Population ageing is leading to rising financing pressures in the pension, health care and long-term care systems. Official projections suggest that ageing-related spending could increase by 3.2% of GDP by 2070. Less optimistic assumptions about demographic developments and labour market outcomes could add several percentage points to pension spending. Moreover, the risk of old-age poverty is relatively high in the earnings-related pay-as-you-go pension system, and expected pension benefits are difficult to calculate. Measures to correct these issues could double the projected increase in public pension spending in the long run. In addition, the centralised health care system has relatively little use of price signals, contributing to reduced access and outcomes that are worse than elsewhere. Structural reform could improve efficiency, but securing a projected increase in life expectancy of 10 years, aligning it with the EU average, is likely to require additional public resources. This, together with the cost of new technologies and improving quality and coverage, could increase spending by as much as 50% by 2070. The fragmented long-term care system is putting a relatively large responsibility for such care on family members, implying that public spending in this area will increase, particularly as economic structural changes affects the geographical distribution of the population.

Regional growth has been uneven in Hungary, leading to a wide dispersion in employment and income outcomes. The divergent growth pattern reflects that the greater Budapest area has benefitted from positive agglomeration effects and the benefits from inward FDI in western and northern regions that has provided important technology transfers as well as links to international supply chains. By contrast, other poorer and rural regions have few linkages with national and international supply chains, holding back growth. Boosting growth in a manner that benefits most people will require further exploitation of positive agglomeration effects as well as the development of local networks that enable poorer areas to make use of their own comparative advantages and join national and global supply chains.