HUNGARY ungary’s economic freedom score is 67.2, making its economy the H 55th freest in the 2021 Index. Its overall score has increased by 0.8 point, primarily because of an improvement in judicial effectiveness. WORLD RANK: REGIONAL RANK: Hungary is ranked 31st among 45 countries in the Europe region, and its 55 31 overall score is below the regional average but above the world average. ECONOMIC FREEDOM STATUS: The Hungarian economy has been in the upper ranks of the moderately MODERATELY FREE free for more than a decade. To make the jump to the mostly free cat- egory, the government would have to continue the effort it began in its 2020 budget to rein in spending. Improvements in judicial effectiveness and government integrity would also be necessary. IMPACT OF COVID-19: As of December 1, 2020, 4,977 deaths had been attributed to the pandemic in Hungary, and the economy was forecast to contract by 6.1 percent for the year. ECONOMIC FREEDOM SCORE 67.2 ▲ UP 0.8 POINT 0 50 60 70 80 100 REGIONAL WORLD AVERAGE AVERAGE 61.6 70.1 (EUROPE REGION) HISTORICAL INDEX SCORE CHANGE (SINCE 1995): +12.0 RECENT FREEDOM TREND QUICK FACTS POPULATION: UNEMPLOYMENT: 9.8 million 3.4% 66.7 66.4 67.2 GDP (PPP): INFLATION (CPI): 65.8 65.0 $335.8 billion 3.4% 4.9% growth in 2019 5-year compound FDI INFLOW: $5.2 billion annual growth 4.1% $33,979 per capita PUBLIC DEBT: 66.3% of GDP 2019 data unless otherwise noted. Data compiled as of September 2020 BACKGROUND: Once part of the Austro–Hungarian Empire, Hungary emerged from 45 years of Com- munist rule to become fully independent in 1990. It joined NATO in 1999 and became a member of the European Union in 2004. Prime Minister Viktor Orbán, in office since 2010, won reelection to a third term in 2018. His center-right Fidesz-Hungarian Civic Alliance won two-thirds of the seats in parliament. Orbán’s government has clashed repeatedly with the European Union, particularly over migration issues and accusations of government encroachment on independent media. Tourism and a robust automotive manufacturing sector have led to years of strong growth. The government’s more nationalist and populist approach to economic management has set Hungary somewhat apart from its neighbors. 220 2021 Index of Economic Freedom WORLD AVERAGE | ONE-YEAR SCORE CHANGE IN PARENTHESES 12 ECONOMIC FREEDOMS | HUNGARY RULE OF LAW GOVERNMENT SIZE (+0.8) (+6.7) (+1.2) (+3.7) (+0.5) (–0.3) 65.6 52.4 48.7 83.6 35.0 83.3 Property Judicial Government Tax Government Fiscal Rights E ectiveness Integrity Burden Spending Health All citizens have the right to own property and establish The flat individual income tax rate is 15 percent, and the flat private businesses. Hungary maintains a reliable land registry. corporate tax rate is 9 percent. There are special taxes on Several current and former judges have voiced concerns banks, financial firms, and companies in the energy sector. about growing political influence on the court system, calling The overall tax burden equals 36.6 percent of total domestic into question the independence of the judiciary. The public income. Government spending has amounted to 46.6 percent procurement process lacks transparency and accountability, of total output (GDP) over the past three years, and budget and the implementation of anticorruption laws can be uneven. deficits have averaged 2.2 percent of GDP. Public debt is equivalent to 66.3 percent of GDP. REGULATORY EFFICIENCY OPEN MARKETS (–0.3) (+0.2) (–1.1) (–2.4) (No change) (No change) 59.9 64.8 78.8 84.0 80.0 70.0 Business Labor Monetary Trade Investment Financial Freedom Freedom Freedom Freedom Freedom Freedom Hungary’s business freedom is little changed, although its As a member of the EU, Hungary has 45 preferential trade relative business freedom score is down slightly because agreements in force. The trade-weighted average tariff the situation in many other countries around the world has rate (common among EU members) is 3 percent, with 639 improved. In 2020, special labor courts were dissolved, EU-mandated nontariff measures in force. Hungary has an potentially increasing the even-handedness of labor case additional 95 country-specific nontariff barriers. Foreign adjudication. Most prices in Hungary are set by the market, investment remains generally free from government involve- but prices in such sectors as pharmaceuticals, telecommuni- ment. No restrictive measures have been implemented in the cations, and electricity are administered. financial sector over the past year. The Heritage Foundation | heritage.org/Index 221.