Battle for Hungary: Does Orbanomics need fixing?

Economic challenges await no matter who wins next month’s election

Hungarian opposition leader Peter Magyar has promised a “New Deal” to revive the country’s economy. But will a cash influx from Brussels be enough to win voters over?

Across the Western media, Hungary’s April 12 election has been pitched as a geopolitical and ideological battle. On one side stands Viktor Orban: the incumbent prime minister resisting Brussels’ diktats on migration and LGBT ideology, and blocking the EU’s continued funding of the Ukrainian war effort. On the other, Peter Magyar: the centrist promising to mend ties with Brussels and wean Hungary off Russian energy imports.

These issues – along with accusations of spying, counter-spying, and foreign interference – have dominated headlines. But for many voters, the choice will be a more simple one: which candidate will leave them, and the country, better off financially? And after 16 years of ‘Orbanomics’, can Magyar offer any meaningful change?

What is Orbanomics?

Viktor Orban’s economic policies were shaped by the tumult of the 1990s and the global financial crisis of 2008. Throughout the 1990s and early 2000s, Hungary’s economy was heavily reliant on foreign investment and privatization-led growth. By the end of the 1990s, almost a fifth of Hungary’s enterprises were in foreign hands. Its reliance on external markets and foreign capital, soaring external and public debt, and widespread borrowing in foreign currency left the country vulnerable, and the system came crashing down in 2008.

Hungary was the first EU state to require a joint IMF/EU assistance package during the financial crisis. Holders of Hungarian foreign debt dumped their bonds, and as the country’s GDP contracted by around 6-7% in 2009 and unemployment passed 10%, the IMF demanded strict spending cuts, wage cuts, and other austerity measures.

Orban viewed both the privatization of the 1990s and the IMF-mandated austerity rules as affronts to Hungary’s sovereignty. Once elected in 2010, he set out to build a stable, sovereign, and shock-proof economy.

He achieved this by nationalizing large swathes of the banking, telecoms, and energy sectors, as well as private pension funds; the government forced banks to convert foreign currency mortgages into Hungarian forints; native population growth was prioritized over immigration; and welfare recipients were employed in large-scale public works projects.

With the EU mandating a strict 3% limit on Hungary’s budget deficit, Orban turned to emergency taxes on corporations to bolster public finances, service Hungary’s debt, and in some cases, force foreign owners to sell their firms to Hungarians.

Foreign investment was still encouraged. More than a dozen auto manufacturers – including Audi, BMW, and Mercedes-Benz – opened factories in Hungary, together building nearly more than 800,000 vehicles per year in the country. At present, the auto industry accounts for around 5% of Hungary’s GDP and a quarter of its industrial output.

Did Orbanomics work?

Initially ridiculed by the Western neoliberal establishment, Orban’s model of state capitalism quickly paid dividends. Hungary repaid its IMF loan in 2013, and posted its first budget surplus since the crash.

By 2014, Hungary’s economy was among the fastest-growing in the EU, with GDP rising by 4.9% that year. Unemployment fell from 11.2% in 2010 to 3.4% in 2019. Average wages have almost quadrupled during Orban’s 16 years in power, rising from around €555 per month in 2010 to an all time high of €2,031 last December. Meanwhile, Orban’s refusal to abandon Russian energy imports has ensured that household energy prices are lower in Hungary than in any other EU country. 

That these gains were achieved despite opposition from the EU and neoliberal establishment has made Orbanomics a model for other sovereignists and nationalists in the EU. Poland’s Law and Justice (PiS), France’s National Rally, and Italy’s Lega parties have all adopted integrated elements of Orban’s policies into their economic platforms.

However, Western reporters are not lying when they describe Hungary’s economy as “troubled” or “faltering.” Since 2004, EU funding has accounted for around 3.5% of Hungary’s GDP. Much of this funding has been frozen since 2022 over Brussels’ concerns about judicial independence in Hungary, and over Orban’s banning of LGBT propaganda and refusal to accept non-European asylum seekers.

Hungary currently has lower growth than its EU peers, stagnant at 0.5% in 2024 and 2025. The country’s debt to GDP ratio has passed 75%, and the cost of servicing that debt stands at around 5% of GDP – the highest in the union. A stimulus package rolled out by Orban in 2022 briefly triggered double-digit inflation, and although the inflation rate has sat steady in the low single digits since late 2023, food prices have only started to come down as of December. Alleged cronyism and low productivity, meanwhile, haunt the country’s nationalized industries.

Some of these headwinds are caused by factors beyond Orban’s control. Interest rates have risen worldwide after the escalation of the conflict in Ukraine, meaning Hungary’s expansionary policies have become more expensive to maintain.

Additionally, while Germany’s largest car manufacturers are still moving production to Hungary to combat rising costs at home – Mercedes-Benz shifted production of its entry-level A Class to its Kecskemet plant in January – the continued decline of the German auto industry, coupled with heavy US tariffs, means that these factories, plus the jobs and tax revenue they provide, may not be around forever.

What has Magyar promised?

Magyar has pitched a “Hungarian New Deal” to voters, promising to create a “predictable” environment for foreign investors and implement a crackdown on corruption. However, he has also called for huge public spending, promising to pump money into housing, healthcare, education, and railways.

To achieve this, Magyar is banking on the EU unlocking some €20 billion in frozen funds, on rolling back some nationalization, and on imposing a slew of new wealth taxes, payroll taxes, and levies on small businesses. Magyar has also proposed replacing Hungary’s flat 15% income tax with a three-tier progressive system.

What has Orban promised?

Passed last year, Orban’s 2026 budget included steep tax cuts for families, financed by external borrowing and more special levies on banks, energy firms, and the retail sector. In a speech last month, the prime minister pointed to the country’s current low inflation rate of 1.4% and to the provision of low-interest housing loans and minimum wage hikes as proof that Orbanomics can still benefit the average Hungarian.

What does the future look like for Hungary?

No matter who wins on April 12, Hungary’s economic problems won’t evaporate overnight. Orban’s tax cuts and wage hikes may have put more money in Hungarians’ pockets, but this has been achieved at the cost of rising debt, budget deficits, and the underfunding of key services.

Magyar’s policies, on the other hand, risk strangling consumer spending and further restricting economic growth. According to figures published by Orban’s Fidesz party, the average working professional will see their annual take-home pay decrease by €641 if Magyar’s progressive tax system comes into force.

Magyar has pledged to end Hungary’s reliance on Russian oil and gas, although he envisages a slow phaseout between now and 2035. This clashes with the EU’s projected cutoff date of 2027, and it is unclear whether Magyar, Brussels’ preferred candidate, would move his phaseout date up to meet the EU’s target. Hungary’s Szazadveg Foundation, a conservative think tank, has claimed that household energy bills would triple if the country were to abandon Russian energy.