Population Decline: Challenge for the New Government

From an economic perspective, demographic trends are vital, as they determine the size of the workforce, tax revenues, pension expenditures and the future trajectory of healthcare spending.

Declining population – and its possible impact on employment – is one of the longer-term challenges faced by the new Hungarian government, headed by Péter Magyar, coming to power this week-end. The issue of Hungary’s population decline is the topic of one of the latest research studies by the Budapest-based GKI Economic Research Co.

Acceleration of population decline
As a starting point, the researchers highlight that on average, a woman in Hungary gives birth to 1.3 children. While this is slightly better than the average of the other Visegrád Four (V4) countries (the Czech Republic, Poland and Slovakia), it remains significantly below the 2.1 replacement rate required to maintain a stable population. Consequently, Hungary’s population shrinks year after year, and the proportion of newborns within the total population has also begun to decline recently. This process started 4-5 years later in Hungary than in the other V4 countries, indicating an acceleration of population decline and aging. Hungary has an exceptionally high aging index of 147, meaning there are 147 people over the age of 65 for every 100 people under the age of 14.

Lower revenues, higher expenditures
According to data from the Hungarian Central Statistical Office (KSH), the shrinking population is accompanied by a decrease in employment: in the first quarter of 2026, the number of employees fell by 65,000 compared to the same period of the previous year. GKI researchers expect the number of employed persons to drop to 4.388 million (-5.2%) by 2030 compared to 2025, due to demographic reasons. Even in the short term, this results in lower revenues and significantly higher expenditures for the state budget. While the narrowing labor supply strengthens workers’ bargaining power and boosts wage growth, it presents significant cost pressures and recruitment difficulties for companies. In contrast, the rise of artificial intelligence and automation triggers opposing trends; however, the final outcome and precise scale of these two conflicting forces remain uncertain for now.

Rising pension expenditures
Between 2026 and 2030, budget revenues are expected to drop by a total of HUF 680 billion (at current prices) due to lower employment-related taxes and contributions, as well as a decline in VAT revenues. Meanwhile, are rising: demographic changes are projected to increase pension payouts by HUF 230 billion under the current system (at 2025 prices). Should further welfare measures be implemented, these costs will rise even higher.

No short-term reverse in trends
Since 2010, migration flows have intensified in both directions; however, the dynamics of immigration have consistently managed to offset emigration. As a result, the net migration balance has been positive every year, contributing an average annual surplus of nearly 18,000 people to the population. In the coming years, the population-boosting effect of net migration may weaken, as immigration largely consists of guest workers whose numbers the new government intends to reduce. Overall, in line with regional trends, no turnaround in demographic processes is expected in Hungary; in fact, unfavorable indicators foreshadow further economic hardships. Since these trends cannot be reversed in the short term, the focus should be shifted toward managing demographic impacts and adaptation.