2021 Index of Economic Freedom

Hungary

OVERALL SCORE67.2
WORLD RANK55
Rule of Law

Property Rights65.6

Judicial Effectiveness52.4

Government Integrity48.7

Government Size

Tax Burden83.6

Government Spending35.0

Fiscal Health83.3

Regulatory Efficiency

Business Freedom59.9

Labor Freedom64.8

Monetary Freedom78.8

Open Markets

Trade Freedom84.0

Investment Freedom80.0

Financial Freedom70.0

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Quick Facts
  • Population:
    • 9.8 million
  • GDP (PPP):
    • $335.8 billion
    • 4.9% growth
    • 4.1% 5-year compound annual growth
    • $33,979 per capita
  • Unemployment:
    • 3.4%
  • Inflation (CPI):
    • 3.4%
  • FDI Inflow:
    • $5.2 billion

Hungary’s economic freedom score is 67.2, making its economy the 55th freest in the 2021 Index. Its overall score has increased by 0.8 point, primarily because of an improvement in judicial effectiveness. Hungary is ranked 31st among 45 countries in the Europe region, and its overall score is below the regional average but above the world average.

The Hungarian economy has been in the upper ranks of the moderately free for more than a decade. To make the jump to the mostly free category, the government would have to continue the effort it began in its 2020 budget to rein in spending. Improvements in judicial effectiveness and government integrity would also be necessary.

IMPACT OF COVID-19: As of December 1, 2020, 4,977 deaths had been attributed to the pandemic in Hungary, and the economy was forecast to contract by 6.1 percent for the year.

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Background

Once part of the Austro–Hungarian Empire, Hungary emerged from 45 years of Communist rule to become fully independent in 1990. It joined NATO in 1999 and became a member of the European Union in 2004. Prime Minister Viktor Orbán, in office since 2010, won reelection to a third term in 2018. His center-right Fidesz-Hungarian Civic Alliance won two-thirds of the seats in parliament. Orbán’s government has clashed repeatedly with the European Union, particularly over migration issues and accusations of government encroachment on independent media. Tourism and a robust automotive manufacturing sector have led to years of strong growth. The government’s more nationalist and populist approach to economic management has set Hungary somewhat apart from its neighbors.

Rule of LawView Methodology

Property Rights 65.6 Create a Graph using this measurement

Judicial Effectiveness 52.4 Create a Graph using this measurement

Government Integrity 48.7 Create a Graph using this measurement

All citizens have the right to own property and establish private businesses. Hungary maintains a reliable land registry. Several current and former judges have voiced concerns about growing political influence on the court system, calling into question the independence of the judiciary. The public procurement process lacks transparency and accountability, and the implementation of anticorruption laws can be uneven.

Government SizeView Methodology

The flat individual income tax rate is 15 percent, and the flat corporate tax rate is 9 percent. There are special taxes on banks, financial firms, and companies in the energy sector. The overall tax burden equals 36.6 percent of total domestic income. Government spending has amounted to 46.6 percent of total output (GDP) over the past three years, and budget deficits have averaged 2.2 percent of GDP. Public debt is equivalent to 66.3 percent of GDP.

Regulatory EfficiencyView Methodology

Hungary’s business freedom is little changed, although its relative business freedom score is down slightly because the situation in many other countries around the world has improved. In 2020, special labor courts were dissolved, potentially increasing the even-handedness of labor case adjudication. Most prices in Hungary are set by the market, but prices in such sectors as pharmaceuticals, telecommunications, and electricity are administered.

Open MarketsView Methodology

As a member of the EU, Hungary has 45 preferential trade agreements in force. The trade-weighted average tariff rate (common among EU members) is 3 percent, with 639 EU-mandated nontariff measures in force. Hungary has an additional 95 country-specific nontariff barriers. Foreign investment remains generally free from government involvement. No restrictive measures have been implemented in the financial sector over the past year.

Country's Score Over Time

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Regional Ranking

RANK COUNTRY OVERALL CHANGE
1Switzerland81.9-0.1
2Ireland81.40.5
3United Kingdom78.4-0.9
4Estonia78.20.5
5Denmark77.8-0.5
6Iceland77.40.3
7Georgia77.20.1
8Lithuania76.90.2
9Netherlands76.8-0.2
10Finland76.10.4
11Luxembourg760.2
12Sweden74.7-0.2
13Austria73.90.6
14Czech Republic73.8-1.0
15Norway73.40.0
16Germany72.5-1.0
17Latvia72.30.4
18Armenia71.91.3
19Cyprus71.41.3
20Bulgaria70.40.2
21Malta70.20.7
22Belgium70.11.2
23Azerbaijan70.10.8
24Spain69.93.0
25Poland69.70.6
26Romania69.5-0.2
27North Macedonia68.6-0.9
28Slovenia68.30.5
29Portugal67.50.5
30Serbia 67.21.2
31Hungary67.20.8
32Kosovo66.5-0.9
33Slovak Republic66.3-0.5
34France65.7-0.3
35Albania65.2-1.7
36Italy64.91.1
37Turkey64-0.4
38Croatia63.61.4
39Montenegro63.41.9
40Bosnia and Herzegovina62.90.3
41Moldova62.50.5
42Russia61.50.5
43Belarus61-0.7
44Greece60.91.0
45Ukraine56.21.3
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