Share

Hungary Economic Snapshot

Economic Forecast Summary (December 2021)

GDP is projected to expand by 6.9% in 2021, before growth slows to 5% in 2022 and 3% in 2023. The recovery will be driven mainly by domestic demand. Private consumption will continue to benefit from higher real incomes. Investment will rebound on the back of increasing industrial capacity constraints and inflows of EU funds. Headline inflation will remain high, reflecting supply-side constraints and a tight labour market. A significant risk is that stronger wage growth and prolonged supply shortages could intensify inflation pressures.

Economic Survey of Hungary (July 2021)

The COVID-19 pandemic interrupted the strong economic growth performance in 2016-19, which entailed large increases in employment and real incomes, and the lowest unemployment rate in thirty years. The swift vaccination rollout allows a faster recovery from the pandemic from mid-2021 onwards. However, the strength of the recovery is uncertain, reflecting the potential scarring of the economy arising from the prolonged crisis. Looking further ahead, population ageing will lead to a smaller and older workforce, reinforcing the need for improving the productivity performance of the economy to restore the impressive employment and income gains achieved before the pandemic. In the near term, underutilised labour resources, such as low skilled workers, need to be mobilised through higher labour mobility and skills upgrading. Thereafter, maintaining productivity growth requires improved vocational and tertiary education, more competitive markets, and faster adoption of new technologies, particularly to accelerate the digital transformation of the economy. These policies should be implemented alongside measures to promote green growth and prepare public finances for the long-term fiscal challenges associated with population ageing.

Executive Summary

Presentation

Reform Priorities (May 2021)

Going for Growth 2021 - Hungary

To ensure a speedy recovery that benefits all, the improvement of the business environment and skills should be on top of the policy agenda. State-intervention and regulatory barriers hamper market entry and dampen productivity. Low graduation rates from tertiary education, weak vocational training outcomes and high drop-out rates lower employment prospects of young adults, who are at risk of long-term scarring given the impact of the pandemics on the labour market.

©Shutterstock/Anton Petrus

Read full country note

2021 Structural Reform Priorities

  • Competition and regulation: Reduce barriers to entry and competition and streamline insolvency procedures
  • Education and skills: Improve students’ educational outcomes and employability
  • Tax system: Adjust the tax-benefit system to strengthen work incentives for low-income earners
  • Labour market: Improve participation of low-skilled workers and women
  • Social protection and labour market: Tackle old-age poverty and keep older workers in the labour market

 

>> Going for Growth homepage