Hungary’s latest parliamentary elections delivered a political shock: the Tisza opposition party secured a landslide victory, capturing around 71% of seats, the largest majority in modern history. The message from voters was unmistakable.
Viktor Orbán conceded quickly, helping to calm markets and reduce immediate political risk. The transition is expected to be smooth, with government formation by mid-May and parliamentary work starting in early May.
However, the real test lies ahead. While the handover appears orderly, Fidesz-era appointees across key institutions could slow or resist change. Tisza has the mandate, but they must now navigate the system.
The EU funding question
EU funding sits at the center of Hungary’s economic reset. The figures are substantial. The Recovery and Resilience Facility totals EUR 10.4 billion (5% of GDP), comprising EUR 6.5 billion in grants and EUR 3.9 billion in loans. Cohesion funds allocate EUR 21.8 billion (10% of GDP) to Hungary, although EUR 2 billion has already been lost and around EUR 8 billion remains frozen. In addition, the proposed EUR 16 billion (8% of GDP) SAFE defence facility remains unapproved. Combined recovery and cohesion funds, if disbursed regularly, would amount to around 3% of GDP per year, providing a much needed boost to growth amid a currently sluggish and mismanaged Hungarian economy.
Hungary: EU funds
Time is limited. The RRF has a fixed deadline of 31 August 2026, and progress remains partial after years of delays linked to rule-of-law disputes. Unlocking these funds is not merely a technical matter, it is the central economic and political test for Prime Minister Magyar.
Progress depends on three pillars: meeting ‘super milestones’ on judicial independence and anti-corruption, adjusting reforms to accelerate delivery, and executing investments, including forward-looking projects. Confidence in the new government is increasing regarding RRF funds. Around EUR 6.5 billion in grants appears highly likely, with EUR 1 billion to EUR 3 billion in loans also within reach, equivalent to up to 4.5% of GDP.
Early discussions with the European Commission have been constructive, signaling goodwill on both sides. Funds could begin to flow by late 2026, possibly sooner.
According to analysts, these EU funds could add around 40-50 bps to GDP growth in the coming years, on top of the 2-2.7% GDP growth expected between 2026 and 2028. Given the scale of funding, the upside to growth could prove higher.
Beyond this, SAFE defence funding adds another dimension. EUR 10 billion has been requested by Tisza, conditional on stricter controls to limit corruption risks. These funds could support a significant military build-up, pushing defence spending towards around 5% of GDP by 2035, while also supporting domestic industry.
This illustrates why EU funding matters beyond simple stimulus. It can crowd in private investment, restart stalled projects and improve the efficiency of public spending. If unlocked, it would not only support growth, but also enable a more sustained, investment-led recovery.
A democratic reset
During our trip to Budapest in March, we observed that change was already in the air. This election has significance beyond Hungary. It represents the next step in a regional pattern, following Poland and Romania, showing that democratic correction in Central and Eastern Europe remains possible despite years of institutional strain.
The result challenges a prevailing narrative that once illiberal systems take hold, they cannot be reversed. Hungary’s vote suggests otherwise. Change is possible, and it can occur through the ballot box.
The implications extend across Europe. A more aligned Hungary strengthens EU unity, improves policy coherence and reinforces support for Ukraine at a critical moment.
This was not only a national election. It was a signal that democracy in the region can bend, but does not have to break.
Rebalancing east and west
Hungary’s foreign policy is set for a significant reset. The period of close ties with Russia is ending, with energy independence now a clear objective, targeted for 2035, possibly sooner. Even flagship projects such as the Paks nuclear power plant expansion are under review.
However, this does not represent a withdrawal from global capital. Chinese and Korean investors, including BYD, which has invested EUR 4 billion in an EV plant in Szeged that started pilot production in January 2026, and CATL, which has invested EUR 7.3 billion in a battery gigafactory in Debrecen scheduled to begin operations in spring 2026, remain welcome. The shift lies in the regulatory framework, with tighter standards on environmental impact, subsidies and transparency.
The previous model, characterized by reliance on a narrow set of partners, is being phased out. It is being replaced by diversification, balance and reduced geopolitical concentration.
The investor moment
Political resets are typically reflected in asset prices before earnings. Hungary appears to be entering that phase.
This pattern is familiar. Poland, Romania and others experienced similar turning points ahead of major re-ratings. These moments are rare, and markets tend to move ahead of the data.
Investors who wait for complete clarity often miss these shifts. Those who identify institutional inflection points early, and act with discipline, are more likely to benefit.
Hungary is not only changing, it is repricing.
Despite an impressive 63% and 27% USD total return over 1-year and YTD, respectively, and 14% and 41% outperformance of MSCI EM and Eurostoxx over 1-year, the Hungarian market still trades at attractive 9.1x P/E for 2026, with a 26% and 40% discount to MSCI EM and Eurostoxx, respectively. During our visit to Budapest in March, where we met listed companies, local asset managers, senior lawyers, as well as local residents, the shift was already evident before a single vote had been cast. These conversations strengthened our conviction ahead of the election, and we acted accordingly.
Conclusion: Hungary at a strategic inflection point
Hungary now stands at a rare inflection point, where political mandate, institutional reform and external support can align. The scale of the opportunity is clear, but the complexity of execution is equally significant. Delivering on expectations will require speed, discipline and resilience against entrenched structures. If Tisza succeeds, Hungary could emerge not only as a domestic turnaround story, but also as a defining example of democratic and economic renewal in Europe. Markets have begun to price in this possibility, but the outcome will depend on whether policy can match the promise.
