Author: Dávid Malatinszky
The latest country report from the European Commission and the European Council’s 2025 country-specific recommendations raise serious concerns, warning that Hungary is struggling with deep economic and social challenges.
Economic Freefall
Public debt rose to 73.5% of GDP in 2024, while Hungary’s competitiveness sharply declined. Although the budget deficit fell to 4.9% of GDP, the economy remained unstable. After a 0.8% contraction in 2023, GDP grew by only 0.5% in 2024. The weak performance stemmed from low external demand, declining business confidence, and a sharp drop in investment.
The Commission expects 0.8% growth in 2025 — far below Minister of National Economy Márton Nagy’s projection of 2.5%. This sober forecast contrasts with Prime Minister Viktor Orbán’s January prediction of an “economic takeoff.” The Commission warns that recovery is sluggish and unpredictable, deterring investors. Investment fell 7.7% in 2023 and 11.1% in 2024, among the steepest declines in the EU, while Hungary also recorded the highest construction cost inflation in the bloc.
Inflation has eased from 17.0% in 2023 to 3.7% in 2024, but core inflation remains high at 5.9%. Rising food prices and domestic demand continue to drive inflationary pressure, leaving Hungary’s economy fragile — especially in fiscal stability and competitiveness. Without deeper reforms, the budget deficit could stay near 5% in coming years.
Rule of Law Concerns
The EU criticizes the Hungarian government’s ongoing state of emergency, maintained for five consecutive years, as it limits democratic oversight and public consultation. The Commission highlights ineffective anti-corruption measures and restricted competition in public procurement, where one-third of tenders attract only a single bidder.
Billions of euros in EU funds remain frozen due to rule-of-law issues. Hungary currently has no access to the Recovery and Resilience Facility (RRF), missing out on €6.5 billion in grants and €3.9 billion in loans. Out of €21.7 billion in cohesion funds, €6.3 billion were suspended, and €1 billion was permanently lost last year. According to Népszava, fines for Hungary’s breaches of EU migration rules are being deducted directly from cohesion funds.
Discrimination and Unpredictability
The business climate is described as hostile to foreign investors, especially in retail. The government targets large, often foreign-owned chains with special taxes, price caps, and mandatory discounts. HVG reported that Lidl Hungary remained profitable despite paying 44 billion HUF in special retail tax and 562 million HUF in corporate tax, while Tesco reported a 22 billion HUF loss after a 25 billion HUF special tax payment. Frequent regulatory changes further strain businesses.
“Russians in the Pantry”
Hungary’s heavy reliance on Russian energy poses major security risks: 70% of gas and over 80% of oil imports came from Russia in 2024. While Western countries diversify, Hungary remains dependent. The Commission aims to end all Russian oil and gas imports by 2027, yet Foreign Minister Péter Szijjártó traveled to St. Petersburg to negotiate continued cooperation.
The Paks nuclear expansion is also troubled. Reports suggest the government is reconsidering the project, especially after new U.S. sanctions on Russian companies in late 2024 affected Gazprombank, a key financial player. Payments to Russian contractor Rosatom and its Hungarian subcontractors were frozen.
Rising Inequality
Although living standards improved over the past decade, vulnerable groups — including Roma, people with disabilities, and low-skilled workers — saw little benefit. Poverty is rising again, particularly child poverty, affecting one in five children and 28% of large families. Wealth inequality is among the highest in the EU: in 2023, the richest 1% owned 33% of total wealth (Átlátszó).
The tax system favors high earners, offering greater rebates and benefits to wealthier households. Meanwhile, housing has become unaffordable: between 2010 and 2024, home prices rose 230%, and rents 108%. Social housing is scarce, and ongoing cuts to municipal funding — especially in Budapest — worsen the crisis.
Education and Healthcare
The Commission flags serious problems in education: high early school-leaving rates, segregation, and teacher shortages, particularly in disadvantaged rural areas. Only 32.3% of 25–34-year-olds held a tertiary degree in 2024 — one of the lowest rates in the EU.
The healthcare system is severely underfunded, spending just 4.1% of GDP in 2023 — among the EU’s lowest. Many citizens must pay out of pocket, mainly for medicine.
Environment
Water quality is alarmingly poor: only 11.3% of surface waters are in good condition (EU average: 37.3%). Wastewater treatment capacity is falling, and pollution risk remains high.
Climate change intensifies Hungary’s problems: drought hit 27% of the country in 2022, while floods, erosion, and frost further damage agriculture. Air pollution causes around 10,000 deaths annually, with industrial emissions among the EU’s worst.
The latest country report from the European Commission and the European Council’s 2025 country-specific recommendations raise serious concerns, warning that Hungary is struggling with deep economic and social challenges.
Economic Freefall
Public debt rose to 73.5% of GDP in 2024, while Hungary’s competitiveness sharply declined. Although the budget deficit fell to 4.9% of GDP, the economy remained unstable. After a 0.8% contraction in 2023, GDP grew by only 0.5% in 2024. The weak performance stemmed from low external demand, declining business confidence, and a sharp drop in investment.
The Commission expects 0.8% growth in 2025 — far below Minister of National Economy Márton Nagy’s projection of 2.5%. This sober forecast contrasts with Prime Minister Viktor Orbán’s January prediction of an “economic takeoff.” The Commission warns that recovery is sluggish and unpredictable, deterring investors. Investment fell 7.7% in 2023 and 11.1% in 2024, among the steepest declines in the EU, while Hungary also recorded the highest construction cost inflation in the bloc.
Inflation has eased from 17.0% in 2023 to 3.7% in 2024, but core inflation remains high at 5.9%. Rising food prices and domestic demand continue to drive inflationary pressure, leaving Hungary’s economy fragile — especially in fiscal stability and competitiveness. Without deeper reforms, the budget deficit could stay near 5% in coming years.
Rule of Law Concerns
The EU criticizes the Hungarian government’s ongoing state of emergency, maintained for five consecutive years, as it limits democratic oversight and public consultation. The Commission highlights ineffective anti-corruption measures and restricted competition in public procurement, where one-third of tenders attract only a single bidder.
Billions of euros in EU funds remain frozen due to rule-of-law issues. Hungary currently has no access to the Recovery and Resilience Facility (RRF), missing out on €6.5 billion in grants and €3.9 billion in loans. Out of €21.7 billion in cohesion funds, €6.3 billion were suspended, and €1 billion was permanently lost last year. According to Népszava, fines for Hungary’s breaches of EU migration rules are being deducted directly from cohesion funds.
Discrimination and Unpredictability
The business climate is described as hostile to foreign investors, especially in retail. The government targets large, often foreign-owned chains with special taxes, price caps, and mandatory discounts. HVG reported that Lidl Hungary remained profitable despite paying 44 billion HUF in special retail tax and 562 million HUF in corporate tax, while Tesco reported a 22 billion HUF loss after a 25 billion HUF special tax payment. Frequent regulatory changes further strain businesses.
“Russians in the Pantry”
Hungary’s heavy reliance on Russian energy poses major security risks: 70% of gas and over 80% of oil imports came from Russia in 2024. While Western countries diversify, Hungary remains dependent. The Commission aims to end all Russian oil and gas imports by 2027, yet Foreign Minister Péter Szijjártó traveled to St. Petersburg to negotiate continued cooperation.
The Paks nuclear expansion is also troubled. Reports suggest the government is reconsidering the project, especially after new U.S. sanctions on Russian companies in late 2024 affected Gazprombank, a key financial player. Payments to Russian contractor Rosatom and its Hungarian subcontractors were frozen.
Rising Inequality
Although living standards improved over the past decade, vulnerable groups — including Roma, people with disabilities, and low-skilled workers — saw little benefit. Poverty is rising again, particularly child poverty, affecting one in five children and 28% of large families. Wealth inequality is among the highest in the EU: in 2023, the richest 1% owned 33% of total wealth (Átlátszó).
The tax system favors high earners, offering greater rebates and benefits to wealthier households. Meanwhile, housing has become unaffordable: between 2010 and 2024, home prices rose 230%, and rents 108%. Social housing is scarce, and ongoing cuts to municipal funding — especially in Budapest — worsen the crisis.
Education and Healthcare
The Commission flags serious problems in education: high early school-leaving rates, segregation, and teacher shortages, particularly in disadvantaged rural areas. Only 32.3% of 25–34-year-olds held a tertiary degree in 2024 — one of the lowest rates in the EU.
The healthcare system is severely underfunded, spending just 4.1% of GDP in 2023 — among the EU’s lowest. Many citizens must pay out of pocket, mainly for medicine.
Environment
Water quality is alarmingly poor: only 11.3% of surface waters are in good condition (EU average: 37.3%). Wastewater treatment capacity is falling, and pollution risk remains high.
Climate change intensifies Hungary’s problems: drought hit 27% of the country in 2022, while floods, erosion, and frost further damage agriculture. Air pollution causes around 10,000 deaths annually, with industrial emissions among the EU’s worst.
