Dr Zoltán Pogátsa on the Hungarian economy: neither the golden age, nor an apocalypse

This article is available for reading in Trade magazin 2025/8-9.

Dr. Pogátsa Zoltán
közgazdász, szociológus,
habilitált egyetemi docens

Employment yes, productivity no

The Hungarian economy is facing serious challenges, but it is functional and not fundamentally threatened by collapse. According to the economist, the main risk lies not in the numbers but in the narratives. Well-founded strategic decisions are needed, especially in areas where the greatest lag is evident today – productivity, the knowledge-based economy, domestic consumption and human capital development. One of the outstanding achievements of the past decade is the nearly one million new jobs created in Hungary, which is remarkable even at the EU level. At the same time, this growth has been extensive: more people are working, but we aren’t producing proportionally more.

Where do we stand in the global value chain?

According to Zoltán Pogátsa, the structural problem of the Hungarian economy is that it is located in the low added value stages of the value chain – characterised by assembly, logistics and low-skilled labour. For instance while Taiwan’s semiconductor industry is based on ultraviolet photolithography, Hungary’s debates about the added value of the battery and automotive industries are secondary in this comparison. Competitiveness requires economic development policies that shift the country’s industrial structure towards the high-value end of the chain. Although Hungary’s GDP and productivity have grown in absolute terms, our position relative to the EU average remained virtually unchanged between 2010 and 2022: productivity started at 75% and remained at the same level after 12 years.

Why aren’t Hungarians consuming?

Although official statistics show real wage growth, the share of household consumption in the GDP has decreased from nearly 70% to below 60%. Zoltán Pogátsa explained: this isn’t a contradiction, but a logical consequence of the Hungarian income structure. The bottom 60-70% of the population can’t be considered middle class in the European sense, as their purchasing power lags behind the EU average and they have little savings. In 2022–2023 the lowest income deciles were particularly hard hit by the highest food price rise in the EU (nearly 50%). This group is cautious when considering its future spending and is holding back on consumption, which is leading to persistently low domestic demand.

Human capital: the main reason for lagging behind

The main reason why the Hungarian economy is lagging behind isn’t the external environment or fiscal balance, but the persistent underfunding of human capital, emphasised Zoltán Pogátsa. Although Hungary spends roughly the same proportion of its GDP on education as the EU average (5%), a significant portion of these resources goes to infrastructure investments, rather than teacher salaries or content development. As a result, teacher salaries are among the lowest in the EU, PISA results are poor and language skills are the worst in the EU. New industrial investments aren’t enough to catch up – only a strategy that invests in human capital, knowledge and innovation can bring about a real breakthrough.