2017 Index of Economic Freedom

Hungary

overall score65.8
world rank56
Rule of Law

Property Rights60.1

Government Integrity41.5

Judicial Effectiveness51.8

Government Size

Government Spending25.3

Tax Burden79.3

Fiscal Health79.3

Regulatory Efficiency

Business Freedom64.0

Labor Freedom64.4

Monetary Freedom91.7

Open Markets

Trade Freedom87.0

Investment Freedom75.0

Financial Freedom70.0

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Quick Facts
  • Population:
    • 9.9 million
  • GDP (PPP):
    • $258.4 billion
    • 2.9% growth
    • 1.7% 5-year compound annual growth
    • $26,222 per capita
  • Unemployment:
    • 7.0%
  • Inflation (CPI):
    • -0.1%
  • FDI Inflow:
    • $1.3 billion
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Hungary has implemented critical reforms in many areas. Licensing procedures have been streamlined, and the overall entrepreneurial environment is further aided by strong trade freedom, business freedom, and investment freedom. Since January 2016, the personal income tax rate has been lowered to a flat rate of 15 percent, down from 16 percent.

The economy has grown at a robust pace over the past few years and now has significant momentum. Consolidating public finances and further encouraging economic growth remain policy priorities. Additional fiscal adjustments are needed to put public debt on a firmly downward path and provide more space for vibrant private-sector activity.

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Background

Hungary has been a member of NATO since 1999 and a member of the European Union since 2004. In the April 2014 parliamentary election, held in accordance with a new constitution that took effect in January 2012, the center-right Fidesz–Hungarian Civic Alliance won the majority of seats, and Prime Minister Viktor Orbán, in office since May 2010, was able to form a new government. Robust exports and increased domestic demand have helped Hungary’s economy to achieve strong growth. Public works programs, including building border fences, have succeeded in lowering unemployment but also have swallowed a growing percentage of GDP. Hard-currency indebtedness and a shortage of labor remain key vulnerabilities.

Rule of LawView Methodology

Property Rights 60.1 Create a Graph using this measurement

Government Integrity 41.5 Create a Graph using this measurement

Judicial Effectiveness 51.8 Create a Graph using this measurement

Citizens have the right to own property and establish private businesses, but cronyism remains a serious concern, and critics cite recent taxes targeted to drive out or take over foreign businesses. Judicial independence is increasingly threatened. Corruption remains a notable problem. Government allies lead state agencies that have anticorruption roles, and several companies with close ties to the government are supported primarily by public funds.

Government SizeView Methodology

The personal income tax rate has been cut from 16 percent to a flat 15 percent. The top corporate tax rate is 19 percent. Other taxes include a value-added tax. The overall tax burden equals 38.5 percent of total domestic income. Government spending has amounted to 49.9 percent of total output (GDP) over the past three years, and budget deficits have averaged 2.4 percent of GDP. Public debt is equivalent to 75.5 percent of GDP.

Regulatory EfficiencyView Methodology

The regulatory framework allows business formation and operation to be efficient and dynamic. Bankruptcy proceedings are relatively straightforward. Labor regulations lack flexibility. Most prices are set by the market, but the government administers prices on tobacco and pharmaceuticals, surcharges in the state-run mobile payment system, and fees on connections to district heating systems, telecommunications, and electric companies.

Open MarketsView Methodology

Trade is extremely important to Hungary’s economy; the value of exports and imports taken together equals 171 percent of GDP. The average applied tariff rate is 1.5 percent. There is no general screening of foreign investment. State-owned enterprises distort the economy. Credit to the private sector has continued to contract, and the number of nonperforming loans, while declining, remains significant.

Country's Score Over Time

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Regional Ranking

rank country overall change
1Switzerland81.50.5
2Estonia79.11.9
3Ireland76.7-0.6
4United Kingdom76.40.0
5Georgia763.4
6Luxembourg75.92.0
7The Netherlands75.81.2
8Lithuania75.80.6
9Denmark75.1-0.2
10Sweden74.92.9
11Latvia74.84.4
12Iceland74.41.1
13Finland741.4
14Norway743.2
15Germany73.8-0.6
16Czech Republic73.30.1
17Austria72.30.6
18Macedonia70.73.2
19Armenia70.33.3
20Romania69.74.1
21Poland68.3-1.0
22Kosovo67.96.5
23Bulgaria67.92.0
24Cyprus67.9-0.8
25Belgium67.8-0.6
26Malta67.71.0
27Hungary 65.8-0.2
28Slovakia65.7-0.9
29Turkey65.23.1
30Albania64.4-1.5
31Spain63.6-4.9
32France63.31.0
33Portugal62.6-2.5
34Italy62.51.3
35Montenegro62-2.9
36Bosnia and Herzegovina60.21.6
37Croatia59.40.3
38Slovenia59.2-1.4
39Serbia 58.9-3.2
40Belarus58.69.8
41Moldova580.6
42Russia57.16.5
43Greece551.8
44Ukraine48.11.3
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