BUDAPEST, HUNGARY / RankWire.AI / – The Hungarian Finance Ministry announced that Hungary will maintain a 7.5% of GDP target for the 2026 budget deficit despite revising its expenditure plans. The update reflects the country’s weakened fiscal situation, severe drought conditions, and increased energy costs. Initially, the budget aimed for a deficit of 3.7% of GDP, but a subsequent review indicated that the shortfall could reach 8.3% without additional measures. The revised framework ensures the deficit remains below this threshold while accommodating new expenses.
To stabilize finances, the government has allocated approximately 400 billion forints in measures to improve fiscal balance. An additional 300 billion forints are planned to be saved from state operations throughout the rest of 2026. Altogether, these steps amount to around 700 billion forints in expenditure reductions. Officials stated that the revised plan would preserve funding for essential public services while making adjustments to other areas. The Fiscal Council received the draft amendment for preliminary review on August 17 before its intended submission to parliament.
A new emergency reserve of 500 billion forints, named Havária, forms part of the updated budget. This fund is designed to cover unforeseen costs primarily related to drought and disruptions within the energy sector. During the summer, Hungary experienced exceptionally low water levels on the Danube, which impacted agriculture, water management, and power generation. These conditions also affected electricity supply and compelled the government to account for additional energy-related expenses. The reserve provides a dedicated allocation within the revised budget to address these pressures.
Low Danube water levels exert additional strain on energy supplies
Reduced water levels at the Danube led to decreased output at the Paks nuclear power plant, a significant source of Hungary’s electricity. Since the plant relies on Danube water for cooling, sustained low water levels pose operational challenges. During August’s most critical period, production sharply declined before conditions improved, aided by engineering solutions and rising water levels. The disruption increased electricity costs as Hungary had to depend more on imported power while domestic nuclear output remained limited.
The revised budget also maintains several social initiatives previously announced by the government. These include a school-start support of 100,000 forints for roughly 400,000 children in qualifying households. The package further eliminates value-added tax on prescription medicines and reduces the tax rate for firewood. The funding for the social firewood program will double under the new plan. These measures are now incorporated alongside the emergency reserve and broader spending cuts scheduled for the remainder of the year.
Revised fiscal outlook indicates increased public debt ratio
Hungary now anticipates its public debt will reach 77.5% of GDP in 2026, up from the previous estimate of 74.6%. Authorities attributed this rise to the larger budget deficit and weaker nominal GDP projections used in the initial plan. As of July, the central government recorded a deficit of 2.858 trillion forints, which accounts for 67.7% of the annual deficit target outlined in the existing budget law. These figures highlight the significant fiscal adjustments incorporated into the revised plan.
From May to July, budget performance showed signs of improvement after a substantial shortfall in the first four months. The government reported a combined surplus of 991.9 billion forints over these three months. In July alone, the surplus exceeded 500 billion forints, based on official fiscal data. The amended 2026 budget is scheduled to be submitted to parliament by August 31. The proposal retains the 7.5% deficit target, factoring in costs related to drought, energy pressures, spending cuts, and the new emergency fund.