Foundations for Growth and Competitiveness 2026

Hungary

Despite a high but declining investment rate, a significant labour productivity gap keeps Hungary's GDP per capita well below the OECD average. Structural reforms have significantly bolstered the employment rate in the last decade. However, the shrinking working-age population will increasingly undermine long-term growth in the future, which calls for adequate policies to boost productivity.

Fully implementing recent public integrity and anti-corruption reforms, softening services trade restrictions, and lowering entry barriers in the transport sector would improve the business environment and support productivity growth. Developing interconnections between road and rail and systematically using cost-benefit analysis for public investment are priorities for infrastructure improvement. Improving health conditions and accelerating the development of low-carbon energy sources to reduce reliance on energy imports would also contribute to more sustainable growth.

Economic performance

Gaps to the average of the upper half of the OECD countries

Source: Panel A: OECD, Economic Outlook database; Panel B: OECD, Labour Force Statistics database; Panel C: OECD, Economic Outlook and Productivity databases; Panel D: OECD, Economic Outlook and Annual National accounts, GFCF by assets databases.

Selected policy gaps

Source: OECD calculations based on the Foundations for Growth and Competitiveness database.

Governance: Fully implement the new anti-corruption framework and improve transparency throughout the policy cycle

Corruption in Hungary is perceived to be higher than in most other OECD countries. Recent reforms have the potential to improve the situation, but the verification powers of the newly created Integrity Authority remain limited and the way it should interact with the new strategy against fraud and corruption for EU funds is unclear. While draft legislation is required to be made accessible to the public with the possibility to provide comments, consultation is not required in the early phases of the legislative process and there is no oversight body in charge of quality improvements for regulatory impact assessments (RIAs) or ex-post evaluations.

Recommendations

✓ Fully implement the new anti-corruption and public integrity framework, and enhance coherence between the two anti-corruption strategies.

✓ Enhance the powers of the newly created Integrity Authority to remove any constraints which may undermine its capacity to fulfil its purpose and conduct independent investigations.

✓ Improve transparency throughout the policy cycle by consulting stakeholders as early as possible and at different stages of the policy cycle, and by making relevant supporting legislative documents and RIAs available online to the public.

Health: Promote healthier lifestyles, ensure sufficient staffing, and increase the efficiency of health spending

Hungary's life expectancy lags behind the OECD average, due to high mortality from preventable causes, as well as insufficient and inefficient spending on health. The number of nurses and personal care workers is low compared to the OECD average, and staffing varies across regions. Preventive care spending is well below the OECD average, while tobacco and alcohol consumption are high. Poor health conditions may hinder productivity and reinforce demographic challenges posed by an ageing population.

Recommendations

✓ Promote healthier lifestyles with a comprehensive package of reforms, including by raising resources allocated to preventive care and building up on recent reforms that increased taxation on harmful products such as alcohol, tobacco and unhealthy food and beverages.

✓ Facilitate the recruitment and retention of health workers in all regions by ensuring that wages are sufficiently attractive, also compared with neighbouring countries.

✓ Increase the efficiency of health spending by reinforcing the role of primary care, fully exploiting the potential of generic medicines and streamlining the hospital network.

Physical infrastructure: Develop road and rail interconnections, and soften regulations that limit competition in the transport sector

Despite a dense rail network in Hungary, less than half is electrified and train usage only represents a limited share of passenger transport. Increased train usage would limit accute congestion issues around the largest cities. License requirements and the existence of regional monopolies for long-distance passenger transport also hinders the entry of new firms in the road transport sector. Moreover, formal cost-benefit analysis is insufficiently used for public investments in infrastructure projects.

Recommendations

✓ Develop road and rail interconnections, including “Park and Ride” facilities, to ease the use of the public transportation network around Budapest and other main cities where population is growing.

✓ Facilitate business entry in the road transport sector by easing barriers to entry and license requirements.

✓ Systematically rely on cost-benefit analysis for public investments in infrastructure projects.

Trade: Remove unnecessary services trade restrictions

The regulatory environment for services trade has tightened over the past years, notably through restrictions on the entry of non-EU workers, including quota and labour market testing for work permits. Specific hurdles exist in the construction sector, such as residency requirements for non-EU construction engineers and permits for real estate acquisition by foreigners. In the distribution and legal services sectors, significant requirements for firms entering the market may undermine the creation of new businesses and employment.

Recommendations

✓ Ensure that restrictions on the entry of non-EU workers account for labour market tensions, especially as the working-age population is expected to decline significantly due to ageing.

✓ Soften requirements for firms providing distribution services in Hungary without a physical presence in the country.

✓ Reconsider the residency requirement for non-EU construction engineers.

Energy: Ensure sufficient financing for electricity grid investments and facilitate the deployment of renewable energy sources

Despite the rapid increase in the production of solar energy in recent years, the overall share of renewables in the energy mix is low compared to the OECD average. The geothermal potential is largely untapped while wind capacity expansion has come to a standstill in the last decade. Hungary remains highly dependent on energy imports, which creates a risk for energy security and exposes the economy to fluctuations in global energy prices. Massive investments in the electricity grid will be needed to accommodate additional renewable energy sources and deliver gains in energy security and access to affordable, stable energy for businesses and households.

Recommendations

✓ Allow the electricity grid operator to raise fees to cover operating costs and investment needs in the electricity grid if EU and government financing proves insufficient.

✓ Ensure that the recent easing of regulations to install windmills translates into accelerated installation. Consider further adjustments if needed.

Recent progress on structural reforms

The significant reduction in employer social contributions between 2017 and 2022, coupled with a reduction in the duration of unemployment benefits from 9 to 3 months since 2011, have contributed to an increase in the employment rate by more than 10 percentage points over the last decade. Hungary’s employment rate, at 75% in 2024, is now well above the OECD average of 70%.