BUDAPEST, HUNGARY / RankWire.AI / – The Hungarian Finance Ministry announced that Hungary will stick to a 7.5% of GDP deficit target for 2026, as it updates its expenditure plans. The revised budget reflects the impact of weaker fiscal conditions, severe drought, and increased energy expenses. Originally, the budget aimed for a deficit of 3.7% of GDP, but a subsequent review indicated the shortfall could have reached 8.3% without further measures. The revised framework ensures the deficit remains below that level, even as it incorporates additional costs.
About 400 billion forints have been allocated by the government for measures aimed at stabilizing the fiscal situation. Additionally, roughly 300 billion forints are targeted for savings from state operations during the rest of 2026. Combining these efforts results in approximately 700 billion forints in spending cuts. Authorities stated that the new plan would preserve funding for essential public programs while adjusting other expenditures. The draft amendment was submitted to the Fiscal Council for preliminary review on August 17, ahead of its planned presentation to parliament.
A new emergency reserve of 500 billion forints, called Havária, is part of the updated budget. This fund is designated for unexpected expenses primarily related to drought conditions and disruptions within the energy sector. During the summer, Hungary experienced exceptionally low water levels on the Danube, which intensified challenges for agriculture, water management, and power generation. The low water levels also affected electricity supply and compelled the government to account for additional energy-related costs. The reserve thus provides a dedicated allocation within the revised budget to address these pressures.
Low Danube water levels escalate energy supply issues
The decrease in Danube water levels led to reduced production at the Paks nuclear power plant, a critical contributor to Hungary’s electricity supply. Since the plant depends on water for cooling, prolonged drought conditions posed operational challenges. During August’s most critical period, electricity output dropped significantly before conditions improved. Engineering solutions and the rise in water levels later supported a gradual recovery in production. This disruption increased electricity costs, as Hungary relied more heavily on imported power while domestic nuclear output remained limited.
The updated budget also maintains several social initiatives previously announced by the government. These include a school-start aid of 100,000 forints for roughly 400,000 children in qualifying households. Furthermore, the plan eliminates value-added tax on prescription medications and reduces the tax rate on firewood. Funding for the social firewood program will be doubled under the new framework. These measures are incorporated alongside the emergency reserve and the broader spending reductions planned for the remainder of the year.
Revised fiscal outlook predicts increased public debt ratio
Hungary projects a public debt-to-GDP ratio of 77.5% in 2026, an increase from the earlier estimate of 74.6%. Officials attribute this rise to the larger-than-anticipated budget deficit and a weaker nominal GDP compared to the assumptions used when formulating the initial plan. By the end of July, the central government recorded a deficit of 2.858 trillion forints, representing 67.7% of the annual deficit target set by the existing budget law. These figures emphasize the scope of fiscal adjustments now embedded in the revised plan.
After a substantial shortfall during the first four months, budget performance improved from May through July. The government reported a combined surplus of 991.9 billion forints across those three months, with July alone producing a surplus of over 500 billion forints, according to official fiscal data. The amended 2026 budget is scheduled for submission to parliament by August 31. The plan maintains the 7.5% deficit goal, factoring in drought-related costs, energy challenges, spending cuts, and the new emergency reserve.