The center-right, pro-European opposition party Tisza has secured a landslide majority in the new Hungarian parliament, ending 16 years of Fidesz government led by Viktor Orbán and opening a new chapter for the country and its economy.
Despite an electoral victory that will be welcomed by the markets, Hungary faces significant economic and political challenges at this moment of transition to a new government.
The immediate priority for Péter Magyar’s Tisza party is to unlock EU funds, which have been frozen due to rule of law violations by the previous government and amount to about 14 billion euros. It seems unlikely that the government will be able to make the necessary legislative changes quickly enough to meet deadlines and access most of these funds.
Although the government holds a qualified majority, it is likely to face resistance and obstacles in the short term from institutions influenced by the previous government. Nevertheless, part of the RRF funds should be unlocked before the August deadline and, in due course, also the cohesion funds.
The Hungarian economy has been stagnating since 2018, lagging behind other economies in the region. Limited access to EU funds, weak consumer demand, and an investor confidence climate that has led to a contraction in both domestic and foreign investments have all contributed to this stagnation. The injection of EU funds could provide a much-needed economic boost, particularly for local infrastructure, healthcare, and public transport—key sectors to improve living standards and address voters’ concerns. An improvement in consumer and business confidence would also be greatly helpful.
Budget challenges remain. Although immediate deficit cuts are not necessary, presenting a credible medium-term economic plan is crucial to stabilize the country’s rating, currently with a negative outlook. Growth recovery, supported by EU funds and improved sentiment, could enhance public finances’ health and strengthen investor confidence.
Improving relations with the EU and combating corruption and rule of law violations are essential to ensure long-term stability and improve the country’s perception. Addressing these issues is as important for market sentiment as concrete economic data. A credible macroeconomic policy, combined with the resumption of EU funding, could strengthen Hungary’s growth prospects, stabilize its fiscal position, and improve its international reputation. While some challenges remain, the new government has a unique opportunity to tackle systemic issues and foster economic recovery.
