Hungary: the end of the Orban era?

Hungary has a general election tomorrow. Hungary is a relatively small country with less than 10m in population and with a GDP of just $220bn and with just 8.2m registered to vote. This election is pivotal, not just for Hungarians, but also for the EU Commission and the core European governments. The incumbent Fidesz government led by PM Victor Orban has been a thorn in the side of the EU for years. Orban has opposed EU sanctions on Russia and recently blocked the implementation of the latest round of agreed E96bn EU funding for Ukraine on the grounds that Ukraine has been stopping imports of Russian gas. The EU has responded by holding back Hungary’s share of structural and support funds.

Domestically, Orban’s party has been in power for 16 years, including a landslide victory in the 2022 election. It is claimed that over its period of rule, the government has gradually reduced democratic institutions like an independent media and courts; and adopted cronyist procurement policies for government spending and for foreign investors, with a high level of corruption. According to the EU, Hungary is an autocracy, not a democracy. 

Not surprisingly,, Orban’s policies have attracted strong support from US President Trump and the MAGA movement. In the election campaign, US Vice-President Vance visited Hungary to give Orban the full backing. President Trump posted in his usual style: “GET OUT AND VOTE FOR VIKTOR ORBÁN. He is a true friend, fighter, and WINNER, and has my Complete and Total Endorsement. I AM WITH HIM ALL THE WAY!”

The EU leaders are desperate to defeat Orban and break the logjam that he is causing over the funding of the Ukraine war and on EU policies in general. They are backing to the hilt the main opposition party Tisza, led by Peter Magyar.  Magyar was a former Fidesz loyalist with family and friends still in the government. He broke from Orban two years ago, accusing it of corruption and cronyism. Magyar recently added in a social media post: “The ongoing election fraud carried out for months by Fidesz, along with criminal acts, intelligence operations, disinformation and fake news cannot change the fact that Tisza is going to win this election.” 

Magyar’s message on corruption resonated with people.  After an estimated 35,000 people turned up to a protest organised by Magyar in March 2024, he launched his movement. Currently, independent polls suggest that Tisza is leading in the vote. In 2025, Hungary was again ranked at the bottom of the European Union, according to the annual Corruption Perceptions Index (CPI) compiled by the Secretariat of Transparency International in Berlin. The poor result reflects “the continued failure to remedy rule of law deficiencies and to curb systemic corruption, manifested in the organized theft of public funds”

EU economists and Magyar claim that corruption is the main reason behind the country’s now persistent economic decline.  But is it?  As always, it is the structural economic issues that are more important. Since 2019, Hungary‘s real GDP growth has been highly volatile, marked by a sharp pandemic-induced contraction followed by strong but short-lived rebounds. Since mid-2022, the economy has largely fluctuated in a “no-growth zone,” characterized by stagnation or very limited expansion.

Capital investment and productivity has stagnated and unemployment has reached its highest level since 2016. 

After the end of Soviet control in the early 1990s, foreign investment into Hungary by European and US multi-nationals flooded in to use cheap Hungarian labour in new factories (autos and electronics). This led to a sharp rise in the profitability of capital. But that investment petered off by the beginning of the 21st century as ‘globalisation’ slowed. Profitability fell back, particularly after the Great Recession of the 2008-9 and in the Long Depression of the 2010s.

Source: Penn World Tables 11.0

The Hungarian economy remains very reliant on foreign investment and so is vulnerable to international crises, like the Global Financial Crash of 2008 or the COVID pandemic slump of 2020.  And any global inflationary spike affects the Hungarian economy more than most, as it did in the post-pandemic inflation spike – and will also from the Iran conflict.

And it’s the main reason that Hungary lags towards the bottom of the East European “convergence” club, if still higher than Bulgaria and Slovakia.

Wages are low, on average just half that of the EU average, worse than Slovakia and only slightly better than Bulgaria and Greece.

Pay for key sectors like education and health is among the lowest in the EU and life expectancy is poor compared to other EU countries.  On most measures of social deprivation, Hungary performs badly compared to other Visegrad countries (Czech, Poland and Slovakia).  And its gini ratio for inequality of incomes is higher.

Would an election victory by Magyar make any difference to Hungary’s weak economy?  Probably not.  Despite more than two years of campaigning and a 240-page election manifesto, the details of what exactly Magyar will do if he gains power remain vague.  He concentrates on removing ‘corruption’ and undemocratic parts of Hungary’s institutions.  Above all, he wants closer relations with the EU.  He would end the veto Hungary has been applying on EU funds for Ukraine. 

Ending that would release E20bn in frozen EU support funds for Hungary (that’s about 10% of the country’s GDP). Hungary had been allocated a total of €10.4 billion under the EU Recovery and Resilience Facility (RRF), consisting of €6.5 billion in grants and €3.9 billion in loans. However, almost all of these funds have remained frozen or not yet fully accessible due to disputes over rule-of-law, corruption, and judicial independence issues.

But in many areas, Magyar would change little.  He wants a harder line on immigration than Orban by scrapping the country’s ‘guest worker’ scheme. And while he would end ‘dependence’ on Russian energy imports, he wants to preserve ‘pragmatic’ relations with Russia. Orban is relying for support on the government’s generous handouts to pensioners and low-paid. So Magyar, in a ‘New Deal’, is promising a $1.5bn boost for health, railways and energy. But at the same time, he aims to cut the government budget deficit to under 3% of GDP to speed up euro entry by 2030.  And he also wants to cut taxes for most Hungarians. So there are a few contradictions there. Above all, the structure of the Hungarian economy as a foreign investor vassal will not be touched by either party – indeed more incentives for the multi-nationals will flow. 

The 2022 election saw a turnout of just under 70%, where it has been for several elections. The turnout could be higher in this crucial election. But even if Magyar wins, ending corruption and autocracy won’t be easy. His government is very unlikely to have enough seats in the new parliament for the two-thirds majority necessary to reverse the many measures that Orban incorporated into the constitution over the decades. And if changes are not made to comply with EU rules by end-August, Hungary will lose all this EU funding. But at least the EU leaders will get a more cooperative Hungarian government after 16 years.