Macroeconomic situation

FIDESZ-KDNP, which reached the two third majority of the votes in the 2010 elections, has inherited a difficult economic situation. Following the crisis in 2008, serious steps were needed to control the 2010 government finances. The government wished to support the recovery process with a number of measures.

In 2010, they planned a full reform of the Hungarian tax system, the aim was to become the most competitive and simplest taxation system in the region. The government significantly reduced the corporate tax rate and the number of tax types. A new flat – first of 16%, later of 15%- personal income tax was introduced. In recent years, several measures have been taken to improve the tax system.

Reducing the social security contributions alleviates the impact of wage increases on the labour costs. The tax burden on labour is declining, but still remains high in EU comparison, especially for some low-income groups.

In the recent years, the Hungarian economy is characterized by a prosperity, this continued in 2097 as well. In 2017, the volume of gross domestic product increased by 4%, in 2018 4.9% compared to the previous year, with this growth we were at the forefront of the EU rankings. This growth continued in 2019.

GDP growth was driven by a 17% increase in investment performance in the previous year. The expansion of investments has contributed to the fact that in addition to boosting the capacity of businesses, the real implementation of the projects launched in the EU budget cycle in 2014-2020 also gained momentum, and the real estate investment activity also increased.

The performance of most of the branches has increased. The driving forces behind the expansion were the market services, the manufacturing and the construction industry, while the performance of the agriculture has slowed the growth of the GDP. In addition to the improving external environment, the favourable financial position of the households contributed to the growth in performance as well. Real wages have jumped and the loan portfolio practically have stagnated. Between 2012 and 2017 the deficit for the gross domestic product was lower than the 3% Maastricht deficit limit. The government debt was 28.1 billion HUF in the end of 2017.

Educational expenditures in relation to the GDP have decreased between 2007 and 2013. However, since 2014, growth has been observed. According to the data of the Central Statistical Office (KSH), Hungary spent 4.34% of the GDP on education expenditure in 2017.

Employment                                       

In the early nineties, due to changes in ownership, transformation of sectors and regional re-arrangements, the Hungarian labour market was characterised by a dramatic drop in employment and economic activity, a sudden increase in unemployment, and the re-arrangement of labour among the main sectors and occupations. However, social tensions were substantially mitigated by the social insurance systems and by the setting up and strengthening of the legal and institutional frameworks of employment policy. The growth of employment followed (with some delay, fluctuation and a lower level) the stabilisation and growth of the economy,

There has been a significant improvement in the Hungarian labour market since 2013. By 2017, the employment has made new records, thanks to the economic upswing and the government policy measures. In 2018, the unemployment rate was 3.5% compared to 5.1% in 2016. From 2017, there has been a continuous decrease in the number of unemployement.

In 2017, the number of employees increased to 4,421,400, of which 2,417,300 were men, and 2,004,100 were women. In 2017, employment rates continued to improve to 4,469,500, this increased to 4,512,100 in 2019, of which 2,479,000 were men and 2,032,000 were women. The gender gap is the highest among the age group of 25-39, which points to the high impact of maternity participation on the labour market. One of the sources of this problem is that the working time is not flexible enough, the father leave is less widespread, and the variety and availability of childcare facilities for children under the age of 3 is low. The gender gap in employment was 15.2% in 2016, this has not changed significantly in the past 4 years. This high level of gender disparity in employment refer to unused labour reserves. Measures have been taken to increase the capacity of childcare facilities in order to utilize these reserves.

Employment – unemployment:

Another challenge is the relatively high and slightly deteriorating level of early school leaving. The participation of people with disabilities in employment is one of the lowest in the EU (39.6% versus the EU average of 47.4%). The integration of the Roma into the labour market remains a challenge. Between 2011 and 2016 the employment rate of Roma increased from 25% to 36%, but most of the employed (41.6%) participated in the public work programme. Only 26% of Roma women perform paid work, so the gender gap in employment among the Roma reaches 19%.

Employment policy is struggling to meet the strong labour demand by rapidly mobilizing the labour services. The number of participants in the public work programme decreased by 15% in the first half of 2017, but the programme still occupied about 4% of the economically active population. The number of employees continued to increase by 2019 compared to the previous year. According to the data of the Central Statistical Office Labour Force Survey (between February and April 2019), the number of employees aged between 15-74 amounted to 4,491,6 thousand, from which 117,5 thousand were public employees (corresponding to a ratio of 2.6%). In one year, the number of employees increased with 46,7 thousand.

The unemployment rate has dropped close to 4%, due to structural factors (i.e.: rising educational levels, past reform that abolished early retirement opportunities) and the recovery of the economic prosperity.

The proportion of part-time employment (7.9%-2018) is below the EU average in Hungary. This rate was 4.3% in the age group of 15-64 in 2017, 4.8% in 2018 and 5.16% in 2019.