Hungary’s opposition unveils ‘New Deal’ to revive economy and boost living standards

On Saturday, Péter Magyar, leader of Hungary’s opposition Tisza party, announced a bold “Hungarian New Deal” to rejuvenate the country’s stagnating economy through massive investment, predictable economic policies, and anti-corruption measures, speaking to supporters at the party’s congress in Nagykanizsa.

With Tisza holding a strong lead over Prime Minister Viktor Orbán’s Fidesz in most opinion polls, Magyar presents the most formidable challenge to Orbán’s 15-year rule, which has struggled to address rampant inflation and declining living standards.

Hungary’s economy has deteriorated significantly in recent years, severely impacting living standards and fuelling public discontent. According to the European Commission, real GDP growth slowed to a mere 0.5% in 2024, down from 6.5% in Q2 2022, with a 0.4% year-on-year contraction in Q1 2025, driven by declines in industrial output and construction.

Investment has collapsed, with gross fixed capital formation dropping 10.1% in Q1 2025, exacerbated by reduced EU funding due to ongoing disputes over rule-of-law concerns.

Hungary’s export-oriented economy, with exports totalling €130 billion in 2022 against imports of €145.6 billion, faces a persistent trade deficit of €15.6 billion. As 80% of Hungary’s trade is with the EU, particularly Germany, external pressures like potential trade disruptions threaten further economic strain.

Inflation has been a major driver of economic hardship, eroding household purchasing power. Hungary recorded the EU’s highest inflation rate in 2023 at 17.5%, fuelled by a weakening forint, government price caps on staple foods, and elevated global energy prices.

By June 2025, the Harmonized Index of Consumer Prices (HICP) inflation rate had eased to 4.6%, but core inflation remained stubborn at 4.8%, driven by a 9% minimum wage increase, public sector wage hikes, and higher excise duties.

The forint’s depreciation – reaching 379 against the euro in mid-2023 from a low of 430 in October 2022 – has inflated import costs, particularly for energy, with Hungary heavily dependent on Russian supplies.

In 2023, 13% of Hungarians lived below the EU poverty threshold (60% of per capita median income), with the bottom 10% earning just 4% of total income, highlighting severe income inequality.

Living standards have been further strained by rising unemployment and declining real wages. The unemployment rate climbed to 4.5% in 2024, with job vacancies shrinking, and is expected to dip only marginally to 4.3% by 2026.

Real wages, battered by inflation peaking at 24.5% in December 2022, have yet to recover fully despite nominal wage growth spurred by government policies.

Hungary’s Gini coefficient of 0.269 ranks it 11th globally for income equality, but rural poverty and social disparities persist, worsened by an aging population and a low birth rate of 1.59 births per woman.

While household consumption grew by 3% in Q1 2025, supported by wage increases, this was offset by weak investment and trade challenges.

Magyar’s “Hungarian New Deal” seeks to reverse these trends with a €20 billion plan to unlock EU funds frozen due to Brussels’ concerns over corruption and democratic erosion – charges Orbán denies. The plan prioritizes €500 billion annually for healthcare reform, a large-scale rental housing and home construction program, modernisation of state railways using EU and national funds, and investments in energy efficiency and education.

Magyar also vowed to combat corruption by repurchasing state assets allegedly misappropriated over the past 15 years, addressing a key barrier to private investment.

Hungary’s budget deficit, which ballooned to €2.8 trillion (HUF 2,773.6 billion) in H1 2025, or 58.1% of the annual target, underscores the fiscal challenges. Projected at 4.6% of GDP in 2025, with public debt at 74.1% of GDP, the deficit reflects heavy spending on wages and subsidies.

With parliamentary elections looming next year, Magyar’s vision contrasts sharply with Orbán’s policies, which have struggled amid global challenges like the COVID-19 pandemic, the Russia-Ukraine war, and the energy crisis. Orbán’s 2026 election-year budget, featuring tax cuts for families, aims to bolster Fidesz’s support but risks further straining fiscal resources.

Public frustration is palpable, as voiced by Edit Piroska Borsi, a retired teacher at the congress: “People are fed up with this regime. And Tisza is a kind of ‘collecting party’ which stood behind all this (discontent). People want change.”

With Reuters, edited by g.g.

Caption: Leader of the Hungarian opposition Tisza Party Peter Magyar delivers his speech during the party congress in Kanizsa Arena in Nagykanizsa, Hungary, 12 July 2025. EPA/Boglarka Bodnar