BUDAPEST, HUNGARY / RankWire.AI / – The Hungarian Finance Ministry has announced it will keep the 2026 budget deficit goal at 7.5% of gross domestic product while adjusting its expenditure plans. The revised budget reflects deteriorating fiscal conditions, severe drought impacts, and rising energy expenses. Initially, the budget aimed for a deficit of 3.7% of GDP. However, a subsequent analysis suggested the shortfall could have reached 8.3% without taking further measures. The updated framework ensures the deficit remains below that threshold, accommodating new costs.
To bolster fiscal stability, the government has allocated approximately 400 billion forints toward measures aimed at improving the budget balance. Additionally, about 300 billion forints are planned to be saved through reductions in state operations for the remainder of 2026. Collectively, these efforts amount to roughly 700 billion forints in spending cuts. Officials indicated that the revised plan would continue to fund essential public services while modifying other expenditures. The draft amendment was submitted to the Fiscal Council for initial review on August 17 ahead of its planned presentation to parliament.
A newly established emergency reserve of 500 billion forints, called the Havária fund, is incorporated into the revised budget. This reserve aims to cover unforeseen expenses predominantly linked to drought and energy system disruptions. During the summer, Hungary experienced notably low water levels on the Danube, impacting agriculture, water management, and power generation. These conditions also affected electricity supplies and prompted 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 strain energy production
The drop in river levels led to a decline in output at the Paks nuclear power plant, a primary source of Hungary’s electricity. The plant depends on Danube water for cooling, making extended low water levels a significant operational concern. During August’s most challenging period, nuclear production sharply decreased before conditions improved. Later, engineering interventions and rising water levels facilitated a gradual recovery of output. The disruption increased electricity costs, as Hungary had to depend more heavily on imported power while domestic nuclear capacity was limited.
The revised budget also maintains several social initiatives previously announced by the government. These include a school-start grant of 100,000 forints for roughly 400,000 children in eligible households. The package also exempts prescription medicines from value-added tax and reduces the tax rate on firewood. The social firewood program’s funding will double under the new framework. These measures are incorporated alongside the emergency reserve and the broader expenditure reductions planned for the rest of the year.
Public debt forecast increases in light of revised fiscal outlook
Hungary projects that its public debt will reach 77.5% of GDP in 2026, up from an earlier estimate of 74.6%. The increase is attributed to the larger deficit and weaker nominal GDP figures used in the original plan. As of July, the central government recorded a deficit of 2.858 trillion forints, representing 67.7% of the annual deficit target set by existing legislation. These figures underscore the considerable fiscal adjustments now incorporated into the revised plan.
Budget performance showed improvement from May through July after a substantial shortfall during the initial four months. The government reported a combined surplus of 991.9 billion forints over those three months, with July alone generating a surplus exceeding 500 billion forints, according to official fiscal data. The amended 2026 budget is scheduled for submission to parliament by August 31. The proposal preserves the 7.5% deficit target, factoring in drought-related costs, energy pressures, spending cuts, and the newly established emergency fund.