Hungary is located in Central Europe and had a population of 9,721,6852 on January 1, 2025.  Hungary’s GDP per capita, adjusted for purchasing power parity (PPP), was approximately 76–77% of the EU-27 average in 2023–2024. Hungary is a member of the OECD (1996), NATO (1999), the European Union (2004), and the Schengen Zone (2007) and boasts a strategic location in Europe, easy access to EU markets, a highly skilled and educated workforce, and a sound infrastructure which have led companies such as GE, Arconic, Blackrock, UPS, Coca-Cola, Emerson, Microsoft, IBM and many others to locate manufacturing and services facilities in the country. There are approximately 450 wholly owned U.S. companies in the country, and U.S. affiliates employ approximately 110,000 Hungarians. This makes the United States the second largest investor in Hungary after Germany, in terms of employment numbers and third largest in terms of capital invested.

FDI in Hungary has helped modernize industries, create jobs, boost exports, and spur economic growth. The cumulative U.S. FDI in Hungary since 1989 amounts to approximately USD 9 billion (source: Ministry of Foreign Affairs and Trade (MFAT)) and is centered around key sectors such as automotive, IT, electronics, logistics, food processing and shared service center operations. To stimulate additional foreign investment, in 2017 the government lowered the corporate tax from 19% to 9%, the lowest in the European Union. 

Despite an EU requirement, Hungary is still not a member of the Eurozone and has not set a target date. 

Hungary nationalized private pension funds in 2011 and 2014, which pushed financial service providers out of the system but also helped Hungary reduce its public debt and reduce its budget deficit to below 3% of GDP, as subsequent pension contributions were channeled into the state-managed pension fund.  Increased EU funding, greater EU demand for Hungarian exports, and a resurgence in domestic household consumption have all contributed to strong real GDP growth until 2019. To boost household consumption even more ahead of the 2018 election, the government implemented a six-year phased increase in minimum wages and public sector salaries, reduced taxes on foodstuffs and services, lowered the personal income tax rate from 16% to 15%, and implemented a uniform 9% business tax for small and medium-sized enterprises and large corporations.  

Hungary has implemented a series of substantial, government-driven minimum wage hikes annually over the last five years. Between 2020 and 2025, the Hungarian minimum wage rose 81%, one of the fastest paces in the EU. The average gross monthly salary was around EUR 1,805 (early 2025). As a result of public investments, as well as an increase in domestic income, Hungary’s economy grew by 7.2% and its budget deficit amounted to 7.1% of GDP in 2021, followed by a 0.8% downturn in 2023 and a modest 0.6% growth in 2024. The EU forecasts 0.8% growth and a budget deficit at 4.6% of GDP in 2025, and public debt at 74.5%. Consensus Economics, however, expect 2025 GDP to increase by 0.5%  based on domestic demand and government spending, while net exports and investments would contribute negatively to growth.  Hungary’s state debt remains high in comparison to EU Central European neighbors. Pervasive corruption, labor shortages caused by demographic reductions and migration, severe poverty in rural regions, vulnerability to changes in export demand, and a high reliance on Russian energy imports are all systemic economic issues.  The World Factbook (CIA)

Economy

In 2024 Hungary’s economy increased by 0.6%, supported by household consumption and slowly recovering net exports, while decline in investments hampered growth. Industrial production, including manufacturing, as well as construction and agriculture declined, while service sector increased. The 2024 final budget deficit amounted to 4.9% of GDP, well above the initial 2.9% target and thereby increasing the financing needs of the central budget from the original HUF 2.5 trillion (USD 7.2 billion) to HUF 4 trillion (USD 11.4 billion). Gross public debt amounted to HUF 59.9 billion (USD 170.9 billion), equivalent to 73.5% of GDP.   Exports of goods and services amounted to 88% of the country’s GDP in 2024.

Annual average inflation was 3.7% in 2024, and it is projected to be 4.7% in 2025, well above the government’s initial 3.2% target. According to the National Bank of Hungary the rate of core inflation, which excludes, and food prices was 4.6%.  at the end of 2024 and projected between 5-5.5% in 2025. Fluctuations in the exchange rate of the Hungarian Forint to other currencies make planning difficult, in particular its weakening to the Euro from 385 in February 2024 to over 410 by December. 

The Central Bank has embarked on a cautious monetary stance to keep inflation expectations in check and gradually lowered the base rate from 10% in January 2024 to 6.5% by September and has maintained this level since then. It noted that by August 2025 inflation moderated to 4.3%, close to its tolerance band. It also noted that more rapid fiscal consolidation would be required. In 2024, Hungary posted a current account surplus equal to 2.2% of GDP. In absolute terms, the current account balance in 2024 was about USD 5.07 billion (surplus) according to World Bank. Over 2025, the forint has modestly strengthened against the euro, with an increase of about 4.55% year-to-date.  Against the U.S. dollar, the forint has also appreciated by about 14%.

The unemployment rate was 4.4% in December 2024 in Hungary. Gross wages increased by 13.2% and net real wages by 9.2% in 2024, a significant improvement compared to the 2.9% decline in 2023 attributed to a moderating inflation from 17.6% in 2023 to 3.7% in 2024 as well as the annual rise in minimum wage since 2017. In 2024 the minimum wage increased by 15% to a monthly HUF 266 thousand (USD 798). Hungary’s labor market in 2025 faces widespread, significant labor shortages in skilled trades, technical roles, and specific service sectors like healthcare, IT, and construction, as overall unemployment rate is low, 4.5% and employment rate is 75.4%, both figures practically unchanged compared to 2024. The private sector was officially recorded as being short of 60,000 workers.  The most significant issues seem to be in the public sector since the number of unfulfilled jobs in healthcare has remained continuously high, the unfulfilled jobs in education have reached record levels and a new record labor shortage has reached the administrative-protection sector. The government lowered employers’ pension and health care contributions to offset the impact of minimum wage hikes. The government has also set price caps for selected food items in an effort to keep food inflation under control, in addition to setting households’ energy prices below the market price.   

The war in Ukraine is an impediment to economic growth. Although direct trade with Russia and Ukraine is small (approximately 3% of total exports), the war has affected global and regional supply chains, exacerbating supply-side bottlenecks in the automotive industry. Hungary is heavily reliant on Russian energy imports, which accounted for around 80-85% of its gas, 80% of its oil and petroleum, and 100% of its nuclear fuel in 2025. Consumer and corporate confidence began to drop at the start of the conflict. Since February 2022, Hungary has registered approx. 4.2 million Ukrainian refugees had crossed the Hungary-Ukraine border, notably, 80% of these refugees are women and children.  Although civil society organizations note that most of these refugees transited through Hungary to other destinations, those who remain could influence the labor market, especially in sectors where there are labor shortages, such as agriculture, manufacturing, and health.

The U.S. Department of Treasury terminated the Double Taxation Treaty with Hungary, which took effect on January 8, 2023, except for taxes withheld at the source and other taxes, for which it will have effect on or after January 1, 2024. According to experts, there will be negligible effects on the tax impact felt by U.S. and Hungarian companies because both are allowed to deduct taxes paid in foreign markets. The impact could be limited to a few very specific cases involving investment dividends and intra-company employee exchanges (due to a 13% U.S. tax rate). There may be some effect on U.S.-bound investments, but these would only be felt if the Hungarian company repatriated its profits and did not reinvest the money in the U.S. investment. 

Expansionary fiscal policy has facilitated growth

Hungary’s fiscal policy in 2024 is centered on narrowing its budget deficit while maintaining certain government spending commitments under challenging economic conditions. According to the European Commission, the government sector recorded a deficit of 4.9% of GDP in 2024, down from a 7.5% peak in 2020 and 6.7% in 2023.   Revenues rose moderately, especially from consumption-related taxes, while expenditure remains elevated due to public wage increases, utility & energy subsidies, and interest payments. The debt-to-GDP ratio is projected to climb slightly, from 73.5% in 2024 to over 75% in 2025. 

Based on a 3.4% growth, in 2025, the government aimed to slightly reduce the deficit to 3.7% of GDP, then revised this to 4.3% in the fall, while analysts forecast around 4.6%.  as the economy fell close to stagnation and while implementing additional tax cuts (e.g. family-friendly tax measures) and accommodating certain increased expenditures including cheap housing and SME loans ahead of the 2026 elections. The EU has set out a “net expenditure path” for Hungary under its fiscal-governance rules: Hungary has agreed that nominal growth of net expenditure should not exceed 4.3% in 2025 and 4% in 2026 to bring the excessive deficit under control. 

Hungary also plans to activate the “national escape clause” due to increased defense spending, allowing for some flexibility above standard EU thresholds, but within limits tied to GDP. 

Overall, the policy mix is aiming for gradual deficit reduction, stabilizing debt, while trying to protect growth and social support (e.g. via tax cuts, utility or energy subsidies) in the face of a potentially rising inflation in 2026 and external risks.

The main engine of growth will be domestic demand.

Due, in part, to the Russia-Ukraine war, Hungary’s previously strong post-pandemic recovery has stagnated in the first half of 2025. In the short term, the conflict will continue to drive up fuel and food costs and put downward pressure on private consumption and investment. Nonetheless, due to the tight labor market, private consumption will benefit from additional gains in real incomes and consumption is expected to remain the engine of growth while decline in investments continues and net exports still fail to contribute to growth. Food and energy prices have significantly increased, as well as wage growth in private and some public sectors (including law enforcement and the military) have been subject to 7-9% annual increase since 2022. Inflation, double-digits in 2022 and 2023, slowed in 2024, owing to stricter fiscal and monetary policies that would restrict domestic demand growth. Even faster wage growth, despite high food and energy prices, could increase demand pressures and feed rising inflation expectations. 

The growth of private and public investment will be aided by significant residential building and refurbishing subsidies and domestic and foreign direct investment. The government continues to seek to unlock EU funds frozen due to rule of law concerns. The European Commission, in December 2023, assessed those judicial reforms enacted in 2023 had met relevant criteria, allowing Hungary to access about EUR 10 billion of cohesion funds previously withheld due to concerns about judicial independence. Approximately EUR 21 billion in EU funds remain blocked due to corruption concerns and other “horizontal enabling conditions” involving the treatment of asylum-seekers, community, and academic freedom. Of this, EUR 1 billion is permanently lost, and the rest may be forfeited if further reforms aren’t enacted soon.  Restrictions on Russian energy imports create another significant risk, though Hungary sought and received an exemption to EU sanctions on the import of Russian oil via the Druzhba pipeline.  

Expectations of inflation must be kept in check through policy.

Investment volumes are expected to fall by 6.4% in 2025, before rebounding by 2% in 2026 and 4% in 2027, driven by improving external demand, domestic consumption, and business confidence, according to the National Bank of Hungary. The budget deficit is forecast to decline from 4.1-4.5% of GDP in 2025, to 3.2-3.7% by 2027, supported by lower interest expenditures and reduced state investments. The government debt-to-GDP ratio is expected to fall below 72% by the end of the forecast horizon.

Energy price controls could significantly increase the state’s contingent liabilities. Direct income support to households most vulnerable to high energy costs could be an alternate strategy. Cuts in government spending elsewhere could be used to fund such assistance.  Hungary - OECD.

Political Environment

Visit the State Department’s website for background information on Hungary’s political and economic environment Department of State.