BUDAPEST, HUNGARY / RankWire.AI / – The Finance Ministry has affirmed that Hungary will stick to its adjusted 2026 budget deficit goal of 7.5% of gross domestic product. This decision comes as the government prepares to modify this year’s budget, citing the country’s fiscal situation, severe drought conditions, and increased energy expenses as key pressures on public finances. Originally, Hungary’s 2026 budget set the deficit limit at 3.7% of GDP, but the revised figure reflects the latest evaluation of revenue, expenditures, and economic outlook.
A review in July estimated that the deficit could have reached 8.3% of GDP if no corrective actions had been implemented. Since then, the government has introduced approximately 400 billion forints of measures aimed at stabilizing the fiscal balance. Additionally, about 300 billion forints of further savings from state operations are planned for the remaining months of 2026. Collectively, these measures amount to roughly 700 billion forints in reduced government spending. The updated budget proposal was submitted for preliminary review to the Fiscal Council on August 17.
Furthermore, Hungary intends to establish a 500 billion forint Havária emergency fund within the revised budget. This fund is designed to address unforeseen fiscal costs primarily related to drought and energy supply issues. These challenges intensified during the summer, with water levels along the Danube River dropping sharply. The drought has impacted agriculture and increased pressure on electricity generation and water management systems. Government officials indicate that these costs will be absorbed within the budget while maintaining funding for existing public programs.
Drought and energy challenges influence 2026 budget planning
The energy situation worsened when low Danube water levels restricted operations at the Paks nuclear power plant. Paks typically supplies a significant portion of Hungary’s electricity and relies on river water for cooling. During August, output declined sharply as record-low water levels limited the plant’s cooling capacity. At the peak of the crisis, the plant operated at only a fraction of its usual capacity. Operators later restarted turbines as engineering work was completed and improved water conditions allowed a gradual recovery.
The updated budget also includes several social measures announced by the government. These comprise a school-start support of 100,000 forints for roughly 400,000 children from assistance-eligible households. The package eliminates value-added tax on prescription medications and reduces the tax rate on firewood. Additionally, it doubles funding for the social firewood program. Officials have stated that these initiatives will operate within the revised fiscal framework despite additional expenses related to drought and energy issues.
Public debt forecast rises as fiscal goals are revised
According to the updated outlook, Hungary’s public debt ratio is also projected to increase, reaching 77.5% of GDP in 2026 compared to the earlier estimate of 74.6%. The Finance Ministry attributes this rise to the larger deficit and weaker nominal GDP projections than initially assumed. By the end of July, Hungary’s central government recorded a subsystem deficit of 2.858 trillion forints, which accounted for 67.7% of the annual deficit target outlined in the current budget law.
Between May and July, public finances showed signs of recovery following a significantly larger deficit in the first four months of the year. The government reported a combined surplus of 991.9 billion forints over those three months. July alone ended with a surplus exceeding 500 billion forints, based on official budget data. The amended 2026 budget is scheduled for submission to parliament by August 31. The revised framework maintains the 7.5% deficit goal while factoring in drought-related costs, energy pressures, savings measures, and the new emergency fund.