This Survey is published on the responsibility of the Economic and Development Review Committee of the OECD, which is charged with the examination of the economic situation of member countries.The economic situation and policies of Hungary were reviewed by the Committee on 28 June 2021. The draft report was then revised in the light of the discussions and given final approval as the agreed report of the whole Committee on 12 July 2021.The Secretariat’s draft report was prepared for the Committee by Jens-Christian Høj, Martin Borowiecki, Federico Giovannelli and László Dósza with contributions from Shizuka Kato, Viktoria Kis and Thomas Weko under the supervision of Mame Fatou Diagne. Statistical research assistance was provided by Federico Giovannelli and editorial assistance by Emily Derry. The previous Survey of Hungry was issued in January 2019.Information about the latest as well as previous Surveys and more information about how Surveys are prepared is available at http://www.oecd.org/eco/surveys.

The pandemic interrupted the strong economic growth performance in 2016-19, which entailed large increases in employment and real incomes, and the lowest unemployment rate in thirty years.

In 2016-19, Hungary had strong economic growth with large increases in employment and real incomes, while unemployment fell to its lowest level in the past 30 years. At the same time, public finances improved: public deficits and the public debt-to-GDP ratio shrunk. This strong economic performance came to an abrupt halt in 2020 (). While the first wave of the COVID-19 pandemic was relatively mild from a public health standpoint, containment restrictions and reduced international demand hit economic activity hard. The second wave of the pandemic had more severe health impacts, but milder economic consequences, reflecting more targeted containment measures and robust international demand. The third wave had severe health consequence despite a relatively fast roll out of vaccine programmes. The economic downswing and supportive fiscal policy widened the budget deficit and increased public debt ()

Weak productivity growth raises concerns for future living standards. Low productivity reflects educational outcomes that are poorly matched to the labour market, and insufficient geographical mobility of low-skilled workers that has created pockets of unemployment in poorer regions while prosperous regions continue facing labour shortages. Moreover, there is a large productivity gap between foreign-owned firms and less productive domestic-owned firms. To improve productivity and ensure a speedy post COVID-19 recovery, education and training policies need to ensure that all workers are equipped with the skills demanded in the labour market. Better functioning housing and transport infrastructures are key to promote labour mobility. Importantly, domestic firms must move up the value chain. To this end, better roads, digital infrastructure and digital adoption would help facilitate integration into regional and national value chains. A more pro-competitive business environment would allow more productive firms to grow and invest in new technologies. This entails a more efficient implementation of existing competition regulation, the withdrawal of distortive government support to less productive incumbents, and streamlining the insolvency regime to accelerate market exit. A stronger digital public administration could support this process.