Hungary: Economic Mirage
Despite Viktor Orban’s constant flow of big-mouthed announcements and the admiration he garners in Washington, his country has turned into an economic basket case.
April 30, 2025
Hungary's Prime Minister Viktor Orban has bet big on pursuing a very Russia-friendly and China-friendly economic path -- an approach that has greatly frustrated many other EU countries.
In addition, Orban has associated himself closely with Donald Trump in the United States. Hungary's linkages to China are now seen as a major factor of irritation in Washington.
Hungary currently ranks among the countries hit hardest by U.S. tariffs.
Hungary’s economy is characterized by crony state capitalism. Loyalty to the government and reliance on a small set of favorite business people is often the deciding factor.
Hungary is ranked as the EU's number 1 corrupt country in 2024 by the Corruption Perceptions Index. Anti-corruption enforcement is deficient, with control institutions lacking independence and transparency.
Corruption adds 20-25% to public procurement costs. This leads to the inefficient allocation of resources and substandard products or services and creates a privileged elite and undermines fair competition.
Hungary's education system is also struggling. Two-thirds of Hungarians describe their education system as “poor.”
The country’s healthcare system is under pressure as well. Doctors are leaving the country for better pay and more acceptable working conditions abroad.
As of 2024, Hungary is considered "no longer a full democracy" by the EU. In the Economist Democracy Index, Hungary ranks in 54th place, behind Mongolia and the Dominican Republic.
Due to tensions with the European Union over rule of law issues, over €20 billion in EU funds have not been dispersed to Hungary. This will have a direct impact on public investment and economic growth
Unconventional economic policies since 2010 have led to a deteriorated investment climate, affecting business operations and foreign direct investment.
Efforts by Orban to expand Hungary's shrinking workforce by adding hundreds of thousands of skilled and unskilled workers from overseas have backfired politically and were subsequently curtailed.
Sources: The Atlantic, Statista, Financial Times, Budapest Business Journal, Ipsos, Euronews, Transparency International, Wikipedia, Allianz
Takeaways
Despite Viktor Orban’s constant flow of big-mouthed announcements and the admiration he garners in Washington, his country has turned into an economic basket case.
Corruption in Hungary is a major problem. It was ranked as the EU's most corrupt country in 2024 by the Corruption Perceptions Index.
