Hungary’s economy is vulnerable without EU funds

Significance

The package targets banking, energy, retail, telecommunications, airlines, pharmaceuticals and advertising: service sectors where multinationals have important stakes. It is one of most significant adjustment packages in 30 years, and aims to reduce the ballooning budget deficit to 4.9% of GDP in 2022 and 3.5% in 2023.

Impacts

• Fallout from the COVID-19 pandemic, the war in Ukraine and pre-election spending will worsen Hungary’s structural problems.
• Close political ties with Beijing are unlikely to increase Chinese investments, given its share in total FDI of just 4%.
• Government subsidies for mainly German automotive companies are not leading to more R&D or higher value-added production.