The OECD said population ageing and climate change threatened to slow Hungary's progress, so the country should introduce reforms, including changes to the tax system, boosting the competitiveness of smaller domestic firms, and expanding labour market opportunities for women and young people.

Citing the OECD Economic Survey of Hungary, the report says GDP growth is expected to improve from 0.5 percent in 2025 to 1.9 percent in 2026 and 2.2 percent in 2027, driven by significant household spending.

Inflation is projected to rise from 1.9 percent in 2026 to 2.7 percent in 2027 due to continued strong wage growth.

The report advises Hungary to take steps to strengthen fiscal sustainability and prepare for rising ageing- and climate-related spending needs.

It said creating fiscal space will require various reforms, including improving the efficiency of public spending, strengthening the sustainability of the pension system and broadening the tax base by phasing out inefficient financial expenditures.

Enhancing the competitiveness of SMEs is expected to contribute to productivity improvements.

This requires stable regulations, easier business creation and restructuring, improved access to financing, targeted support for innovation and increased investment in skills, including adult education. 

"Such reforms should help smaller firms better integrate into global supply chains and benefit from foreign direct investment," the OECD said.

To counter a shrinking workforce, it said, Hungary must raise employment, particularly among women, by aligning parental leave with international standards and improving childcare access.

"Providing additional tutoring and lowering class sizes in disadvantaged schools would improve school education and boost young people's labour market prospects," the report said.

Concerning the growing costs of floods and droughts, the report says Hungary must strengthen its resilience to climate risks by improving insurance coverage, enforcing strict land-use regulations, ensuring that the risk-prevention plans of municipalities are regularly updated, and encouraging the private sector to invest in climate change adaptation.

Full report available here

Photo: OECD

Source: MTI – Hungary’s national news agency since 1881.

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