- Basic data
- Public finances and the state budget
- Banking system
- Tax system
Before the pandemic, Hungary had one of the highest GDP growth rates in the EU. Thanks to the pandemic, GDP fell by 5.1% in 2020, increased by 7.1% in 2021, and the Hungarian government expects GDP to grow by only 4.3% in 2022 due to the war in Ukraine %. As for the level of government debt, at the end of 2021 it reached 76.8% of GDP. The country has a long-term relatively low unemployment rate, which hovers around 3-4%. Inflation reached 5.1% in 2021, and is expected to increase to 8.9% in 2022. Check ebizdir for economical facts of Hungary.
Hungary is an export economy, the backbone of which is largely the automotive industry. Audi, Mercedes and Suzuki cars are produced in the country, and a BMW production plant is also under construction. Most of the production is exported. A very wide supply chain is connected to the production plants, including, for example, the production of batteries. In the near future, the construction of several new production plants in the field of defense industry is expected. Hungary, on the other hand, imports almost all energy raw materials, with the exception of brown coal.
Regarding the most important items of import and export, the order of the top ten places in 2021 was as follows:
Imports: 1/electrical machinery, apparatus and instruments, 2/road vehicles, 3/telecommunication equipment, sound recording and reproduction equipment, 4/industrial machinery for general purposes, 5/medicines, pharmaceutical products, 6/machinery and equipment for production energy, 7/petroleum and petroleum products, 8/other metal products, 9/other processed products, 10/office machines and data processing equipment.
Exports: 1/road vehicles, 2/electrical machinery, apparatus and instruments, 3/telecommunications equipment, sound recording and reproduction equipment, 4/power generation machinery and equipment, 5/medicines, pharmaceutical products, 6/general industrial machinery purposes, 7/office machines and data processing equipment, 8/other processed products, 9/professional, scientific, control instruments, 10/other metal/products.
|GDP growth (%)||4.6||-4.7||7.1||4.3||4.1|
|Export of goods (billion USD)||122.2||120.0||141.3||155||170.5|
|Import of goods (billion USD)||117.3||113.4||138.9||152.2||166.9|
|Trade Balance (Billion USD)||-3.3||-1.6||-2.6||-2.5||-2.3|
|Industrial production (% change)||5.6||-6.0||9.6||5.7||4.1|
|OECD export risk||ON||ON||ON||ON||ON|
Source: EIU, OECD, IMD, KSH
Public finance and state budget
|State budget balance (% of GDP)||-6.8|
|Public debt (% of GDP)||76.8|
|Current account balance (billion USD)||-5.5|
|VAT||5%, 18%, 27%|
In 2021, according to preliminary data, the deficit of public finances amounted to HUF 3,743 billion, which represents 6.8% of GDP. While government sector revenues amounted to HUF 22,735 billion and expenditures to HUF 26,478 billion. Compared to 2020, income increased by 8.5%, income and expenditure by 7.1%. According to data from the Central Bank of Hungary (MNB), the debt of the government sector at the end of 2021 was HUF 42,414 billion, i.e. 76.8% of GDP.
In the so-called Convergence Program for the period 2022-2026 (issued in April 2022), the Hungarian government stated that it expects a target budget deficit of 4.9% of GDP for 2022 (2021 = a deficit of 6.8%), inflation in in the amount of 8.9% (2021 = 6.3%), economic growth in the amount of 4.3% (2021 = 7.1%) and the reduction of the public debt to the level of 76.1%. Reducing the national debt remains a priority (2021 = 76.8% of GDP, 2022 = 76.1%, 2023 = 73.8%, 2024 = 70.4%, 2025 = 66.9%, 2026 = 63.1%). The projected deficit for 2023 is 3.5% (2024 = 2.5%, 2025 = 1.5%, 2026 = 1.0%), debt is 73.8% (2024 = 70.4%, 2025 = 66.9%, 2026 = 63.1%), economic growth of 4.1% (2024 = 4.2%, 2025 = 4.3%, 2026 = 4.3%) and inflation of % (2024 = 3.0%, 2025 = 3.0%, 2026 = 3.0%).
Foreign exchange debt service (TDS) was 10.0% of GDP in 2020 (more recent data not available). Gross indebtedness in foreign currencies in 2020 was EUR 5billion and net indebtedness in foreign currencies was EUR -8.6 billion. The GDP in 2020 was EUR 13billion. Annual data for a given year will be published in September of the following year.
GDP in 2021 at current prices was HUF 55,257 billion according to preliminary data.
Rating of Hungary by the main rating agencies as of 05/04/2022 (for long-term debt in foreign currencies):
- Standard and Poor’s: BBB, stable
- Moody’s: Baa2, stable
- FITCH Ratings: BBB, stable
The financial and insurance sector accounted for 3.2% of GDP in 2021, the lowest share since 1995 (ranging from 3.2% to 5.0%). In the number of registered businesses by sector, the financial and insurance sector accounted for only 1.6%.
The Hungarian National Bank – Magyar Nemzeti Bank – is the central bank and its task is, for example, to determine the exchange rate and currencies in Hungary and to support the economic policy of the Hungarian government with the help of monetary policy. With Hungary’s accession to the EU, the MNB became a member of the European System of Central Banks (ESCB) in 2004. It is possible to search for market participants on the MNB website. Reports on economic growth, loan processes are on the MNB website in English under the Reports section . The MNB annually publishes the so-called “Golden Book” containing information on the data of supervisory institutions.
In terms of credit banking groups, in 2020 (source: Golden Book), the strongest (according to the size of funds) were the OTP Bank group (Hungarian bank), Magyar Bankholding (Hungarian holding), K&H, Unicredit Bank and Erste Bank.
The legal merger of two member banks of Magyar Bankholding, i.e. Budapest Bank and MKB Bank, took place on March 31, 2022. The merged financial institution will continue to temporarily operate under the name MKB Bank Nyrt. It marked another milestone in the triple banking merger led by Magyar Bankholding, which aims to create the second largest bank in Hungary by integrating Budapest Bank, MKB Bank and, by May 2023, the Takarék Group.
Important insurance companies in Hungary include, for example, Allianz Hungária Biztosító , AEGON Magyarország Áltános Biztosító Zrt. and Generali Biztosító Zrt.
You can also find a list of insurance sectors and market participants on the MNB website.
In Hungary, the basic interest rate is gradually increasing. From June 23, 2021, when it was increased to 0.90%, the rate gradually increased to the current 5.40%.
Due to the pandemic, a moratorium on repayments was introduced in Hungary from 19 March 2020. The government, the MNB and the Hungarian Bank Association discussed its restructuring and it was extended until 30 June 2022.
In an effort to support the Hungarian economy affected by the COVID-19 pandemic, there have been numerous tax changes in Hungary. For accurate up-to-date information, it is therefore recommended to contact the tax office (National Tax and Customs Administration; Nemzeti Adóés Vámhivatal – NAV) or use the services of one of the professional tax advisors – for example Gordia (the company provides tax and accounting consultancy), (they speak Czech, Hungarian, English) or the company Accace Hungary. On their website you can find, for example, a salary calculator.
As for the personal income tax (SZJA), it is the same for everyone, namely 15%. The basic VAT rate in Hungary is the highest of the EU member states at 27%. Two reduced VAT rates of 18% and 5% are also introduced. For example, paper books fall under 5% VAT (in the case of electronic books, the VAT is 27%) or certain foodstuffs. 18% VAT applies, for example, to certain milk products. Act No. CXXVII of 2007 applies to VAT. Deductions from gross salary (in general): 33.5% (15 + 18.5) for employees, 13% for employers. Corporate tax for companies is 9% (this is the lowest corporate tax rate in Europe).
Taxes for small businesses:
- “KATA” – flat tax for small entrepreneurs
- “KIVA” – small business tax
- “TAO” – corporate income tax
Some tax laws can be ordered in three language versions on the Jogtár website.
The government recently proceeded to reduce and simplify some taxes (e.g. from 2022, persons under the age of 25 do not pay personal income tax up to a certain amount).