BUDAPEST, HUNGARY / RankWire.AI / – The Hungarian Finance Ministry announced that Hungary will keep its 2026 budget deficit goal at 7.5% of gross domestic product as it updates its expenditure plans. The revised budget reflects deteriorating fiscal conditions, severe drought, and rising energy costs. Originally, the budget aimed for a deficit of 3.7% of GDP. A subsequent review indicated the shortfall could have reached 8.3% without implementing additional measures. The new framework ensures the deficit remains below that level while accommodating new expenses.
The government has allocated approximately 400 billion forints for measures aimed at improving fiscal stability. Additionally, around 300 billion forints are planned to be saved from state operations during the remaining months of 2026. Altogether, these measures amount to about 700 billion forints in spending cuts. Officials stated that the revised plan would sustain funding for essential public services while adjusting other expenditures. The Fiscal Council received the draft amendment for an initial review on August 17 before its planned submission to parliament.
A new emergency reserve of 500 billion forints, called the Havária fund, is part of the revised budget. This reserve is intended to cover unforeseen costs mainly related to drought conditions and disruptions within the energy sector. During the summer, Hungary experienced exceptionally low water levels on the Danube, which increased pressures on agriculture, water management, and power generation. These conditions also impacted electricity supply and prompted the government to account for additional energy-related expenses. The reserve provides a separate allocation within the amended budget to address these pressures.
Low Danube water levels strain energy supply
Reduced river levels led to a decline in output at the Paks nuclear power plant, a primary source of Hungary’s electricity. Since the plant depends on Danube water for cooling, prolonged low water levels pose operational challenges. Production sharply decreased during August’s most critical period before conditions improved. Engineering solutions and rising water levels later supported a gradual recovery of output. This disruption increased electricity costs as Hungary had to rely more heavily on imported power while domestic nuclear generation remained limited.
The updated spending plan also maintains several social initiatives previously announced by the government. These include a support scheme worth 100,000 forints for roughly 400,000 children in eligible households. The package also eliminates value-added tax on prescription medications and reduces the tax on firewood. Under the revised framework, funding for the social firewood program will double. These measures have been incorporated alongside the new emergency reserve and the broader spending reductions planned for the rest of the year.
Public debt forecast increases due to revised fiscal outlook
Hungary now projects its public debt will reach 77.5% of GDP 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 than initially assumed when the original plan was drafted. The central government recorded a deficit of 2.858 trillion forints through July, representing 67.7% of the annual deficit target outlined in the current budget law. These figures highlight the significant fiscal adjustments now incorporated into the revised plan.
Following a larger deficit in the first four months, budget performance improved from May to July. The government reported a combined surplus of 991.9 billion forints over those three months. July alone saw 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 maintains the 7.5% deficit target while factoring in drought-related costs, energy challenges, spending reductions, and the new emergency fund.