Hungary’s recovery and resilience plan

RRF FUNDED PROJECTS IN HUNGARY

WHAT’S IN THE PLAN?

The reforms and investments in Hungary’s plan  are helping it to become more sustainable, resilient and better prepared for the challenges and opportunities of the green transition and digital transition. Following Council approval of Hungary’s plan on 15 December 2022, Hungary’s recovery and resilience plan was updated on 8 December 2023 also to introduce a REPowerEU chapter.

• 47 investment streams and 67 reforms
• 67.1% of the plan will support climate objectives 
• 29.1% of the plan will foster the digital transition.    

The transformative impact of Hungary’s plan is the result of a strong combination of reforms and investment which address the country’s specific challenges. The reforms address bottlenecks to lasting and sustainable growth by strengthening the rule of law (including measures to fight corruption and improve competition in public procurement), judicial independence, energy, education and public finances. Investment is targeted at the green and digital transitions (in particular energy and sustainable transport), as well as tackling challenges related to health and skills.

All measures have to be implemented within a tight time frame, as the Regulation establishing the Recovery and Resilience Facility requires all milestones and targets within the national plans to be completed by August 2026.

Hungary’s plan includes 13 reforms and 16 investments to reduce its reliance on fossil fuels, in line with one of the 's objectives.

To finance this increased ambition, Hungary has requested to take up €3918 million in loans, in addition to Hungary’s REPowerEU grant of €700.5 million.

Key measures for REPowerEU

The REPowerEU reforms and investments mutually reinforce each other and will help build an energy system fit for the future with a high share of renewables.

The REPowerEU chapter includes measures that will modernise and strengthen the electricity sector. Reforms are related to the introduction of dynamic pricing in the retail electricity market, improving regulatory reserve markets, strengthening the role of energy communities and aggregators, incentivising the uptake of electricity storage, increasing the number of consumers to use smart meters and harmonising the ways the connection application rules are applied by the distribution system operators. Several measures aim to boost the integration, production and more effective use of renewables. These range from grid development to facilitate for the integration of further energy from renewable sources to supporting the deployment and use of renewables, such as solar energy, renewable hydrogen, geothermal and sustainable bio-methane.

In addition, significant investments, some of which will be implemented through financial instruments, will also boost sustainable transport and energy efficiency of households, companies and the public sector. The REPowerEU chapter also includes measures aiming at industry decarbonisation, upskilling and reskilling of the workforce and increasing production capacities and services for the green transition.

In the area of climate and environmental policies, Hungary’s challenges include the need to raise the ambition in the reduction of greenhouse gas emissions, to increase the use of renewable energy sources, to reduce the dependence on fossil fuels, to make the building stock more energy-efficient, to decarbonise transport  and improve air quality and water management.

Key measures for the green transition

• The plan supports the green transition through the broad overhaul of Hungary’s electricity regulatory framework and significant energy investments.
  • Hungary will remove regulatory obstacles to the deployment of wind turbines and will improve transparency and availability of the grid connection.
  • The significant investment in grid development will allow for the secure and flexible integration of electricity generated from renewable energy. There will also be support provided for almost 31,000 households for the installation of their solar panel systems.
•  More than €1730 million is dedicated to energy efficiency improvement of households, companies and the public sector. Households and the public sector will receive support for energy efficient renovation or construction of buildings, while companies will in addition to that get support for energy efficient improvement of their production processes. About 2 million square meter of floor area of public buildings will be renovated or newly built leading to 30% reduction of primary energy use. Among others energy efficient renovation and construction of buildings for early age childcare facilities, schools, universities and in the healthcare sector will be financed.
• Measures promoting sustainable transport will also contribute to green transition. Important railway lines and their management system will be modernised and 300 zero-emission buses will be purchased. The infrastructure of trams and trolley buses will be further developed and 51 new will be purchased. The purchase of at least 12 500 electric vehicles and charging stations will be supported.

The modified plan, including the REPowerEU chapter, has further strengthened the focus on the plan on the green transition, devoting 67.1% of the available funds to measures that support climate objectives (up from 48.1% in the original plan).

Digital challenges for Hungary include integration of digital technologies by enterprises, as well as digital skills shortages and access to public data.

Key measures for the digital transition

Hungary’s recovery and resilience plan supports the digital transition with investments and reforms in the education and the public administration, as well as the digitalisation of the health, energy and transport sectors.

• Reinforcing digital skills and modernisation of digital equipment by providing 579,000 digital notebooks to pupils and teachers as well as modern display tools to 3,100 schools, developing digital curricula and digital skills at different levels and fields of education, including green skills (€606 million).
• Investments into digital healthcare, such as IT infrastructure in healthcare institutions, telemedicine solutions, new functionalities for mobile health apps and a remote health monitoring system for elderly people (€488 million).
• Investments into digitalisation of the energy sector include the development of smart transmission and distribution grids and the roll-out of 816 000 smart meters. Digital solutions at energy companies will also be financed to improve the security of electricity supply and the operational efficiency of the electricity system.
• Investment into central traffic management system on railway lines and a reform introducing a national single tariff, ticketing and passenger information system for bus and rail will make public transport more digital, user-friendly and safer.

The modified plan's digital ambition remains high, devoting 29.1% of the available funds to measures that support digital objectives.

Key challenges with an impact on Hungary’s medium-term economic performance include workforce with limited skills, challenges related to research and innovation capacity of domestic firms, material deprivation as well as insufficient access to the labour market, quality education and healthcare for disadvantaged groups.

Key measures in reinforcing economic and social resilience

The plan contains a set of reforms and investments that reinforce economic and social resilience.

• It includes the strengthening of the anti-corruption framework by establishing new independent bodies equipped with the appropriate tools and capacity to act, creating the possibility to challenge in court the decisions of investigative authorities or prosecutors not to investigate or prosecute corruption and corruption-related practices, binding targets to improve competition and transparency of public procurement, requirements for public consultation of stakeholders and easier access to public information.
• The plan also consists of measures to reinforce judicial independence by increasing the powers of the National Judicial Council, amending the functioning of the Supreme Court to shield it from risks of political influence, removing the role of the Constitutional Court in reviewing final decisions by judges at the request of public authorities and safeguarding the possibility of national Courts to refer preliminary questions to the Court of Justice of the European Union.
• For the establishment of modern healthcare the plan supports upgraded healthcare infrastructure and equipment, optimised service provision in the hospital network, developed primary and preventive care through communities of general practitioners providing integrated healthcare services as well as the prohibition of informal out-of-pocket payments by patients to healthcare workers and digitalisation of healthcare services.
• Quality education and social inclusion is expected to be strengthened by promoting a more attractive teachers’ profession through gradual wage increases, improving access to mainstream education for disadvantaged students and for those with special needs, and financial incentives for schools to reduce the segregated enrolment of disadvantaged pupils in just a few schools, support for 3,600 additional early age childcare places as well as social measures in the 300 most disadvantaged settlements experiencing high levels of poverty.
• Reforms promoting the medium and long-term sustainability of the Hungarian pension system, contributing to lengthening working lives and strengthening the adequacy of pensions for lower-income pensioners, combatting aggressive tax planning, simplifying the tax system, and introducing regular spending reviews can contribute to the higher quality of public finances.

The REPowerEU chapter includes support for vulnerable households for energy renovation and training the current and future workforce to acquire green skills.

Hungary’s plan is consistent with the challenges and priorities identified in the European Semester, the annual cycle of coordination and monitoring of each EU country’s economic policies. For a detailed explanation of the European Semester see the following link: The European Semester explained | European Commission (europa.eu)

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