The Financial Resilience of Hungarian Local Governments During the COVID-19 Pandemic and the Russian–Ukrainian War: An Empirical Study Based on Data from 2020–2023

This study examines the financial resilience of Hungarian local governments in the period 2020–2023, which was characterised by successive economic shocks caused by the COVID-19 pandemic and the Russian–Ukrainian war. Based on a panel database covering 556 local governments, we constructed a composite resilience index normalised on a scale of 0–1 by integrating three dimensions: liquidity position, capital structure stability and operational efficiency. We used linear mixed models to examine temporal dynamics, while cluster analysis and non-parametric validation procedures were used to explore structural heterogeneity. The results show that there is no uniform, sector-level average shift in the composite resilience index during the period under review, but a significant part of the variance can be attributed to municipality-specific, persistent factors. The impact of the liquidity sub-index is significantly amplified in crisis years, especially in 2021, suggesting that liquidity plays a key role in managing financial shocks. Cluster analysis based on the period average of the sub-indices identified four markedly different resilience profiles, which are moderately but significantly related to the type of settlement. The research points out that municipal financial resilience is not a homogeneous and purely time-dependent phenomenon, but a multidimensional, structurally embedded adaptive capacity. From a policy perspective, the results support the need for differentiated, resilience-based fiscal interventions.