BUDAPEST, HUNGARY / RankWire.AI / – Hungary will keep its 2026 budget deficit target at 7.5% of gross domestic product as it revises its expenditure plans. The Hungarian Finance Ministry stated that the revised budget reflects weaker fiscal conditions, a severe drought, and rising energy costs. The initial budget aimed for a deficit of 3.7% of GDP. A subsequent review suggested 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. It also plans to save around 300 billion forints through reduced spending in state operations for the rest of 2026. Altogether, these steps amount to roughly 700 billion forints in spending cuts. Officials emphasized that the revised plan would maintain funding for essential public programs while adjusting other expenditures. The Fiscal Council received the draft amendment for initial review on August 17 prior to its scheduled submission to parliament.
A new emergency fund of 500 billion forints, called Havária, forms part of the revised budget. This reserve will cover unforeseen costs primarily related to drought and energy system disruptions. During the summer, Hungary experienced exceptionally low water levels on the Danube, adding strain to agriculture, water management, and power generation. These conditions also impacted electricity supply and forced the government to account for increased energy-related expenses. The reserve provides the amended budget with a dedicated allocation to address these pressures.
Low Danube water levels strain energy supply
Reduced water levels in the Danube lowered output at the Paks nuclear power plant, a key supplier of Hungary’s electricity. Since the plant relies on Danube water for cooling, sustained low water levels pose operational challenges. Production sharply declined in August during the most difficult period before conditions improved. Engineering solutions and rising water levels later supported a gradual increase in output. This disruption also led to higher electricity costs because Hungary had to depend more on imported power while domestic nuclear generation remained limited.
The revised spending plan maintains several social initiatives announced earlier by the government. These include school-start support 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. Funding for the social firewood program will double under the new framework. Officials incorporated these measures alongside the emergency reserve and the broader spending reductions planned for the rest of the year.
Revised fiscal outlook raises public debt expectations
Hungary now anticipates its public debt will reach 77.5% of GDP in 2026, up from the previous projection of 74.6%. Officials attributed this increase to the larger budget deficit and weaker nominal GDP assumptions made when preparing the initial 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 current legislation. These figures highlight the significant fiscal adjustments embedded within the revised plan.
Performance from May through July improved after a larger shortfall in the initial months. The government reported a combined surplus of 991.9 billion forints over those three months. July alone saw a surplus exceeding 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 while factoring in drought-related costs, energy pressures, spending cuts, and the new emergency fund.