofnationallyfinancedprimarycurrentexpenditureisinlinewithanoverallneutralpolicystance,takingintoaccountcontinuedtemporaryandtargetedsupporttohouseholdsandfirmsmostvulnerabletoenergypricehikesandtopeoplefleeingUkraine.Standreadyto adjust current spending to the evolving situation. Not relevant anymoreSDG 8, 16Expandpublicinvestmentforthegreenanddigitaltransitions,andforenergysecuritytakingintoaccounttheREPowerEUinitiative,includingbymakinguseoftheRecoveryandResilienceFacilityandother Union funds.Not relevant anymoreSDG 8, 16Fortheperiodbeyond2023,pursueafiscalpolicyaimedatachievingprudentmedium-termfiscalpositions. Not relevant anymoreSDG 8, 16Improvethelong-termsustainabilityofthepensionsystem,whilepreservingadequacyinparticularthrough addressing income inequalities.Limited progressSDG 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 progressSDG 1, 2, 4, 8, 10Improvetheadequacyofsocialassistanceandensureaccesstoessentialservicesandadequatehousing for all. Limited progressSDG 1, 2, 10Improveeducationoutcomesandincreasetheparticipationofdisadvantagedgroups,inparticularRoma, in quality mainstream education. Limited progressSDG 4, 8, 10Improve access to quality preventive and primary care services.Limited progressSDG 32022 CSR 4Limited progressReinforcetheanti-corruptionframework,includingbyimprovingprosecutorialeffortsandaccesstopublic information, andLimited progressSDG 16strengthen judicial independence.Some progressSDG 16Improvethequalityandtransparencyofthedecision-makingprocessthrougheffectivesocialdialogue,engagement with other stakeholders and regular impact assessments. Limited progressSDG 16Continue simplifying the tax system. Limited progressSDG 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 progressSDG 6, 12, 15the digitalisation of businesses, Some progressSDG 9green and digital skills, and Limited progressSDG 4research and innovation.Limited progressSDG 92022 CSR 6Some progressReduce overall reliance on fossil fuels Limited progressSDG 7, 9, 13by accelerating the deployment of renewables, in particular by streamlining the permitting procedures Some progressSDG 7, 8, 9, 13and the upgrading of the electricity infrastructure.Limited progressSDG 7, 9, 13Diversifyimportsoffossilfuelsby,interalia,strengtheninginterconnectionwiththeparticipationofother countries.Limited progressSDG 7, 9, 13Reducethedependencyonfossilfuelsinbuildingsandtransportbysteppingupeffortsonenergy-efficiency measures for all, especially in residential housesSome progressSDG 7, 9, 13and on sustainable transport, in particular through electrification.Some progressSDG 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 %.Some 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.No progressSDG 8, 16Pursue effective coordination and clear demarcation of macroeconomic policies in order to ensure fiscal and external sustainability.Limited 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, 16Progress on the cohesion policy programming documents is monitored under the EU cohesion policy. 
 
 
  
 
Table (continued) 

Source: European Commission 

113 

2023 CSR 2UrgentlyfulfiltherequiredmilestonesandtargetsrelatedtostrengtheningjudicialindependenceandsafeguardingtheprotectionofthefinancialinterestsoftheUnioninordertoallowforaswiftandsteadyimplementationofitsrecoveryandresilienceplan.SwiftlyfinalisetheREPowerEUchapterwitha view to rapidly starting the implementation thereof. Proceed with the speedy implementation of 2023 CSR 3Limited progressImprove the adequacy of the social assistance system, including unemployment benefits.Limited progressSDG 1, 2, 10Improveaccesstoeffectiveactivelabourmarketmeasures,inparticularupskillingopportunitiesforthemost disadvantaged groups,Limited progressSDG 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 progressSDG 7, 9, 13byacceleratingthedeploymentofrenewables,includingwindenergy,geothermalandsustainablebiomethane,inparticularbystreamliningpermittingprocedures,whileconductingregularenvironmentalimpact assessments, and by creating a supportive and predictable regulatory environment.Some progressSDG 7, 8, 9, 13Phase out subsidies for fossil fuels.No ProgressSDG 12, 13Reformtherulesonthebalancingoftheenergymarketandtariffsettinginordertoallowforcostrecovery and an optimum use of the grid.Limited progressSDG 7, 8, 9Where necessary, upgrade the electricity infrastructure, including grid and storage capacities.Limited progressSDG 7, 8, 9DiversifyimportsoffossilfuelsinordertosignificantlydecreasedependenceonRussia,includingbystrengthening cooperation with other Member States, including, where necessary, on infrastructure.Limited progressSDG 7, 8, 9Improveenergyefficiency,inparticularinbuildings,andcontinueeffortstoreduceoverallgasconsumption.Limited progressSDG  7, 8, 9Adjustthecurrentsystemofregulatedenergypricesinordertoencourageenergysavingwhileproviding targeted support for low-income households.Limited progressSDG  7, 13, 1, 10Stepuppolicyeffortsaimedattheprovisionandacquisitionofskillsandcompetencesneededforthegreen transition.Limited progressSDG 4, 7, 132024 CSR 1Some progressSubmit the medium-term fiscal-structural plan in a timely manner.Full ImplementationSDG 8, 16InlinewiththerequirementsofthereformedStabilityandGrowthPact,limitthegrowthinnetexpenditure26in2025toarateconsistentwith,interalia,puttingthegeneralgovernmentdebtonaplausiblydownwardtrajectoryoverthemediumtermandreducingthegeneralgovernmentdeficittowards the 3% of GDP Treaty reference value.Full ImplementationSDG 8, 16Wind down the emergency energy support measures before the 2024/2025 heating season.Limited progressSDG 8, 16Pursueeffectivecoordinationandcleardemarcationofmacroeconomicpoliciestoensurefiscalandexternal sustainability.Limited ProgressSDG 8, 16Phaseoutremainingpriceandinterestratecapstoreducedistortiveeffectsandfacilitatethesmoothtransmission of monetary policy.Limited progressSDG 8Target support measures in the housing sector to low-income households.Limited progressSDG 1, 8, 10Strengthenthemedium-termbudgetaryframework,alignthepreparationofannualbudgetswiththebudgetary year and limit discretion in the implementation of annual budgets.Limited progressSDG 8, 162024 CSR 2Inlightofprolongeddelays,significantlyacceleratetheimplementationofcohesionpolicyprogrammesandtherecoveryandresilienceplan,includingtheREPowerEUchapter,ensuringcompletionofreformsandinvestmentsbyAugust2026,byswiftlyimplementingthenecessarymeasurestoensuretheprotectionoftheEU’sfinancialinterestsandresolvingpendingissuesonenablingconditions.Inthecontextofthemid-termreviewofcohesionpolicyprogrammes,continuefocusingontheagreedpriorities,takingactiontobetteraddresspoverty,focusingonenergypovertyandtheleastdevelopeddistrictsandmunicipalities,andimprovethesmartspecialisationstrategy,whileconsideringtheopportunitiesprovidedbytheStrategicTechnologiesforEuropePlatforminitiativetoimprovecompetitiveness.2024 CSR 3Limited progressImprovetheregulatoryframeworkandenhancecompetitioninproductmarketsandservicesbyavoidingarbitraryadministrativeinterventionsandtheselectiveuseoftailor-madelegislationprovidingundue advantage or disadvantage to specific companies,No progressSDG 9, 16byapplyingcompetitionscrutinysystematicallytobusinesstransactionsandbyreducingtheuseofemergencymeasurestowhatisstrictlynecessary,inlinewiththeprinciplesofthesinglemarketandthe rule of law.No progressSDG 9, 16Improve the adequacy of social assistance and unemployment benefits.Limited progressSDG 1, 2, 10Improveeducationalattainmentlevelsaswellasaccesstoeffectiveactivelabourmarketmeasures,inparticular upskilling and reskilling opportunities for the most disadvantaged groups, andNo progressSDG 4, 8, 10ensure effective social dialogue.Limited progressSDG 162024 CSR 4Limited progressReduceoverallrelianceonfossilfuels,acceleratethediversificationofgassupplytowardsnon-Russiansources, andLimited progressSDG 7, 8, 9take steps to phase out fossil fuel subsidies.No progressSDG 12, 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 on the RRP 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. Progress on the cohesion policy is monitored in the context of the Cohesion Policy of the European Union. 
 
  
 
ANNEX 17: COMPETITIVE REGIONS 

While  persistent  regional  disparities  are 
present  in  Hungary,  significant  opportunities 
exist  for  growth  and  regional  convergence, 
provided  there  is  also  a  positive  change  in 
the  business  and  institutional  environment. 
Several  regions  show  promising  potential  in  high-
tech  sectors  and  knowledge-intensive  services, 
including electromobility, pharmaceuticals, and ICT, 
in  addition,  other  regions  well-positioned  to 
leverage green technologies, including geothermal 
energy.  For  this  to  happen  however,  further 
investments  in  education,  digital  transformation, 
R&D, energy and access to services are necessary, 
while capitalizing on regional specializations.  

Regional  differences  in  human  capital  (252), 
innovation  capacities,  and  digital  and 
technological  transformation  significantly 
influence 
patterns  across 
Hungary. 

productivity 

is 

in  high-tech  sectors 

Employment 
in 
general above  the  EU  average in Hungary.  In 
Budapest,  13.0%  of  employment  is  in  high-tech 
sectors, and the figure is also high in Pest (8.5%), 
Közép-Dunántúl 
Észak-Magyarország 
(5.0%) and Észak-Alföld (4.7%), all higher or close 
to  the  EU  average  (5.2%),  demonstrating  these 
regions' strong position in these sectors. 

(6.6%), 

real  GDP  per  head 

Despite  growth  in  the  last  decade,  the  gap 
between  the  capital  region  and  the  other 
regions is both substantial and persistent. In 
2023, 
in  Budapest 
corresponded to 168% of the EU average, while it 
remained  below  70% in  all  other NUTS 2  regions. 
Észak-Alföld  and  Észak-Magyarország  remain  the 
poorest regions of the country, with GDP per head 
at 49 and 48% of the EU average. 

Employment  in  knowledge-intensive  services 
lags  behind  the  EU  average  but  is  still  near 
the  national  average  (37.2%)  in  the  four 
least  developed  regions,  which  reveals 
promising opportunity for growth. Participation 
in  education  and  training  also  exceeded  the 
national  average  in  the  four  least  developed 
regions,  which  can  contribute  to  improving  their 
competitiveness. 

in 

average 

2014-2023, 

Though  all  regions  grew  faster than  the  EU-
27 
internal 
convergence  is  progressing  slowly.  Except  for 
Budapest and Pest, the  other regions  are growing 
more slowly than the national average. This shows 
that  not  only  the  gap  with  the  capital  region  is 
increasing,  but  also  that  the  gaps  between 
different  non-capital 
regions  are  becoming 
noteworthy. 

Competitiveness 

across 

counties. 

Regional  economic  disparities  are  primarily 
in  productivity 
driven  by  differences 
performance 
While 
productivity per hour worked in Budapest and Pest 
reached 75-80% of the EU average, other regions 
were below the national average with Észak-Alföld 
laging significantly behind Despite these gaps, the 
post-2013  period  has  seen  most  counties 
achieving  productivity  growth  rates  above  the  EU 
average,  with  Dél-Alföld  and  Pest  performing 
particularly strongly, while performance was lower 
in Dél-Dunántúl and Észak-Alföld. 

Graph A17.1: Labour productivity per hour worked 

Unit: Real GDP per hour worked (EUR, 2015 prices) 
Source: ARDECO (JRC)  

Despite  progress,  outside  of  Budapest  and 
Pest county, less than 25% of the population 
aged  25-64  had  a  high  level  of  education  in 
2024 (EU: 36.1%). The number of people having 
a  low  level  of  education  was  significantly  above 
in  Észak-Magyarország, 
the  national  average 

(252) Human capital encompasses knowledge, skills and 

competences, highlighting the importance of education, 
training and experience in building a workforce that drives 
economic growth, innovation and productivity. 

114 

051015202530354045201220132014201520162017201820192020202120222015 EUR per hour workedOther NUTS2 regionsCapital regionNational averageEU27 
 
      
 
 
 
Table A17.1:Selected indicators at regional level in Hungary 

Source: Eurostat and JRC 

Észak-Alföld and Dél-Dunántúl, indicating a barrier 
to productivity growth. This indicates that targeted 
investments  in  education  and  skills  in  these 
regions would be beneficial to lay the foundations 
for improving their competitiveness. 

On the digital transformation of enterprises, 
whereas  most  regions  lag  behind  the  EU 
average,  the  rate  of  businesses  using 
advanced  digital  technologies  reached  or 
exceeded  the  EU  average  in  certain  fields. 
These  included  data  analytics  in  all  regions  and 
the  use  of  AI  in  Dél-  and  Közép-Dunántúl.  In 
addition,  the  high  rate  of  access  to  broadband 
connection  across 
the  country  provides  an 
opportunity 
for  growth  based  on  digital 
technologies, including in services. 

Budapest  was  the  only  region  with  higher 
investments  in  R&D  (2.3%  of  GDP)  than  the 
EU  average  (2.28%)  in  2022.  Közép-Dunántúl 
and Dél-Alföld also surpassed the other regions in 
terms  of  R&D  expenditure,  pointing  to  their 
potential  in  innovation-driven  growth.  The  other 
five  regions  lag  significantly  behind  in  terms  of 
R&D  expenditure,  which  constrains  their  growth 
potential. 

There  is  significant  potential  in  regional 
specialisation,  building  on  the  competitive 
advantages  of  regions.  Industry  already makes 
a  significantly  above-average  contribution  to 

regional  GVA in Komárom-Esztergom, Fejér, Győr-
Sopron-Moson,  Heves  and  Borsod-Abaúj-Zemplén 
counties  (between  33%  and  42%,  compared  to 
20.1%  in  the  EU).  This  can  positively  impact  real 
productivity  growth,  provided  these  regions  can 
also  move  towards  higher  value-added  activities, 
advanced  technologies  and  promoting  business 
R&D and innovation in these sectors. 

ecosystems 

Some  counties  –  Pest,  Csongrád-Csanád, 
Győr-Moson-Sopron,  Hajdú-Bihar,  Baranya 
and  Borsod-Abaúj-Zemplén  -  show  potential 
to  develop  growth  trajectories  built  around 
including  the 
knowledge-based  activities, 
and 
development 
of 
internationalisation. 
includes 
electromobility  (inter  alia  in  Győr-Moson-Sopron), 
industry  and  agriculture 
the  pharmaceutical 
(Hajdú-Bihar), 
the  health  and  biotechnology 
industry (Csongrád-Csanád) and ICT (Veszprém). In 
the 
the 
innovation  activities  of  small  to  medium-sized 
enterprises could pave the way towards improving 
their productivity. 

remainder  of  counties, 

improving 

This 

Green  technology  has  the  potential  to  drive 
growth in several regions, with the potential 
to scale up at the level of the single market, 
natural 
drawing 
endowments  and  human  and  technological 
capacities.  All  regions  except  Nyugat-Dunántúl 
and  Közép-Dunántúl  have  unique  potential  at 

regions' 

these 

on 

115 

GDP per head (PPS)Productivity - GDP per hour worked (PPS)Real productivity growth (per hour worked)Employment in high-technology sectorsPopulation growthParticipation in lifelong learningPopulation with low educational attainmentAt-risk-of-poverty or social exclusionIndex EU-27 = 100Index EU-27 = 100Average annual % change% of total employmentAverage annual change per 1000 residents% of population aged 25-64% of population aged 25-64% of total population202320222013-202220242014-2023202420242024European Union (27 MS)1001000.95.21.713.319.621.0Hungary77701.76.7-2.711.811.920.2Budapest168751.113.0-2.815.53.312.7Pest65802.88.59.110.88.020.3Közép-Dunántúl67651.76.6-1.29.312.111.6Nyugat-Dunántúl68681.84.00.27.410.013.4Dél-Dunántúl51651.43.3-7.311.216.823.3Észak-Magyarország48641.95.0-8.212.320.129.9Észak-Alföld49621.54.7-5.612.017.926.8Dél-Alföld54642.32.6-6.913.013.124.8 
 
 
     
 
global level for geothermal energy production and 
is  a  strategic 
associated  activities,  which 
opportunity. Észak-Alföld has a relatively stronger 
profile  in  green  transition,  as  do  Dél-Alföld,  Dél-
Dunántúl  and  Pest  in  digital  transition,  indicating 
In  addition,  green 
focuses 
agriculture and energy technology companies have 
already demonstrated promising results in several 
regions,  for  example  in  Észak-  and  Dél-Alföld,  as 
have  environmental  technology  (e.g.  waste  or 
water  management)  companies  in  Budapest,  Pest 
and Közép-Dunántúl. 

investment. 

for 

However,  one-sided 
specialisation  also 
entails  risks.  These  include  high  exposure  to 
sector-specific crises, especially as regards the car 
industry, and potentially increased pressure on the 
environment,  as  is  the  case  with  the  recently 
opened  battery  factories,  especially  in  Észak-
Alföld,  Pest  and  Nyugat-Dunántúl.  This  highlights 
the  importance  of  diversification  in  the  regions 
concerned. 

Disparities 
in  demographical  trends  also 
affect  the  growth  potential  of  regions.  With 
the  exception  of  Pest,  population  declined  is  all 
regions  between  2014  and  2023  -  reaching  a 
significant  contraction  of  8.2  per  1  000  residents 
in  Észak-Magyarország,  7.3  in  Dél-Dunántúl,  6.9 
Dél-Alföld and 5.6 in Észak-Alföld.  

Map A17.1:  Regional Competitiveness Index 2.0, 
2022 edition 

Source: DG REGIO, JRC based on Eurostat 

Institutional  quality  remains  well  below  the 
EU average (European Quality of Government 

in 

the 

challenges  affecting 

Index  2024  (253)),  in  particular  in  Észak-
Magyarország  and  Észak-Alföld.  This  is  also 
reflected 
the 
subnational  business  environment  (254),  especially 
as  concerns  utility  services  and  the  effective 
place. 
implementation 
Furthermore, 
the  decreasing  autonomy  of 
municipalities  significantly  reduces  their  ability  to 
create a competitive local business environment. 

regulations 

of 

in 

All  regions  except  Budapest  fall  below  the 
EU-27  average  in  terms  of  competitiveness. 
Hungary  lags  behind  European  peers  when  it 
comes  to  competitiveness  in  a  broad  sense, 
including  and  beyond  quality  of  government,  as 
measured  by  the  Regional  Competitiveness  Index 
2.0.  Nevertheless,  the  Western  regions  of  Közép-
Dunántúl  and  Nyugat-Dunántúl  outperform  other 
regions,  rooted  in  higher  levels  of  education  and 
labour market efficiency 

Social fairness 

Labour  market  conditions  are  generally 
better or comparable to the EU average in all 
Hungarian  regions.  In  2024,  the  unemployment 
rate varied from 2.6% in Budapest to 7.3% in Dél-
Dunántúl.  Regional  youth  unemployment  rates 
ranged from 7.9% in Közép-Dunántúl to 22.8% in 
Dél-Dunántúl  in  2024.  In  addition,  unemployment 
and youth unemployment rates reflect urban-rural 
divides. 

regions  and 

the  population 

The  risk  of  poverty  and  social  exclusion 
varies  across 
is  more 
pronounced  in  rural areas  (see  Annex  11).  In 
in  Észak-
2024,  29.9%  of 
Magyarország  were  at  risk  of  poverty  or  social 
exclusion, and the figure was also well above the 
national  average  (20.2%)  in  Észak-Alföld  (26.8%) 
and  Dél-Dunántúl  (23.3%).  In  these  regions,  the 
number  of  people  receiving  regular  child  benefits 
is  4-5  times  higher  than  in  Nyugat-Magyarország 
and Pest. 

(253) European Quality of Government Index 2024| University of 

Gothenburg 

(254) World Bank. 2024. Subnational Business Ready in the 

European Union 2024: HUNGARY. Washington, DC: World 
Bank. Licence: Creative Commons Attribution CC BY 3.0 IGO. 

116 

 
 
 
 
 
Access  to  healthcare  is  very  limited  in  rural 
areas,  where  only  12%  of  the  rural 
population live within 10 minutes' drive from 
the  nearest  hospital.  Disparities  in  access  to 
quality  basic  services  -  social,  educational, 
healthcare,  and  childcare  services  -  affect  the 
capacity  of  rural  areas  to  retain  their  population 
(255),  especially  in  the  case  of  young  people  and 
families,  affecting  especially  Észak-Magyarország 
and Észak-Alföld, and inner peripheries. 

The incidence of housing cost overburden has 
increased  since  2021.  The  proportion  of 
households  spending  more  than  40%  of  their 
income on rent (at 8.5% in 2024) has quadrupled 
since  2021  in  cities  and  tripled  in  towns  and 
suburbs  and  rural  areas.  The  quality  of  housing 
and  living  conditions  are  least  favourable  among 
the lowest income quintile, especially the Roma. In 
addition,  the  supply  of  affordable  housing  cannot 
keep  up  with  the  growing  concentration  of 
economic  activities,  resulting 
in  pressure  on 
regional  housing  markets  and  in  an  increase  in 
commuting. 

The  proportion  of  people  facing  energy 
poverty  increased  in  all  regions  in  2023  or 
2024.  Overall  in  Hungary,  the  proportion  of  the 
population  unable  to  keep  their  home  sufficiently 
warm  increased  from  4.7%  in  2022  to  7.2%  in 
2023  before  easing  to  6.1%  in  2024.  Észak-
Magyarország  (11.7%)  and  Észak-Alföld  (9.0%) 
recorded  the  highest  rates  and  the  sharpest 
deterioration in the past two years. 

Adoption  of  sustainable  transportation  is 
slow,  particularly  passenger  rail  transport. 
Outside Budapest  and Pest, less than 10% of the 
population  in  a  120-km  radius  can  be  reached 
within  1.5  hours  by  train.  This  highlights  the 
country’s  high  car  dependency  and  investment 
needs in public transportation. 

Sustainability 

Hungarian  regions  face  specific  challenges 
and  opportunities  concerning  sustainability. 
The  Regional  Green  Transition  Vulnerability  Index 

is  high  for  all  regions,  particularly  Észak-Alföld, 
Dél-Alföld  and  Dél-Dunántúl,  due  to  the  strong 
reliance  on 
transitioning  sectors,  such  as 
agriculture.  The  impact  of  climate  change  on 
regional GDP is especially significant in Dél-Alföld 
and in Baranya County. The occurrence of droughts 
has increased in Észak- and Dél-Alföld, aggravated 
by the lack of adequate water retention measures. 
The  area  of  Homokhátság  in  Dél-Alföld  is  a 
particularly  vulnerable  region,  struggling  with 
water  scarcity,  which  has  created  various 
economic and social problems, also attributable to 
the  lack  of  comprehensive  measures  (256).  Larger 
cities  experience  urban  heat 
island  effects. 
Hungary is prone to flooding, especially along the 
Danube and Tisza rivers, and flash floods occur on 
the  hilly  and  mountainous  area  –  including  in 
Észak-Magyarország.  Climate  change  is  coupled 
with  excess  mortality  in  the  four  least  developed 
regions. 

The health of natural ecosystems is at risk in 
several  regions.  This  is  because  of  habitat 
fragmentation  and  loss  of  biodiversity,  resulting 
from  urban  sprawl,  unsustainable  agricultural 
practices  –  although  IPM  practices  have  been 
applied  by  farmers  -  and  re-industrialisation. 
Natura  2000  sites  and  protected  areas,  such  as 
in  the  Észak-Alföld 
Hortobágy  National  Park 
region,  are  under  pressure,  whereas  wetland 
habitats  along  the  Dráva  River  are  threatened  by 
reduced water flows. 

Air  quality  in  Hungary  is  below  the  EU 
average.  Annual  average  concentrations  of  both 
particulate matters (PM 2.5 and 10) exceeded the 
EU  average  for  all  regions,  peaking  in  Budapest, 
Baranya, 
Szabolcs-
Borsod-Abaúj-Zemplén, 
Szatmár-Bereg and Heves counties, as a result of 
transportation  and  using  solid  fuels  for  industrial 
activity and for residential heating. 

energy 

renewable 

Several  regions  display  untapped  potential 
production. 
for 
Municipalities  in  Észak-Alföld,  Dél-Alföld  and  Dél-
Dunántúl have a high untapped potential for solar 
energy  production,  while  other  regions  have 
potential  for  onshore  wind  energy,  with  more 
favourable wind capacity factors in the regions in 
Nyugat-Dunántúl. 

(255) Field Consulting Services Zrt (2020): A helyi életminőség 

javulása terán elért eredmények értékelése. 

(256) Kovacs, Andras & Farkas, Jeno & Vasárus, Gábor & Lennert, 
József. (2024). A duna-tisza közi homokhátság területés 
vidékfejlesztési kihívásai. Földrajzi Közlemények. 148. 1-17. 

117