THE LEGATUM PROSPERITY INDEX™ 2016

Bringing Prosperity to Life

Hungary

Ranked 47th of 149

At a glance

Ranks

47 th on the Legatum
Prosperity Index™

52nd
56th
46th
38th
50th
38th
46th
114th
93rd

SUB-INDEX RANKINGS

In the Prosperity Sub-Index rankings, Hungary performs best on Safety & Security and Education and scores lowest on the Social Capital sub-index.

Visit our Rankings table to see how Hungary compares to other countries.

Prosperity Gap

The ‘Prosperity Gap’ takes a country's GDP and uses it as the yardstick to measure a nation's expected Prosperity Index ranking.

Hungary continues to run a prosperity deficit, though it is considerably lower than either that of Russia or Kazakhstan who have similarly GDPs per capita. However, Poland, has closed its prosperity gap over the same time period and now has a prosperity surplus with a GDP similar to that of Hungary’s.

Note:
In the chart above, each dot represents a country. The curve shows the general tendency with which prosperity increases as GDP per capita increases. If a country falls below the curve, then we can say that compared to all other countries, it is under-delivering prosperity for its citizens. Likewise, if a country rises above the curve, then we can say that it is over-delivering prosperity for its citizens. Learn more about the Prosperity Gap here.

Alternatively, have a look at the Prosperity Gap view on our Rankings table for a full list of countries and to see how each of them are performing on the various sub-indices.

Commentary

Since 2007, Hungary has slowly moved down eight ranks in the Prosperity Index to 47th with its overall prosperity score remaining almost unchanged throughout. In some sub-indices, Hungary has seen improvements in common with regional trends, while in others – notably Governance, Personal Freedom, and Social Capital – it has undergone a decline, in contrast to developments in its region. Hungary is a member of the OECD, but performs below the OECD average in all sub-indices.

In the Economic Quality sub-index, Hungary has moved down 12 ranks over the past decade to 52nd, a position it had held for the past two years. Nevertheless, this is an improvement upon its performance during the post-2008 financial crisis years when its lowest recorded rank was 57th in 2013, reflecting the recovery of its economy.

There are causes for concern, however, that Hungary’s GDP growth masks important issues, notably poverty. There has been an increase in poverty over the past decade: around 15% of Hungarians live at the national poverty line, 2.6% more than in 2007 and the Hungarian Central Statistical Offices (KSH) reported in 2015 that, in fact, over 35% of Hungarians live below the poverty line. Following this report, that appeared to contradict the government’s narrative on economic progress, the KSH stated that it would not release further data on poverty. Among OECD members, Hungarians are the least satisfied with their current income – only 5% of the population. Trade barriers have also increased and anti-monopoly policies have become less effective over the past decade, while a large percentage of Hungary’s youth emigrate for better job opportunities.

Hungary’s score in the Governance sub-index is considerably lower than the OECD average and the country has moved down seven ranks in the Governance sub-index over the past ten years. Although governance in Hungary was already plagued with corruption and cronyism, a notable downward trend is seen post 2011. Liberal democracy has been gradually undermined in Hungary – particularly in areas of press freedom and the independence of judiciary. The Constitutional Court’s powers were weakened, previously independent institutions have had their seats filled with party loyalists, and electoral law was changed to create electoral districts which would be advantageous towards the government. In 2014, These constitutional changes have been heavily criticised by the European Commission, who launched infringement proceedings against Hungary in 2012 which were withdrawn after minor concessions were made in what has been termed as the Hungarian Prime Minister’s ‘strategic retreat.’

The Prosperity Index reports that Hungary’s legal system has become less efficient in challenging regulation, its government less transparent, its judicial independence compromised, and that regulatory quality has decreased over the past decade. After Japan, Hungary has the fewest women in parliament: they make up just 10%. These developments are certainly concerning for the country’s future prosperity and have contributed to country’s growing prosperity deficit.

Hungary’s Governance score over the past decade
Liberal democracy faces challenges in Hungary
Governance in Hungary, OECD and the EU.
Hungary lags behind its OECD and EU peers in terms of Governance.

With strong anti-immigrant, nationalist rhetoric and negative trends in media independence, it is unsurprising that Hungary has also seen a decline in the Personal Freedom Index. It has moved down 17 ranks over the past ten years, especially after 2011. There has been a notable decline in tolerance for ethnic minorities and immigrants: 15% fewer people believe their area is a good place for ethnic minorities and 12% fewer people believe their area is a good place for immigrants since 2007. Hungary’s civil liberties ranking has also gone down, while press freedom became considerably worse. This correlates with the government’s new ‘media reform package’ which was passed in 2011 to create a Media Council headed by a president appointed directly by the Prime Minister. The constitution was amended to remove a ban on information monopolies.

This increase in nationalist policies and populist rhetoric, not to mention the financial crisis and increased poverty, may have had an effect on Social Capital in Hungary. Hungary has moved down 38 ranks in the Social Capital sub-index since 2007 to 114th and there was an even more notable drop after 2013 when it moved down 48 ranks in one year. Volunteering for organisations and donations to charity remain particularly low. Neighbouring Romania, by contrast, has seen its Governance, Personal Freedom, and Social Capital improve over the same period with a lower GDP. Unless Hungary can turn these trends around, it faces the very real possibility of being left behind by its neighbours in delivering rising prosperity to Eastern Europe.

 Level of Personal Freedom in Hungary and Romania since 2007
Hungary’s Personal Freedom score declines while neighbouring Romania experiences the opposite.

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Data

How to read this graph:
When comparing multiple countries on a spider chart, data points that appear
further away from the center represent a better performance to the points that are closer to the center.