Hungary has made significant progress in converging towards OECD living standards, but population ageing and climate change threaten to slow this trajectory. According to a new OECD report, reforms are needed to strengthen public finances and lay the foundations for future growth – including reforming the tax system, boosting the competitiveness of smaller domestic firms, and expanding labour market opportunities for women and young people.
The OECD Economic Survey of Hungary shows that GDP growth is projected to pick up from 0.5% in 2025 to 1.9% in 2026 and 2.2% in 2027, supported by robust household spending. Inflation is expected to increase from 1.9% in 2026 to 2.7% in 2027 as wage growth remains strong.
Hungary should take steps to strengthen fiscal sustainability and prepare for rising ageing- and climate-related spending needs. Creating fiscal space will require a mix of reforms, including improving public spending efficiency, enhancing the sustainability of the pension system, and broadening the tax base by phasing out inefficient tax expenditures.
Enhancing the competitiveness of small and medium-sized enterprises would support stronger productivity growth. This calls for more stable regulations, facilitating business creation and restructuring, improving access to finance, providing targeted support for innovation, and boosting investment in skills, including adult learning. Such reforms should help smaller firms better integrate into global supply chains and benefit from foreign direct investment.
As the working-age population shrinks, Hungary needs to strengthen labour market participation, notably among women. This requires aligning the effective length of family leave entitlements with international practices, for both women and men, and expanding access to early childcare and long-term care. Providing additional tutoring and lowering class sizes in disadvantaged schools would improve school education and boost young people’s labour market prospects.
As the costs of recurring floods and droughts continue to increase, Hungary should strengthen its resilience to climate risks by improving insurance coverage, strictly enforcing land-use regulations, ensuring municipalities’ risk-prevention plans are regularly updated, and providing incentives for private adaptation investment.
