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Context. Supportive macroeconomic policies over the past few years, a favorable external environment, and high utilization of EU funds have contributed to a strong growth rebound and a welcome drop in unemployment. There has also been a continuous decline in vulnerabilities, which has underpinned Hungary's financial stability during bouts of global market volatility. Still, debt levels and associated financing needs remain elevated, thus leaving the economy prone to shocks. At the same time, a weak business environment, low productivity, and labor market problems weigh on Hungary's medium-term growth prospects. While the overall strategy has been successful in maintaining strong growth in the near term, it has also expanded the role of the state in the economy and shifted risks to the public sector. Policy recommendations. Policies should aim at supporting strong, sustained, private sector-led growth while further reducing vulnerabilities.

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