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Economic Overview

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

Contrasting with the trends observed in recent years, Hungary's GDP contracted sharply following the outbreak of the COVID-19 pandemic, as the backbone of growth - rising household income and exports - was severely impacted. Nevertheless, the economy was dynamic in 2021 despite headwinds from global supply chain disruptions, with an estimated growth of 7.6% (IMF). Underpinned by continuing fiscal stimulus measures and household consumption, economic growth is set to remain strong at 5.1% in 2022, before moderating to 3.8% in 2023 (IMF forecast).

Public finances have also been affected by the pandemic and the measures taken to contain its economic effects – including a one-time income tax refund to families with children, a subsidised loan programme for SMEs, an income tax cut for workers under age 25, the re-introduction of the 13th monthly pension and administrative wage increases – with an estimated budget deficit of 6.9% in 2021. As most measures fade out, the deficit is expected to decrease to 5.3% this year and 3.2% in 2023. Likewise, the debt-to-GDP ratio should resume its downward trend over the forecast period after reaching 76.6% in 2021. Public investment in 2022 will be partly financed by rising EU funds, which are also expected to provide a boost to investment. Rising commodity prices and wage pressures contribute to persistently high inflation: regulated prices for residential energy contributed to shield households from commodity price increases; however, companies are expected to pass their higher energy and wage costs on to consumers, fuelling non-energy inflation. Overall, the rate was estimated at 4.5% in 2021 by the IMF and it is forecast at 3.6% in 2022 and 3.3% in 2023.

Employment reached its pre-pandemic level in the summer of 2021 and job creation is set to continue as the economy grows. The rate was estimated at 4.1% in 2021 (from a pre-COVID level of 3.3%); as the IMF expects unemployment to stabilize around 3.8% over the forecast period. Meanwhile, wage growth is set to remain robust amid emerging signs of labour shortages, following the approval of a 20% minimum wage hike and sizeable salary increases in the public sector.

 
Main Indicators 201920202021 (e)2022 (e)2023 (e)
GDP (billions USD) 163.49155.01e180.96198.99216.44
GDP (Constant Prices, Annual % Change) 4.6-5.07.65.13.8
GDP per Capita (USD) 16,729e15,86618,52820,38022,174
General Government Balance (in % of GDP) -3.4-7.3e-6.9-5.3-3.2
General Government Gross Debt (in % of GDP) 65.580.476.675.673.1
Inflation Rate (%) 3.43.3e4.53.63.3
Unemployment Rate (% of the Labour Force) 3.34.14.13.83.8
Current Account (billions USD) -0.74-0.151.091.753.27
Current Account (in % of GDP) -0.5-0.10.60.91.5

Source: IMF – World Economic Outlook Database , October 2021

Note: (e) Estimated Data

Country Risk

See the country risk analysis provided by La Coface.

 

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Main Sectors of Industry

The agricultural sector, which used to be the dominant force in the country's economy for many years, now represents 3.4% of GDP and employs 4.7% of the working population (World Bank, latest data available). The country has arable land of 4,145k ha, around 47.4% of its territory. Cereals, fruits, maize, vegetables and wine are the main crops.

Industry accounts for 24.5% of the country's GDP and employs 32% of the working population. Hungarian industry is very open to foreign investment, with manufacturing almost consistently ranking top receiver of foreign direct investment. The automotive and electronics sectors are the two main industrial sectors. The manufacturing sector alone accounts for 17.5% of the country’s GDP. The electronics industry is one of the largest industrial sectors in Hungary, accounting for one-fifth of total manufacturing production.

The services sector contributes 56.6% of GDP and employs almost 63.2% of the labour force. Trade, tourism and finance account for the largest share of activity and employment within the tertiary sector. In recent years the added value produced by the ICT sector increased by more than one-fifth, to USD 20 billion, with the digital economy currently making up more than 20% of Hungary's overall gross value added.

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 4.7 32.1 63.2
Value Added (in % of GDP) 3.5 25.2 55.8
Value Added (Annual % Change) -6.8 -5.6 -4.8

Source: World Bank - Latest available data.

 
Monetary Indicators 20162017201820192020
Hungarian Forint (HUF) - Average Annual Exchange Rate For 1 USD 281.52274.43270.21290.70308.00

Source: World Bank - Latest available data.

 

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Foreign Trade

Hungary's economy is very open, with trade accounting for about 157.2% of GDP (World Bank, latest data available). Cars and the spare parts industry account for the highest share of exports and imports. Medicine and data processing machines are also among Hungary's main exports whereas telephones, electronic circuits and petroleum products are among the main imports.

The European Union is by far the largest economic partner of Hungary, with Germany being the main trading partner both for imports and exports (27.9% of exports, 24.6% of imports). Slovakia is the second top destination for Hungarian goods (5.4%), followed by Italy (5.3%), Romania (5.2%) and Austria (4.3%). China is the second supplier of goods to Hungary (7.9%), followed by Poland and Austria (5.8% each), and the Czech Republic (5.1% - data by Comtrade).

Hungary's trade balance, which was traditionally in deficit, started posting surpluses in the last decade owing in particular to the good health of the German economy. In 2020, the country’s trade balance was estimated at 1.7% of GDP by the World Bank. In the same year, exports of goods stood at USD 120.3 billion, down by 2.8% y-o-y; with imports following a similar trend (-4.3% - USD 115.3 billion). Imports of services lost almost one-fifth of their value compared to pre-pandemic levels, totalling USD 17,6 billion; whereas exports - at USD 22.2 billion – contracted by 26%. According to provisional data from the Hungarian Statistical Office, the value of exports amounted to EUR 98.1 billion and that of imports to EUR 95.9 billion in 2021. Overall, the surplus on the balance of external trade in goods decreased to EUR 2.3 billion.

 
Foreign Trade Values 20162017201820192020
Imports of Goods (million USD) 93,690107,519120,741120,590115,353
Exports of Goods (million USD) 101,980113,806124,705123,796120,311
Imports of Services (million USD) 16,30718,30320,71621,51017,614
Exports of Services (million USD) 23,07926,62829,81930,02822,238

Source: World Trade Organisation (WTO) ; Latest available data

Foreign Trade Indicators 20162017201820192020
Foreign Trade (in % of GDP) 164.3165.2163.4161.8157.2
Trade Balance (million USD) 4,3911,896-1,926-3,379-930
Trade Balance (Including Service) (million USD) 11,1819,7667,1404,6443,578
Imports of Goods and Services (Annual % Change) 3.48.57.08.2-4.4
Exports of Goods and Services (Annual % Change) 3.86.55.05.8-6.8
Imports of Goods and Services (in % of GDP) 77.879.279.579.577.5
Exports of Goods and Services (in % of GDP) 86.586.083.982.379.7

Source: World Bank ; Latest available data

Foreign Trade Forecasts 20212022 (e)2023 (e)2024 (e)2025 (e)
Volume of exports of goods and services (Annual % change) 10.56.85.15.35.3
Volume of imports of goods and services (Annual % change) 8.26.53.94.64.6

Source: IMF, World Economic Outlook ; Latest available data

Note: (e) Estimated Data

 
International Economic Cooperation
Hungary is a member of the following international economic organisations: IMF, European Union, OECD, G-9, North Atlantic Treaty Organization (NATO), ICC, Central European Initiative (CEI), WTO, among others. For the full list of economic and other international organisations in which participates Hungary click here. International organisation membership of Hungary is also outlined here.
Free Trade Agreements
The up-to-date list of Free Trade Agreements signed by Hungary can be consulted here.
 

Main Partner Countries

Main Customers
(% of Exports)
2020
Germany 27.9%
Slovakia 5.4%
Italy 5.3%
Romania 5.2%
Austria 4.3%
See More Countries 51.9%
Main Suppliers
(% of Imports)
2020
Germany 24.6%
China 7.9%
Poland 5.8%
Austria 5.8%
Czech Republic 5.1%
See More Countries 50.8%

Source: Comtrade, Latest Available Data

 

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Political Outline

Current Political Leaders
President: Janos Ader (since 10 May 2012; re-elected for a second five-year term in 2017) - Fidesz
Prime Minister: Viktor Orban (since 29 May 2010) - Fidesz
Next Election Dates
Presidential: 2022
National Assembly: April 2022
Current Political Context
The right-wing Fidesz party and its leader Viktor Orban have been dominating the political scene in Hungary for the last 12 years. The stance of the party has always been anti-European, and in 2021 Fidesz decided to leave the European People's Party group. Meanwhile, Conservative politician Péter Márki-Zay won the race to become the Hungarian opposition’s joint candidate for prime minister, defeating Klára Dobrev from the left-liberal Democratic Coalition. Márki-Zay will lead an anti-government alliance spanning opposition parties on the right, centre, and left.
Main Political Parties
Hungary is a multi-party democracy largely divided between the conservative right and opposition, Unity Coalition. Primary parties:

- Fidesz-Hungarian Civic Alliance (Fidesz): centre-right, nationalist, socially conservative, most popular party across all legislative districts
- Christian Democratic People’s Party (KDNP): right-wing, propagates national conservatism; acts as a sister organisation of Fidesz
- Jobbik: initially far-right and anti-EU, the party has switched to more mainstream right political line
- Politics Can Be Different (LMP): centre, green-liberal, champions protection of the environment, supports sustainable development and aims to work against corruption

Unity Coalition is composed by:
- Hungarian Socialist Party (MSZP): centre-left, largest opposition party, favours a free market
- Democratic Coalition (DK): centre-left (too small to form parliamentary group)
- Together-Dialogue for Hungary (E-PM): centre-left, Hungarian green liberal political party (too small to form parliamentary group)
- Hungarian Liberal Party (too small to form parliamentary group).

Other minor parties are:
- National Self-Government of Germans in Hungary (MNOÖ): German-Hungarian interests
- Momentum Movement: centrist, liberal

Executive Power
The President is the Chief of State and the Prime Minister is the Head of Government. The President is elected by the National Assembly for a five-year term (eligible for a second term). The Prime Minister is elected by the National Assembly on the recommendation of the President.
The Cabinet is a Council of Ministers elected by the National Assembly on the recommendation of the President; other ministers are proposed by the Prime Minister and appointed and relieved of their duties via the presidential elections.
Legislative Power
The Hungarian Parliament is unicameral. The National Assembly is composed of 199 members elected every four years and can either initiate new legislation or approve those introduced by the Government.
 

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COVID-19 Country Response

COVID-19 epidemic evolution

To find out about the latest status of the COVID-19 pandemic evolution and the most up-to-date statistics on the COVID-19 disease in Hungary, please visit the official portal Koronavirus.gov.hu (in Hungarian). For regular updates on the situation, consult the official website About Hungary.
For the international outlook you can consult the latest
situation reports published by the World Health Organisation as well as the global daily statistics on the coronavirus pandemic evolution including data on confirmed cases and deaths by country.

Sanitary measures

To find out about the latest public health situation in Hungary and the current sanitary measures in vigour, please consult the dedicated page on the government platform Koronavirus.gov.hu (in Hungarian), as well as the website About Hungary. An updated overview in English is available on the website of the US Embassy in Hungary.

Travel restrictions

The COVID-19 situation, including the spread of new variants, evolves rapidly and differs from country to country. All travelers need to pay close attention to the conditions at their destination before traveling. Regularly updated information for all countries with regards to Covid-19 related travel restrictions in place including entry regulations, flight bans, test requirements and quarantine is available on TravelDoc Infopage.
It is also highly recommended to consult COVID-19 Travel Regulations Map provided and updated on the daily basis by IATA.
The US government website of Centers of Disease Control and Prevention provides COVID-19 Travel Recommendations by Destination.
The UK Foreign travel advice also provides travelling abroad advice for all countries, including the latest information on coronavirus, safety and security, entry requirements and travel warnings.

Import & export restrictions

For the up-to-date information on all the measures applicable to movement of goods during the period of sanitary emergency due to the COVID-19 outbreak (including eventual restrictions on imports and exports, if applicable), please consult the website of Ministry of Foreign Affairs and Trade (in Hungarian).
The “Guidelines for border management measures to protect health and ensure the availability of goods and essential services” issued by the European Commission can be consulted
here.
For a general overview of trade restrictions due to COVID-19 pandemic, please consult the section dedicated to Hungary on the
International Trade Centre's COVID-19 Temporary Trade Measures webpage.

Economic recovery plan

To know about the economic measures taken by the Hungarian government to address the impact of the COVID-19 pandemic on the national economy, please visit the dedicated page on the official governmental portal Koronavirus.gov.hu (in Hungarian). Information on the tax administration measures in the course of COVID-19 pandemic are available on the website of the National Tax and Customs Administration.
The information on the EU’s economic response to COVID-19 and the actions to minimise the fallout on the EU member states’ economies of the COVID-19 outbreak is available on the websites of the
European Council.
For the general overview of the key economic policy responses to the COVID-19 outbreak (fiscal, monetary and macroeconomic) taken by the Hungarian government to limit the socio-economic impact of the COVID-19 pandemic, please consult the section dedicated to Hungary in the
IMF’s Policy Tracker platform.

Support plan for businesses

For the information on the local business support scheme and taxation measures established by the Hungarian government to help businesses to deal with the economic impacts of the COVID-19 epidemic on their activity, please consult the website of the National Tax and Customs Administration. Further information can be sourced on the website of the European Commission.
For a general overview of international SME support policy responses to the COVID-19 outbreak refer to the OECD's
SME Covid-19 Policy Responses document.
You can also consult the World Bank's Map of SME-Support Measures in Response to COVID-19.

Support plan for exporters

For the up-to-date information on possible support plans for exporters in Hungary, please consult the website of the state-owned Hungarian Export-Import Bank (EXIM). Furthermore, the government of Hungary launched a new export funding and investment promotion program.
The European Commission adopted a Temporary Framework for State aid measures to support the economy in the COVID-19 outbreak, which enables short-term export credit insurance to be provided by the State where needed.

 

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