BUDAPEST, HUNGARY / RankWire.AI / – Hungary will stick to a 7.5% of GDP deficit goal for 2026 as it revises its expenditure plans. The Hungarian Finance Ministry stated that the updated budget reflects ongoing economic challenges, including severe drought and rising energy costs. Originally, the budget aimed for a deficit of 3.7% of GDP. A subsequent review indicated that the shortfall could have reached 8.3% without implementing additional measures. The revised framework ensures the deficit remains below that level while accommodating new costs.
The government has allocated approximately 400 billion forints for measures designed to strengthen fiscal stability. Additionally, it plans to save around 300 billion forints from ongoing state operations during the remainder of 2026. In total, these steps amount to about 700 billion forints in spending cuts. Officials emphasized that the revised plan would sustain funding for essential public services while adjusting other expenditures. The Fiscal Council received the draft amendment for preliminary review on August 17 before its intended submission to parliament.
A new emergency fund of 500 billion forints, called Havária, is part of the revised budget. This reserve aims to cover unforeseen expenses mainly linked to drought conditions and disruptions within the energy sector. During the summer, Hungary experienced notably low water levels on the Danube, which intensified pressures on agriculture, water management, and power generation. These conditions also impacted electricity supply and compelled the government to account for additional energy-related costs. The reserve provides a dedicated allocation within the amended budget to address these pressures.
Low Danube levels intensify energy supply concerns
The decrease in river levels led to reduced output at the Paks nuclear power plant, a key source of Hungary’s electricity. Because the plant relies on Danube water for cooling, sustained low water levels pose operational challenges. During the most difficult phase in August, production sharply declined before conditions improved. Implementation of engineering solutions and higher water levels later facilitated a gradual recovery of output. The disruption contributed to increased electricity costs as Hungary had to rely more on imports while domestic nuclear production remained constrained.
The revised fiscal plan also preserves several social measures previously announced by the government. These include support for 100,000 forints at the start of the school year for roughly 400,000 children in qualifying households. The package additionally eliminates value-added tax on prescription medicines and reduces the tax rate on firewood. Under the updated framework, funding for the social firewood program will be doubled. These measures are incorporated alongside the new emergency reserve and the broader expenditure reductions planned for the rest of the year.
Public debt forecast climbs amid revised fiscal outlook
Hungary now projects the public debt-to-GDP ratio to reach 77.5% in 2026, an increase from the initial estimate of 74.6%. Officials attributed this rise to the larger budget deficit and weaker nominal GDP figures used when formulating the original plan. Through July, the central government recorded a deficit of 2.858 trillion forints, representing 67.7% of the annual deficit target set by the current budget law. These figures highlight the scale of fiscal adjustments now embedded within the amended plan.
Budget performance saw improvement from May to July after a significant shortfall in the first four months. The government reported a combined surplus of 991.9 billion forints over these three months. July alone generated a surplus of more than 500 billion forints, according to official fiscal data. The government intends to submit the revised 2026 budget to parliament by August 31. The proposal maintains the 7.5% deficit target while accounting for drought-related costs, energy pressures, spending cuts, and the new emergency fund.