Hungary’s economy faces severe headwinds. The global economic slowdown and heightened financial market stress have pushed an already fragile and highly indebted economy towards recession. But, controversial domestic policies have also contributed to uncertainty thereby hurting consumer, business and market confidence. Stabilising the economy is the first most pressing priority. Strengthening the credibility and predictability of domestic policies is essential to develop an environment which is conducive to growth and rising incomes. An agreement with multilateral organisations would help restore confidence and support needed fiscal consolidation. In doing so, it would lower the debt burden in foreign currency by stabilising the exchange rate. The second challenge is to put growth on a sound footing to allow a durable recovery. This requires reductions in households’ debt without damaging banks to avoid a credit crunch. Finally, raising potential growth is of utmost importance: boosting labour force participation and health outcomes are two promising avenues.