Hungary’s exhausted growth model may depend on a change of government to get moving again.
For a country that built its modern economic identity on luring foreign factories, Hungary finds itself in a peculiar bind. The factories came and unemployment fell. And then the model, like a car stuck in first gear, refused to accelerate further. Ioannis Gutzianas, an economist at the Vienna Institute for International Economic Studies (wiiw), lays out the predicament in the institute’s March monthly report. Hungary’s GDP grew by a miserable 0.3 per cent in 2025, a far cry from the “spectacular take-off” promised by the government of Viktor Orbán. Weak demand for vehicles and batteries (the flagship sectors his administration bet on) dragged industrial output down, while the grand inauguration of several large foreign-invested plants was quietly postponed.
The Vienna Institute reckons GDP will expand by 2.2 per cent this year, which sounds respectable until you learn how much of that bounce comes from an election-season spending binge. With Hungarians heading to the polls on April 12, the government has showered voters with pre-election handouts: public-sector pay rises, bonuses for military and law-enforcement staff, and expanded family tax allowances. The European Commission forecasts a budget deficit of 5.2 per cent of GDP in 2026, swollen by these giveaways. The Vienna Institute describes it as a year of two halves: a sugar rush in the first, followed by painful fiscal consolidation in the second.
Hungary’s structural weakness
The deeper trouble lies in what Gutzianas calls the structural weaknesses of Hungary’s growth model. The strategy Orbán pursued through the 2010s (attracting export-oriented manufacturing, chiefly linked to German carmakers) delivered jobs and headline growth. It also produced an economy with low domestic value added, feeble innovation capacity, and productivity gains that barely register outside a handful of export-facing plants. Public spending on education and research has flatlined for a decade. The government’s answer to these shortcomings is characteristically blunt: expand its “100 new factories programme” to 150 new factories. More assembly lines, in other words, when the problem is what comes off them.
An irony compounds the difficulty. Hungary has pushed unemployment to historically low levels, and now depends on migrant workers to staff new production facilities. For a government whose political identity rests on fierce opposition to immigration, this sits awkwardly. Orbán’s rhetoric and his labour market are pulling in opposite directions.
Then there is the missing money. Some 17 billion euros in EU funds remain frozen, blocked over rule-of-law concerns and corruption allegations. Hungary has already permanently lost more than one billion euros in cohesion money because it failed to implement the reforms Brussels demanded by its deadlines. The freeze has weighed on public investment and dragged down the country’s medium-term growth trajectory, as the wiiw report notes. Budapest has threatened to veto the next EU budget unless the money is released, a familiar tactic that has produced diminishing returns.
Change on the way?
The April election could shake things up. Independent polls give the opposition Tisza party, led by former Fidesz insider Péter Magyar, a lead of roughly 20 percentage points among decided voters, enough (perhaps) for a comfortable parliamentary majority. Tisza’s economic platform centres on unlocking the frozen EU funds, restoring investor confidence, and reducing corruption, while increasing spending on healthcare, pensions and public-sector wages.
The revenue side of that programme is thin, as Gutzianas observes. Beyond cutting personal income taxes and slapping a wealth levy on billionaires, Tisza offers no comprehensive tax reform. The party expects fiscal space to materialise from faster growth, cheaper borrowing, revived EU transfers and efficiency gains from less corruption. The most plausible short-term change would be a rapprochement with Brussels and a gradual release of the frozen funds. Everything else (better governance, a stronger growth trajectory, preparation for eventual euro adoption by 2030) would take considerably longer.
Even a decisive Tisza victory would run into institutional concrete. Fidesz has spent 16 years embedding allies across Hungary’s state apparatus. The president holds office until 2029; the head of the Constitutional Court until 2037; the prosecutor general until 2034; the central bank governor until 2031. Without a two-thirds supermajority (which the Partizán Electoral Barometer gives a 28 per cent probability), a new government would find key levers of economic policy beyond its reach. Monetary-policy coordination, fiscal oversight and investigations of alleged corruption would all be complicated by institutional holdovers from the Orbán era.
Turning the taps back on
The wiiw report suggests that, beneath the political noise, both parties share a broad economic philosophy: investment-driven growth plugged into international manufacturing supply chains.
The real gap between them concerns governance standards and geopolitical alignment. András Kármán, the figure most frequently mentioned as a possible Tisza finance minister, is a former central banker and EBRD official with market-friendly instincts who left an earlier Orbán-era ministry post because its policies were too unorthodox for his taste. István Kapitány, a former Shell executive tipped for the energy brief, has spoken about diversifying away from Russian energy imports. Neither man sounds like a revolutionary.
Hungary’s economic fate in 2026 hinges less on grand strategic visions than on a prosaic question: Can whoever wins the election get Brussels to turn the taps back on? Seventeen billion euros buys a lot of hospitals, roads and research grants. It would not, by itself, fix a growth model that has run out of road. But it would buy time to build one that might.
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