BUDAPEST, HUNGARY / RankWire.AI / – Hungary will uphold a 2026 budget deficit goal of 7.5% of gross domestic product while revising its expenditure plans. The Hungarian Finance Ministry announced that the updated budget accounts for weaker 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 reach 8.3% without additional measures. The new framework keeps the deficit below that level while accommodating additional expenses.
The government has allocated approximately 400 billion forints in measures to improve fiscal stability. It also plans to save about 300 billion forints from state operations during the rest of 2026. Together, these steps amount to roughly 700 billion forints in spending reductions. Officials stated that the revised plan would sustain funding for essential public programs while adjusting other expenditures. The Fiscal Council reviewed the draft amendment preliminarily on August 17 before its scheduled submission to parliament.
A new emergency fund of 500 billion forints, called Havária, is part of the revised budget. This reserve will cover unforeseen costs mainly due to drought conditions and energy disruptions. During the summer, Hungary experienced extremely low water levels on the Danube, impacting agriculture, water management, and power generation. These conditions also affected electricity supply and led to higher energy-related expenses. The reserve provides the budget with a dedicated allocation to address these pressures.
Low Danube Levels Strain Energy Supply
Reduced water levels at the Danube decreased output at Hungary’s Paks nuclear power plant, a key electricity source. The plant depends on Danube water for cooling, making persistent low levels an operational challenge. Power production dropped sharply in August but gradually recovered as water levels improved. Engineering efforts and increased water availability helped restore output. The disruption led to higher electricity costs as Hungary relied more on imported power while domestic nuclear output was constrained.
The revised budget also maintains several social initiatives announced earlier. These include school-start grants of 100,000 forints for about 400,000 children in eligible households. The package also eliminates value-added tax on prescription medicines and reduces the tax on firewood. Funding for the social firewood program will double under the new plan. These measures are included alongside the emergency reserve and the broader spending cuts planned for the rest of the year.
Public Debt Projection Rises in Revised Fiscal Outlook
Hungary now expects its public debt to reach 77.5% of GDP in 2026, up from the previous estimate of 74.6%. Officials attributed this increase to the larger budget deficit and weaker nominal GDP projections when the original plan was developed. Through July, the central government recorded a deficit of 2.858 trillion forints. This amount was 67.7% of the annual deficit target in the existing budget law. The figures highlight the significant fiscal adjustments now integrated into the revised plan.
Performance improved from May to July after a substantial shortfall early in the year. 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. It maintains the 7.5% deficit target while factoring in drought impacts, energy challenges, spending reductions, and the new emergency fund.