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Table of contents Table of contents.......................................................................................2 Executive summary...................................................................................3 About the research....................................................................................5 Research on poverty by the Equilibrium Institute.............................6 Earnings.......................................................................................................8 Spendings.................................................................................................14 Savings....................................................................................................... 20 Poverty.......................................................................................................24 Perspectives..............................................................................................32 Summary...................................................................................................37 2

Executive summary ● With the overall rise in living standards between 2010 and 2019, methodological and policy debates on domestic poverty have diminished, but poverty has not disappeared. The Equilibrium Institute believes that Hungary can only be more successful and prosperous in the 21st century if it addresses poverty as a national challenge rather than an individual problem. ● This is why the Equilibrium Institute has published its policy proposals on poverty reduction, including recommendations for better poverty measurement. These methodological aspects will be put into practice by the think-tank from 2023 onwards, in order to get a real-time picture of the extent of financial exposure in Hungarian society. ● According to the latest data, since the summer of 2023, a citizen would typically need a net monthly income of 250,000(€643) forints to live on a meagre income. On the other hand, there has been a significant shift in the average level of income needed to make ends meet: respondents believe that they would need HUF 50,000(€130) more per month, or HUF 400,000(€1028) net. At the same time, 45% of respondents are unable to provide the financial conditions necessary for a meagre living. ● Half of the Hungarian population has seen their purchasing power fall over the past three years, which respondents attributed mainly to price rises and new spending. ● Since April 2023, the proportion of people who have moderate or great difficulty in meeting their household's normal expenses has fluctuated between 21 and 24%. In addition, 31% of our fellow citizens feel insecure when they think about their financial and material situation – almost one in three would have their budget disrupted by an unexpected expense. ● Currently, almost two-thirds(64%) of Hungarian households can only finance their everyday expenses with little or no effort. A tenth of respondents feel that they are living in good financial conditions: they have no problems with everyday expenses. 3

● 39% of Hungarians would have a problem covering a 100,000(€257) forint unexpected expense, but could still manage it on their own. At the same time, 32% of those surveyed said they would not be able to cope with such a financial challenge. ● According to the research on poverty by the Equilibrium Institute, one in three Hungarians have asked family members or friends for financial help when they are in a financially vulnerable situation, and a third of Hungarian parents have not eaten enough to feed their child at least once in the past two years. ● The majority of Hungarians(54%) are confident about the near future, as they see no chance of having to cope with financial instability in the next few months. At the same time, 75% of Hungarians expect their household incomes to stagnate, while the majority are pessimistic about the long-term outlook. ● All in all, between a quarter and a third of Hungarians, or roughly 2.5-3 million people, are currently considered poor. In addition, 45-50% of respondents can be said to be living on their income and able to maintain a balanced lifestyle. The remaining 15-20% have no real problems with everyday expenses, are able to save small or large amounts and can cover a major unexpected expense without any problems. 4

About the research 5

Research on poverty by the Equilibrium Institute For most of the past decade, the Hungarian economy has expanded spectacularly and real wages have risen significantly. This improving trend has led to a decline in the poverty rate in our country, according to all available statistics. Nevertheless, Hungary remains one of the poorest countries in the European Union. Based on actual consumption at purchasing power parity, Hungarians consumed 70% of the EU average in 2023, putting us in last place among Member States for the first time since the statistics were first published in 1995. 1 In terms of per capita Gross Domestic Product(GDP) at purchasing power parity in 2023, we are also only 22nd in the EU-27. 2 With the overall rise in living standards between 2010 and 2019, methodological and policy debates on domestic poverty have diminished, but poverty has not disappeared. The Equilibrium Institute believes that Hungary can only be more successful and prosperous in the 21st century if it addresses poverty as a national challenge rather than an individual problem. This is why it published its policy proposals on poverty reduction in 2021, which includes recommendations for better poverty measurement. Since 2023, the think-tank has put these methodological aspects into practice: the Equilibrium Institute has conducted a quarterly public opinion survey on the current level of poverty. This has made it possible to get a real-time picture of the extent of financial exposure in Hungarian society in the context of the economic trends that dominated the last year(inflation, energy crisis, freezing of EU funds). 1 Eurostat: Purchasing power parities(PPPs), price level indices and real expenditures for ESA 2010 aggregates; https://shorturl.at/rqzLe 2 Eurostat: Purchasing power parities and GDP per capita; https://shorturl.at/OURfo 6

In 2024, the Equilibrium Institute will publish a single poverty survey, but with a broader focus than before. The same measurement methodology used in the 2023 surveys has been complemented this year by questions from Ipsos' international survey on poverty and economic insecurity covering ten European countries, in order to make the data comparable with other countries in the future. The research was supported by the Friedrich-Ebert-Stiftung Budapest Office. Methodology The Equilibrium Institute's poverty survey is conducted on a representative sample of 1,000 people, using face-to-face interviews. Together, the respondents represent the population aged 18 and over in the country. The polling data may differ by no more than plus or minus 3.2% from what would have been obtained if all eligible persons in the country had been interviewed. Respondents are selected using a two-stage stratified sampling method, which ensures complete randomization, i.e. all adult Hungarian citizens have an equal chance of being included in the sample. Data collection was carried out by ZRI Závecz Research. Data collection period of the survey: 2 – 9 May 2024. 7

Earnings 8

Average income level considered necessary for living has increased by HUF 50,000(€130) since November In May 2024, the Equilibrium Institute asked for the fifth time how much Hungarians need to live a meagre, average or carefree life on an individual level. According to the most recent survey, since the summer of 2023, t he typical monthly net amount needed by a fellow countryman to live a meagre life has remained unchanged at 250,000 HUF(€643) per month. In contrast, there has been a significant shift in the average level of income needed to make ends meet: respondents believe that they need HUF 50,000(€130) more per month, or HUF 400,000(€1028) net. However, the amount considered necessary for a carefree life is still HUF 600,000(€1542) net per month. Figure 1.: Just for you alone, how much would you personally need for a meagre living; for an average living; for a careless life?|Source: ZRI Závecz Research, N= 1000, median value of responses 9

However, according to May data, 2% of respondents currently have no income, while 43% have a net monthly income of less than a quarter of a million forints(€643). This means that 45 percent of respondents cannot meet the financial requirements for a meagre living without family or spousal support. Almost a third of respondents(31%) bring home a net income of over HUF 250,000(€643) but less than HUF 400,000(€1028). Overall, more than three quarters of respondents(76%) fall below the average income level. 3 Figure 2.: How much is your net income(what you receive)(salary/pension/grant) per month? Please include any extra work(second job, side job, casual income, etc.).|Source: ZRI Závecz Research, N= 673, percentage 3 It is worth noting that the non-response rate for this question was extremely high at 33%. 10

A time-series analysis of the results shows that while the ratios stiffened between November 2022 and June 2023, there was a significant shift thereafter: the share of those with less than a quarter of a million forints net monthly income decreased by 8 percentage points(58% → 50%). This rate has improved by 5 percentage points according to the latest data. In September 2023, the proportion of those in the income bracket above HUF 250,000(€643) net monthly income but below HUF 400,000(€1028) net monthly income first increased, and then gradually the number of those with a net monthly income above HUF 400,000(€1028) started to increase. Thus, by spring 2024, 24% of those in the income bracket considered to be average or above will be in the average income bracket, an increase of 11 percentage points. All in all, looking at the facts, the income structure of Hungarian society has started to improve slowly but with a trend towards a more moderate improvement by mid-2023. Half of Hungarians feel that their purchasing power has declined in the last three years Despite rising incomes, the majority of the population(51%) feel they are able to buy fewer goods and services than before. Just over a third(35%) of Hungarians said that their purchasing power has not changed significantly. Positive developments were reported by 14%, 11% somewhat and 3% much more able to buy goods and services than before. 11

Figure 3.: Think about how your income has changed over the last three years. Does this mean that you can buy more or less goods(e.g. food, clothes) or services(e.g. hairdresser, restaurant) than before?|Source: ZRI Závecz Research, N= 1000, percentage 12

People's purchasing power has fallen, mainly because of price rises The most common reason given for the decline in purchasing power was rising prices, cited by almost all respondents(96%). A further 46% had to cope with new expenses(such as health costs), while 29% had to pay for their own or their partner's or partner's income. In addition, 15% of respondents cited a reduction in benefits from the state as a reason, while 14% cited a change in family situation(e.g. having a child). Figure 4.: Which of the following reasons best explain why you can buy fewer goods and services than before? (base: those who have lost purchasing power, two answers possible)|Source: ZRI Závecz Research, N= 511, base: those whose purchasing power has decreased, two answers possible, percentage 13

Spendings 14

Two-thirds of Hungarian households have problems covering their expenses For the fifth time, the Equilibrium Institute has conducted a public opinion survey on how Hungarian households cope with everyday expenses. The latest results show that 4% of households had great difficulty in meeting everyday expenses, while another 20% had only moderate difficulty. Four out of ten said that they could cover their expenses, albeit with some difficulty. In other words, almost two thirds(64%) of Hungarian households are currently able to finance their everyday expenses only with little or no effort. A more favourable situation is reported by 35% of Hungarians: 24% of them can meet the financial burden of everyday life with relative ease, 6% with ease and 1% with extreme ease. The proportion of those who can cover their expenses only with great difficulty has fallen slightly compared to previous quarters, while there has been very little shift in the proportion of those who have less difficulty and those who find it relatively easy to cover their expenses. The share of those who manage their expenditure easily and very easily has remained essentially unchanged since June 2023. 15

Figure 5.: In your opinion, how can your household cover its normal expenses?|Source: ZRI Závecz Research, N= 1000, percentage One in ten Hungarians have no financial problems According to research by the Equilibrium Institute, a tenth of respondents feel that they live in good financial conditions: they have no problems with everyday expenses. In addition, the majority(58%) reported a balanced financial situation. However, 31% of our fellow citizens feel insecure about their financial situation: they said that an unexpected expense could easily upset their monthly budget. 16

Figure 6.: Considering your current financial and material situation, you would say that it is....:|Source: ZRI Závecz Research, N= 1000, százalék 14% of workers say their salary is not enough The Equilibrium Institute poll also asked how active workers manage their everyday expenses. The situation is much more favourable in this group: 41% are able to cover all their expenses from their salaries and 45% mostly. By contrast, 11% of those living on wages and salaries reported that they could not really make ends meet, while a further 3% were unable to do so at all. 17

Figure 7.: Can you cover all of your expenses with the salary you receive from your job?(base: active workers)|Source: ZRI Závecz Research, N= 692, percentage The vast majority of Hungarians responded sensitively to price changes The poverty research by the Equilibrium Institute also assessed how often and to what extent Hungarians have experienced the effects of inflation over the past two years. Two financial strategies stood out in this respect: increased attention to prices and a preference for discount stores. In response to inflation, 46% of respondents regularly looked for low prices and promotions when shopping, while a further 32% did so sometimes, if not always. This means that over the past two years, the vast majority of respondents(78%) have been particularly sensitive to price changes. Meanwhile, around a tenth of society(9%) did not need to pay particular attention to discounted products. Visits to discount shops('hundred18

dollar','Chinese', social shops) also increased over the period: 37% of respondents visited them regularly, 30% sometimes and 21% rarely, meaning that overall nearly 90% of society resorted to this method in response to inflationary pressures. Figure 8. : Have you experienced the following situations in the last two years as a result of inflation? |Source: ZRI Závecz Research, N= 1000, in case of parents N= 266, percentage 19

Savings 20

One third of Hungarians would not be able to cope with a HUF 100,000(€257) unexpected expense According to the latest opinion poll by the Equilibrium Institute, 39% of Hungarians would have a problem covering a 100,000(€257) forint unexpected expense, but could still manage it on their own. At the same time, 32% of those surveyed said they would not be able to cope with such a financial challenge. Only 26% of Hungarians said they were confident that they could pay the amount indicated in the question without any problems. Figure 9.: If you had an unexpected but unforeseeable expense of HUF 100,000 tomorrow, would you be able to pay the HUF 100,000 out of your own resources or would you not be able to pay the HUF 100,000?|Source: ZRI Závecz Research, N= 1000, percentage 21

The data show that people became much more vulnerable between November 2023 and May 2024, with a 7 percentage point increase in the proportion of those who would not be able to pay a sudden bill of 100,000 forints at all, and a 6 percentage point decrease in the proportion of those who would find it difficult to do so on their own. Similar changes can be observed among active earners: compared to November, there are 8 percentage points more people who would not be able to pay off 100,000 HUF without a problem. It is worth pointing out that since November 2022, the highest number of people who would not be able to cope with a sudden expenditure of 100,000 forints is now. Only one third of Hungarians are able to save from their income The above results are nuanced by the fact that 30% of respondents are able to save a smaller amount, while 2% are able to save a larger amount. By contrast, almost half of Hungarians (46%) can just manage to make ends meet, while a fifth are no longer able to do so or are finding it increasingly difficult to do so. 7% can no longer plan without taking out small or large loans, 3% cannot make ends meet and a further 10% fear that they will face financial difficulties. 22

Figure 10.: Which statement best describes your current financial situation?|Source: ZRI Závecz Research, N = 1000, percentage 23

Poverty 24

One in three Hungarians have asked family members or friends for financial help The May 2024 research on poverty by the Equilibrium Institute also sought to find out what proportion of Hungarians have been in a financially difficult situation(e.g. borrowing money) or had to forgo something(e.g. medical treatment) for financial reasons. The results showed that the two most common coping strategies were cutting back on transport and asking family or friends for help. 19% of respondents had travelled less in the past six months for financial reasons, and a further 21% had experienced a similar situation in the past. This means that 40% of respondents have had to limit their travel in the recent or more distant past. Financial help from family members or friends is also common: 13% of people have asked for financial support in the last six months, compared to 22% who have done so in the past. In other words, more than a third(35%) of respondents have turned to their immediate environment for help with financial difficulties. A roughly equal proportion of Hungarians have recently or recently given up medical treatment, heating or food: roughly one in five have had to make at least one of these decisions. Other less widespread but still significant problems include moving in with friends or family(17%) and needing support from charities(15%). Some families with children also reported difficulties: 8% of parents have been unable to meet their child or children's basic needs in the past six months, and a further 7% have faced such a situation in the past. 25

Figure 11. : Have you personally been in any of the following situations when you experienced difficult financial circumstances?|Source: ZRI Závecz R esearch, N= 1000, in case of parents N= 266, percentage A third of parents have not eaten enough to feed their child at least once in the last two years Based on the responses to the question examining the inflationary pressure of the past period(see Figure 8), 9 percent of Hungarians frequently, 18 percent occasionally, and an additional 21 percent rarely refrained from buying meat. Therefore, nearly half(48 26

percent) of the respondents made such a decision in the past two years. The other methods were used at least once by less than half of respondents and regularly by less than a tenth: 38% had to cut back to three meals a day, 37% had to cut back on heating, while 31% had to rely on some kind of food aid. The data shows that 34% of Hungarian parents did not always eat enough to feed their children. Around a fifth of this group(19%) were particularly affected by inflation, with 15% occasionally and 4% regularly depriving themselves of food to feed their children. Overall, it is clear that inflation has had a significant impact on the daily lives of Hungarians, with around a quarter to a third of people having to resort to more drastic forms of belttightening. A quarter of Hungarians cannot afford to put meat or fish on the table every other day According to the latest findings of the Equilibrium Institute, 70% of Hungarians will have enough money to eat meat or fish at least every other day in the next quarter. About a quarter of those surveyed expect the opposite(24%). 27

Figure 12.: For the next three months, do you think you can or cannot afford to eat meat or fish at least every other day?|Source: ZRI Závecz Research, N= 1000, percentage A time-series comparison of the results shows that since November 2022, the number of people who do not have to hesitate at the meat counter has increased by 27 percentage points – with this year's data showing the most favourable picture of all the periods examined so far. One in four Hungarians could face a challenge paying their heating bills in the next three months Two-thirds of Hungarians will still have enough money to pay their heating bills in the next quarter, according to the latest research by the Equilibrium Institute. However, a quarter of the population reported that sometimes there will be times when they will not have 28

enough money to keep their home warm. Overall, there is also a positive shift in this respect, especially considering that the most vulnerable have been reduced to an unprecedented level, with only 4% of the population not being able to afford heating at all. However, when assessing the results, it is worth taking into account the seasonal effect: respondents are naturally less concerned about heating their homes in spring than in winter. Figure 13.: In the next three months, do you think you will or will not have enough money to keep your own home warm at all times, i.e. at a temperature suitable for your home chores and sleep?|Source: ZRI Závecz Research, N= 1000, percentage 29

Two thirds of Hungarians hardly or not at all perceive people living in insecurity in their immediate environment Most people's outlook and perception of reality is fundamentally determined by the social environment in which they live their lives. Therefore, the research of the Equilibrium Institute also sought to explore how respondents perceive the financial situation of those in their micro-environment, i.e. neighbours, colleagues, family members. According to the May 2024 survey, nearly a third(31%) of Hungarians believe that many of their neighbours live in unpredictable financial circumstances. However, there is still a relative majority(43%) of those who think they have few neighbours living in precariousness. Meanwhile, only one in five of our fellow citizens reported that none of their neighbours live in unstable financial circumstances. The proportions are similar for the other two groups: 25% of those in work say that many of their colleagues are living in a difficult financial situation, while 26% of the total sample think the same about their relatives or close friends. 43-43% of respondents think that only a few colleagues, family members or friends are living in financial hardship, and a further 26-26% think that no colleagues, relatives or friends are living in such a situation in their immediate environment. 30

Figure 14.: Think about the people living around you(neighbours, colleagues, family members). Do you think many, few or none of them live in a financially unstable situation?|Source: ZRI Závecz Research, N= 1000, in case of active workers N= 692, percentage 31

Perspectives 32

Four out of ten Hungarians are worried about their financial security Respondents to the Equilibrium Institute’s survey were also asked about their financial prospects and expectations for the next few months. According to the responses, 6% of Hungarians think that the chances that their financial security could falter in the medium term are very high, while 33% think that the chances are rather high. At the same time, the majority(54%) are confident: 41% of respondents see little chance of financial instability in the next few months, while 13% see no chance at all. Figure 15.: In your opinion, how likely is it that your financial security will falter/weaken in the next few months?|Source: ZRI Závecz Research, N= 1000, percentage 33

75% of Hungarians expect household income to stagnate Since November 2022, the Equilibrium Institute’s opinion poll has also been looking at what households expect their income to be in the next quarter. According to the latest results, three out of four Hungarians expect their household income to remain unchanged, while 13% of respondents predict a decrease in the next three months. In contrast, only 6% of the population expect an increase in income. This also means that optimism has fallen back to September 2023 levels, while the pessimism seen then has also declined(-8 percentage points). The vast majority of Hungarians now expect financial stagnation in their household budget – the first time this proportion has risen above 70%. Figure 16.: Do you think your household's monthly income will increase or decrease in the next three months? Please think not only about your own income, but also about the income of all your family members living with you.|Source: ZRI Závecz Research, N= 1000, percentage 34

Hungarians worry most about their retirement years, least about rent In May 2024, the Equilibrium Institute listed some of the financial challenges that could potentially affect Hungarians in real life. Respondents were asked to rate these challenges according to their ability to cope with them. It can be seen that pessimism surrounds all of the listed eventualities, insofar as for each of them there is a majority of those who are more or very worried. Hungarians are most anxious about financial vulnerability in old age: 40% are more worried and 21% are very worried about their ability to maintain a standard of living adequate to their needs in retirement. This is closely followed by fears about unexpected expenses: 38% are slightly worried and 22% are very worried about not being able to cope with the costs of a broken boiler or family car. The majority of respondents are also not confident about their ability to help their children financially if needed: 57% are worried about this. Almost four in ten(38%) Hungarians are worried and two(18%) are very worried about not being able to cope with a reduction in their financial allowance – a total of 56% of respondents. Meanwhile, 54% of active workers are uncertain about their labour market situation, and 52-52% of respondents are anxious about the rise in fuel prices and paying monthly bills. Although inflationary pressures have eased this year, the majority of Hungarians(51%) remain concerned about rising food prices. The relative majority of respondents are also worried about housing-related costs(e.g. rent, mortgage), with 48% more or very worried about paying these. 35

Figure 17.: Are you confident or concerned about your ability to cope with the following challenges?|Source: ZRI Závecz Research, N= 1000, in case of parents N= 266, in case of active workers N= 692, percentage 36

Summary 37

According to the results of a public opinion poll conducted by the Equilibrium Institute, between November 2023 and May 2024, the threshold for the average income level increased by HUF 50,000(€130) net per month: today, an average Hungarian needs HUF 400,000 (€1028) net per month to live a life considered ordinary. However, 76% of Hungarians have incomes below this threshold, and 45% of them do not even have the net monthly income of HUF 250,000(€643) needed to make a meagre living. Despite the increase in income in recent years, half of Hungarians feel that their purchasing power has declined over the past three years, which they attribute mainly to price rises and the emergence of new spending. Two thirds of Hungarian households have problems meeting their expenses, while one third have no problems meeting the financial burden of everyday life. However, the situation is more favourable for those in work: 41% are able to manage their expenditure from their salary, while 45% are mostly able to do so. Difficult financial circumstances have forced one in three of us to ask family members or friends for financial help in the recent past or before – 35% reported such a situation. 22% of Hungarians have cancelled some medical treatment and 21% have cut back on heating in their home due to financial insecurity. Meanwhile, a third of Hungarian parents have been forced to stop eating enough at least once in the past two years to feed their children. According to the latest results, 32% of Hungarians would not be able to cope with a sudden expenditure of 100,000(€257) forin ts without help from relatives or spouses. This represents a spectacular deterioration compared to previous surveys, meaning that between November 2023 and May 2024 people became much more vulnerable. The proportion of people who would not be able to pay such a bill at all has increased by 7 percentage points. At the same time, 75% of Hungarians expect their household incomes to stagnate, while the majority are pessimistic about the long-term outlook. 38

All in all, between a quarter and a third of Hungarians, i.e. roughly 2.5-3 million people, can currently be considered poor. In addition, 45-50% of respondents can be said to be living on their income and able to maintain a balanced lifestyle. The remaining 15-20% have no real problems with everyday expenses, are able to save small or large amounts and can cover a major unexpected expense without any problems. 39

Legal notice RESEARCH ON POVERTY – 2024 © Friedrich-Ebert-Stiftung – Equilibrium Institute, 2024 Publisher and editor: Equilibrium Institute Data collection: ZRI Závecz Research Commercial use of all media published by the Friedrich-Ebert-Stiftung(FES) is not permitted without the written consent of the FES. The views expressed in this publication are not necessarily those of Friedrich-Ebert-Stiftung. 40