Why Hungarian families live worse than anyone else in the EU

It is encouraging that there are things that can be changed so that we are not last in the EU in terms of consumption. What are they?

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  Stop prices from falling

  
  

In recent years, almost everything has become more expensive (food, utilities, fuel, etc.) Prices have sometimes risen faster than wages. It's like having a smaller and smaller basket, even though we work the same amount. If prices stop going up, families can finally breathe a sigh of relief and stop wondering every month what they don't have.

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  We really should be able to live on our wages

  
  

Some people feel that "even though I got a pay rise, I'm still not getting out of it". This is because money is worth less. The point would be to make more and more of your salary - not just more on paper, but more in the shop.

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  Government should spend smarter

  
  

The state spends a lot of money, but not always where it is most needed. If more aid went to ordinary people's lives (e.g. childcare, doctors, housing), there would be more left in families' pockets.

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  Taxes should be cut

  
  

Nowadays, when you go to the shop, you have to pay 27% VAT on almost all products, one of the highest in the EU. This means that a fifth of what we buy goes straight to the state. If this were reduced, life would be cheaper, especially for basic things like bread, milk, nappies, medicine, etc.

This means that the EU pays about 5% of the tax on goods.

Why would this be good for everyone? Because if we have more money in our pockets at the same price, then:

• we can buy more,


• we can provide a better quality of life for our families,


• less people go abroad to work because we can live better at home,


• and the economy spins better when more people spend more.

We don't have to resign ourselves to being last, but to get ahead, the state has to step up! People can only consume more if they can get by more easily on their salaries, if they are not eaten up by inflation and if they are not taxed to death.

It is important to add that the reality is much more complex. The above points are just the tip of the iceberg, there are much more complex economic, social and political processes at work in the background that require deeper analysis. But to make it clear to everyone why we are at the end of the line and what can be done about it, it is worth taking a simplistic view of the basics. But now let's see what the numbers and analysis tell us about the real causes!

Each year Eurostat publishes the AIC indicator for each country as a percentage of the EU average. This paper presents the evolution of AIC for the year 2024, based on the latest data from Eurostat 2025, released on 18 June 2025, giving an overview of the situation in the Member States of the European Union. According to Eurostat analysis, Hungarian household consumption was the lowest in the EU. Actual Individual Consumption (AIC) is an indicator that measures the total value of goods and services actually consumed by households, taking into account differences in price levels across countries. The indicator is calculated on the basis of per capita consumption expenditure expressed in purchasing power parity (PPS), i.e. how much an average resident consumes in goods and services in a year compared to the EU average, after adjusting for price differences. This makes AIC a particularly suitable indicator for international comparisons of living standards. It is important to emphasise that AIC is a direct indicator of household material well-being, as it includes not only goods purchased directly by households, but also items provided by government or non-profit organisations for household consumption (e.g. health care, education). While GDP is primarily a measure of economic performance, AIC is a better measure of the material well-being of the population.

Actual consumption levels in the European Union (2024)

From Eurostat

The highest AIC level was recorded in Luxembourg, where consumption was 41% above the EU average. Luxembourg was followed by the Netherlands and Germany (20% and 18% above the average respectively). Six other Member States were also above the EU average, including Belgium and Austria with AIC levels 12% higher. Several large Member States were around the EU average (roughly within ±10%), such as Italy and Spain, as well as Cyprus, Slovenia, Lithuania and Portugal. In 2024, Hungary had the lowest AIC value (72%), followed by Bulgaria and Estonia, both with 74% of the EU average. Poland and the Czech Republic were close to 85-90%.

Poland and the Czech Republic were the EU's lowest performers.

9 EU countries had consumption above the EU average, while 18 countries had consumption below the average in 2024. In 2014, the highest per capita consumption was nearly three times the lowest, falling to twice the lowest by 2024. In other words, there is a gradual convergence: consumption in poorer countries has converged somewhat with that of richer countries. However, not all countries have benefited equally from this catching-up process.

The situation in Hungary

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Bulgaria had the lowest per capita consumption in the EU between 2014 and 2023. Although Hungary's AIC rose slightly (from 70% in 2023 to 72% in 2024), Bulgaria made a much bigger improvement, jumping from 70% to 74% over the same period. As a result, Hungary slipped to the bottom of the ranking in 2024, while Bulgaria overtook Hungary. This means that the relative gap between Hungary and the other Member States has increased substantially in recent years.

Compared to other countries in the region, Hungary's lag is striking. Previous data already indicated that Hungary is gradually losing ground. The long-term trend of Hungary's AIC indicator shows that Hungary has only marginally caught up with the EU average year on year, while the poorer countries in the region have been catching up dynamically. At the beginning of the 2010s, there were still countries (e.g. Croatia, Latvia, Estonia) that were also below the EU average. The same is true for Romania, which was behind us for a long time before, but is now significantly ahead.

Romania

Hungary is therefore not only lagging behind the old EU Member States, but also the countries that will join with it or later.

GDP/capita and AIC/capita in purchasing power parity terms compared to the EU average (=100%) (2024)

From Eurostat

Correlations between AIC, GDP and price level

The question arises how actual individual consumption relates to other indicators of the economy, in particular GDP and purchasing power. Generally speaking, GDP per capita and the AIC indicator lead to similar rankings, as both are correlated with countries' development. However, the differences are much larger for GDP, while the distribution of AIC is more even: household consumption levels are less dispersed than GDP levels across the EU. This is because GDP includes factors (e.g. corporate profits, capital gains, export performance) that are not necessarily reflected in household consumption. In contrast, AIC more directly reflects the welfare enjoyed by households.

The case of Hungary illustrates how the ranking of GDP and AIC can differ. In 2024, Hungarian GDP per capita was ~77% of the EU average, making Hungary "only" the fifth weakest among the Member States. In contrast, Hungary ranked last in the consumption index with 72%. In other words, less of the income generated in the country is reflected in household consumption than in other EU countries. There are several possible explanations for this: on the one hand, the profits of the highly foreign-owned corporate sector (e.g. the profits of multinational companies) do not enrich domestic consumption, and on the other hand, the distribution of income and the characteristics of state redistribution also influence how much of GDP is passed on to households in the form of consumption. Moreover, in some countries GDP can be artificially high without actually making the population richer (a classic example is Ireland, where GDP is more than twice the EU average, while AIC per capita is close to the EU average).

Purchasing power and price levels are also important in interpreting AIC. Since AIC is expressed on a PPP basis, the level of prices is also an important issue. In 2024, Hungary had the lowest price level in the EU for consumer goods (~60% of the EU average). This means that most goods and services are cheaper in Hungary than elsewhere in Europe. Yet, even with these low prices, our country is the country where people consume the least. Bulgaria's price level is similarly very low (~50-55% of the EU average), and Bulgaria's AIC indicator is close to ours. The opposite is the case in Denmark or Ireland, where price levels are well above the EU average (20-30% higher), yet their consumption levels are higher than average. So high prices go hand in hand with high incomes and consumption in these countries. In the case of Hungary, low prices are associated with low income levels, so consumption at purchasing power parity remains low.

Why has Hungary slipped to last place? Reasons and explanations

There are two factors that have contributed to Hungary's real per capita consumption lagging behind other EU Member States. One of the most important is record high inflation.In 2022 and 2023, Hungary had the highest inflation in the EU, with annual inflation in 2023 exceeding 17%, far outstripping the EU field. This drastically reduced households' real income and purchasing power, as wage growth failed to keep pace with prices. As a result, household consumption has fallen. High inflation was partly driven by external factors (energy price explosion, effects of the war in Ukraine), but was also exacerbated by domestic specificities such as the 2022 election spending, loose fiscal and monetary policy and food market turmoil.

Another important factor is wage and income trends. Although Hungary has seen almost steady real wage growth since 2010, this has lagged behind wage catch-up in neighbouring countries. In Romania and Bulgaria, for example, wages have risen much faster (from a low base) over the last decade, allowing for higher consumption. Here, on the other hand, net earnings fell by the end of 2022 and in 2023.

In addition, the weakening of the forint exchange rate also plays a role: although the AIC is measured on a PPP basis (so the exchange rate effect is indirect, through the price level), the persistently weak forint has caused high imported inflation, which has also eroded purchasing power.

In the longer term, structural reasons also explain the low level of domestic consumption. In Hungary, household consumption expenditure as a share of GDP is relatively lower than in many other countries. One reason for this is that profits from export-oriented sectors (automotive, electronics, etc.), which account for a significant share of GDP, are less channelled into domestic consumption. Some of the income generated is channelled abroad (in the form of dividends) or used for business investment rather than for household spending. Moreover, the specificities of the Hungarian tax system and state redistribution also affect consumption: in recent years, high levels of consumption taxes (VAT, excise duties) and the erosion of the real value of certain social benefits may have curbed household spending. Social inequalities are also relevant: if a large share of income is concentrated in higher income groups, they spend only part of it on consumption, while lower income groups, who consume a larger share of their income, receive less - this can also pull down aggregate AIC.

Finally, the demographic factor cannot be ignored. Hungary's population is on a declining and ageing trend. An increase in the proportion of older, inactive population tends to moderate consumption dynamics, as the consumption structure and volume of retired people differs from that of younger, active earners - they typically spend less on, for example, consumer durables. While this reason does not directly explain our international ranking (as other countries are facing similar demographic problems), it does affect our long-term consumption potential.

In summary, Hungary's AIC ratio becoming a top performer is the result of a combination of factors: short-term macroeconomic shocks (especially the rising inflation) are as important as the longer-term stalling of the convergence process and the structural characteristics of the economy. While other Eastern European countries have been catching up rapidly in household consumption, the growth rate in Hungary has been more moderate and has even slowed down in recent years.

Futures and prospects

Hungary's ranking last in the EU in terms of real consumption per capita is a serious warning sign for economic policy. In terms of economic policy implications, it calls for an increase in household disposable income and consumption possibilities. If domestic consumption stays stuck at a persistently low level, this could also limit economic growth, as domestic demand is an important component of GDP. A country whose population consumes little is more exposed to export and investment developments; a weak domestic market makes growth uncertain, especially in times of external shocks. Therefore, policymakers should consider measures to stimulate domestic consumption - for example, through targeted tax cuts (especially in consumption taxes), policies to support real wage growth, or strengthening the social safety net for the most vulnerable groups.

From a social welfare perspective, the record-breaking AIC figure means that the average Hungarian household has the lowest material living standards in the EU. The longer-term consequence of this could be increased emigration, as countries with higher living standards are more attractive to workers. Migration from Hungary has already been significant in recent years; if wage and consumption catching-up does not improve, this process could continue, leading to labour shortages and demographic problems. Internal social tensions may also increase: a key factor for people's subjective well-being and satisfaction is that they feel that their living standards are improving. If we are also last in this respect, according to Eurostat data, it could undermine public confidence and satisfaction with government.

From a convergence perspective, Hungary's lagging behind shows that it has lost ground in recent years in catching up in terms of consumption. While the goal used to be to get close to the EU average (both in GDP and living standards), now we seem to be more at risk of moving away. If this becomes permanent, our country could be pushed to the economic periphery of the EU. This also runs counter to the EU's cohesion ambitions - since one of the aims of EU subsidies and policies is to reduce differences in living standards between member states. Unless Hungary can get back on a faster growth and catching-up path, it could risk losing its relative competitiveness and attractiveness in the region in the future.

Hungary's last place in the AIC ranking is a warning sign that the situation of households needs to be addressed. Boosting consumption is important not only for the welfare of the population, but also for the sustainable growth of the economy as a whole. This will require bringing down and containing inflation, helping wages catch up, translating corporate profits and productivity gains into household incomes, and improving public redistribution. If progress is made in these areas, Hungary can resume its convergence path and gradually catch up with the EU countries with higher consumption levels. Otherwise, we could fall permanently behind, which poses serious challenges both economically and socially. So the current data are both a diagnosis and a call for action: a diagnosis of where we stand in terms of living standards in Europe, and a call for appropriate political and economic action to reverse the trend," says a summary analysis by GKI Economic Research.

How much money would be needed for a peaceful life in Hungary

- read our previous article!