​The 2023 European Commission Country Report on Hungary provides a comprehensive analysis of the nation's economic performance, fiscal health, and structural challenges within the framework of the European Semester. Between 2017 and 2022, Hungary's GDP per capita increased from approximately 69% to 74.7% of the EU average, indicating a notable convergence towards EU income levels. The labor market showed significant improvement, with an employment rate of 80.2% and an unemployment rate of 3.6% in 2022, both outperforming EU averages. However, despite these gains, material deprivation remains among the highest in the EU, suggesting that economic growth has not been evenly distributed across all societal groups. 

Hungary's economic expansion was bolstered by fiscal and monetary stimuli, leading to one of the highest investment rates in the EU since 2017. Nevertheless, the composition of investments shifted from productivity-enhancing assets, such as machinery and intellectual property, towards construction, limiting potential productivity gains. In 2022, labor productivity in Hungary was 32% below the EU average, highlighting the need for structural reforms in education, innovation, and the business environment to foster sustainable productivity growth.

Expansionary fiscal policies and strong domestic demand contributed to a deterioration of the external balance, with the current account moving from a surplus to a deficit of 8.2% of GDP in 2022. Inflationary pressures intensified, with the Harmonized Index of Consumer Prices (HICP) reaching 25.9% in the first quarter of 2023, the highest in the EU. Factors such as rising energy prices, currency depreciation, and indirect tax increases exacerbated inflation, while policy measures like interest rate ceilings and subsidized loans limited the effectiveness of monetary tightening.

The implementation of Hungary's Recovery and Resilience Plan (RRP) has faced delays, primarily due to concerns over judicial independence and the protection of EU financial interests. The plan includes 27 "super milestones" aimed at addressing these issues, but as of the report's publication, no payments had been disbursed under the RRP. Swift and effective implementation of the plan is crucial for advancing structural reforms and ensuring sustainable economic growth.

In summary, while Hungary has made progress in economic convergence and labor market performance, significant challenges remain. Addressing structural issues in productivity, inflation control, and the effective implementation of recovery plans are essential for ensuring long-term economic resilience and alignment with EU standards.