2014 Index of Economic Freedom

Hungary

overall score67.0
world rank51
Rule of Law

Property Rights60.0

Freedom From Corruption48.6

Limited Government

Government Spending26.8

Fiscal Freedom81.1

Regulatory Efficiency

Business Freedom79.3

Labor Freedom65.7

Monetary Freedom75.6

Open Markets

Trade Freedom87.8

Investment Freedom75.0

Financial Freedom70.0

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Quick Facts
  • Population:
    • 10.0 million
  • GDP (PPP):
    • $195.6 billion
    • -1.7% growth
    • -1.0% 5-year compound annual growth
    • $19,638 per capita
  • Unemployment:
    • 11.0%
  • Inflation (CPI):
    • 5.7%
  • FDI Inflow:
    • $13.5 billion
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Hungary’s economic freedom score is 67.0, making its economy the 51st freest in the 2014 Index. Its score has decreased by 0.3 point, with declines in property rights, the control of public spending, and monetary freedom outweighing improvements in freedom from corruption and fiscal freedom. Hungary is ranked 24th out of 43 countries in the Europe region, and its overall score is well above the world average and about the regional average.

Over the 20-year history of the Index, Hungary has advanced its economic freedom score by nearly 12 points. The overall score improvement has been broad-based, driven by advancements in six of the 10 economic freedoms including double-digit growth in scores for trade freedom, financial freedom, monetary freedom, fiscal freedom, and the management of public spending. For the past 15 years, Hungary has achieved the status of a “moderately free” economy.

The rule of law and consistent protection of private property have contributed to Hungary’s long-term competitiveness and growth. Steps have been taken to improve fiscal transparency, but further fiscal consolidation and better management of public finance remain critical to ensuring Hungary’s successful transition to a freer market economy.

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Background

The center-right FIDESZ party won a two-thirds parliamentary majority in April 2010 but got into trouble with the European Union and the Council of Europe because of government overcentralization, failure to address human rights problems, and racist rhetoric by the extreme nationalist Jobbik party. Prime Minister Viktor Orbán inherited significant public and private-sector debt. Despite electoral support, Orbán so far has achieved only limited success. He rejected a €15 billion International Monetary Fund bailout plan, avoiding an IMF austerity program, but has yet to address the debt problem. Growth remains anemic, and three major credit rating agencies have downgraded Hungarian debt to junk bond status amid doubts about the independence of Hungary’s central bank.

Rule of LawView Methodology

Property Rights 60.0 Create a Graph using this measurement

Freedom From Corruption 48.6 Create a Graph using this measurement

Rampant collusion has been reported between the public sector and privileged private businesses. In December 2012, the constitution was amended to bar foreigners and non-farmer Hungarian citizens from buying farmland. The independence of the judiciary has come under scrutiny following the adoption of a reform package granting extensive judicial administrative powers to an agency whose leadership is elected by parliament.

Limited GovernmentView Methodology

The individual 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 is equal to 35.7 percent of gross domestic income. Government spending is 49.4 percent of gross domestic income. The EU has excused Hungary from budget monitoring despite limited progress in controlling spending. Public debt is now about 80 percent of GDP.

Regulatory EfficiencyView Methodology

Launching a business takes four procedures and five days, and the minimum capital required has been reduced to less than 10 percent of the level of average annual income. Restrictions on work hours remain rigid, and the overall labor code lacks flexibility. The state has reinserted itself into what had been one of the few fully privatized natural-gas industry sectors in Europe.

Open MarketsView Methodology

EU members have a low 1.1 percent average tariff rate and, in general, few non-tariff barriers to trade. In 2012, the government amended the constitution to prohibit people from selling their agricultural land to foreigners. The growing financial sector is open to competition, and the state has largely withdrawn from banking. Capital markets are relatively developed, and foreign investors participate freely.

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
1Switzerland81.60.6
2Ireland76.20.5
3Denmark76.10.0
4Estonia75.90.6
5United Kingdom74.90.1
6The Netherlands74.20.7
7Luxembourg74.20.0
8Germany73.40.6
9Finland73.4-0.6
10Sweden73.10.2
11Lithuania730.9
12Georgia72.60.4
13Iceland72.40.3
14Austria72.40.6
15Czech Republic72.21.3
16Norway70.90.4
17Belgium69.90.7
18Armenia68.9-0.5
19Latvia68.72.2
20Macedonia68.60.4
21Cyprus67.6-1.4
22Spain67.2-0.8
23Poland671.0
24Hungary 67-0.3
25Albania66.91.7
26Slovakia66.4-2.3
27Malta66.4-1.1
28Bulgaria65.70.7
29Romania65.50.4
30Turkey64.92.0
31Montenegro63.61.0
32Portugal63.50.4
33France63.5-0.6
34Slovenia62.71.0
35Italy60.90.3
36Croatia60.4-0.9
37Serbia 59.40.8
38Bosnia and Herzegovina58.41.1
39Moldova57.31.8
40Greece55.70.3
41Russia51.90.8
42Belarus50.12.1
43Ukraine49.33.0
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