2013 Index of Economic Freedom

Hungary

overall score67.3
world rank48
Rule of Law

Property Rights65.0

Freedom From Corruption46.0

Limited Government

Government Spending29.7

Fiscal Freedom79.7

Regulatory Efficiency

Business Freedom79.1

Labor Freedom64.4

Monetary Freedom77.1

Open Markets

Trade Freedom86.8

Investment Freedom75.0

Financial Freedom70.0

Embed This Data

Create a Comparison Chart

See how Hungary compares to another country using any of the measures in the Index.

vs
Close
Download PDF
Quick Facts
  • Population:
    • 10.0 million
  • GDP (PPP):
    • $195.6 billion
    • 1.7% growth
    • -0.6% 5-year compound annual growth
    • $19,591 per capita
  • Unemployment:
    • 10.7%
  • Inflation (CPI):
    • 3.9%
  • FDI Inflow:
    • $4.7 billion
Embed This Data

Hungary’s economic freedom score is 67.3, making its economy the 48th freest in the 2013 Index. Its score has increased by 0.2 point, with declines in property rights, labor freedom, and freedom from corruption counterbalanced by improvements in the control of public spending and investment freedom. Hungary is ranked 24th out of 43 countries in the Europe region, and its overall score is well above the world average.

Hungary’s economy, an open market with high-quality institutional infrastructure, benefits from a thriving private sector. Commercial law is well developed, with improvement needed only in judicial and administrative enforcement. Overall, the legal and regulatory frameworks sustain the rule of law and provide effective protection for property rights, although laws adopted under a new constitution in 2012 have led to a dispute with the European Union over judicial independence.

Despite cuts in flat income and corporate tax rates in 2011 to improve competitiveness, recent unpredictable and discriminatory “crisis taxes” have undermined confidence in the overall tax regime. Short-term reforms aimed at reducing deficits were not structurally sound and prompted downgrades of sovereign debt to junk status. Responsible long-term budget reform is needed to address the deficit effectively and ensure sustainability.

Close

Background

The center-right FIDESZ party won a parliamentary majority in April 2010, and Prime Minister Viktor Orbán inherited an economy burdened by heavy public and private-sector debt. The economy slowed in 2011 and contracted 0.7 percent in the first quarter of 2012. Three major credit rating agencies have downgraded Hungarian debt to junk bond status amid doubts about the independence of Hungary’s central bank. The government has been seeking International Monetary Fund, European Union, and European Central Bank loans to mitigate market turmoil connected with the eurozone financial crisis. Hungary joined the EU in 2004 but has not adopted the euro. Services account for almost two-thirds of the economy, but there is increased emphasis on improving tourism.

Rule of LawView Methodology

Property Rights 65.0 Create a Graph using this measurement

Freedom From Corruption 46.0 Create a Graph using this measurement

Property rights are relatively well respected, and the threat of expropriation has been low. The legal framework continues to evolve, and a new constitution that took effect in January 2012 may have eroded the independence of the judiciary. Despite efforts to eradicate corruption more effectively, concerns remain, particularly in the area of government procurement.

Limited GovernmentView Methodology

The income tax rate is a flat 16 percent, and the top corporate tax rate is 19 percent. Other taxes include a value-added tax (VAT) and a property tax. The overall tax burden equals 37.6 percent of total domestic income. Government spending has risen to a level equivalent to 48.4 percent of total domestic output. Public debt remains at about 80 percent of GDP. Borrowing costs have risen precipitously in light of perceived political and institutional risk.

Regulatory EfficiencyView Methodology

The regulatory regime generally allows dynamic and innovative business formation and operation. Launching a business takes four procedures and five days, and the minimum capital requirement has been reduced to less than 10 percent of the average level of annual income. Restrictions on work hours remain rigid, and the overall labor code lacks flexibility. Inflation has edged higher even as the economy has grown slowly.

Open MarketsView Methodology

Hungary maintains a common 1.6 percent average tariff with other members of the European Union, and the trade regime is competitive. The investment regime is relatively efficient, but bureaucratic red tape and deficient transparency impede the dynamic growth of investment. The growing financial sector is open to competition. The state has largely withdrawn from banking, and foreign investors participate freely in capital markets.

Country's Score Over Time

Bar Graph of Hungary  Economic Freedom Scores Over a Time Period

Country Comparisons

Bar Graphs comparing Hungary  to other economic country groups

Regional Ranking

rank country overall change
1Switzerland81-0.1
2Denmark76.1-0.1
3Ireland75.7-1.2
4Estonia75.32.1
5United Kingdom74.80.7
6Luxembourg74.2-0.3
7Finland741.7
8The Netherlands73.50.2
9Sweden72.91.2
10Germany72.81.8
11Georgia72.22.8
12Lithuania72.10.6
13Iceland72.11.2
14Austria71.81.5
15Czech Republic70.91.0
16Norway70.51.7
17Armenia69.40.6
18Belgium69.20.2
19Cyprus69-2.8
20Slovakia68.71.7
21Macedonia68.2-0.3
22Spain68-1.1
23Malta67.50.5
24Hungary 67.30.2
25Latvia66.51.3
26Poland661.8
27Albania65.20.1
28Romania65.10.7
29Bulgaria650.3
30France64.10.9
31Portugal63.10.1
32Turkey62.90.4
33Montenegro62.60.1
34Slovenia61.7-1.2
35Croatia61.30.4
36Italy60.61.8
37Serbia 58.60.6
38Bosnia and Herzegovina57.30.0
39Moldova55.51.1
40Greece55.40.0
41Russia51.10.6
42Belarus48-1.0
43Ukraine46.30.2
See Entire Region List ›

View all countries ›

Back to Top