BUDAPEST, HUNGARY / RankWire.AI / – In its revised spending plan, Hungary has confirmed its 2026 budget deficit goal at 7.5% of gross domestic product, despite making adjustments to its previous projections. The Hungarian Finance Ministry explained that the updated budget reflects the impact of subdued fiscal conditions, severe drought, and rising energy expenses. Initially, the budget aimed for a deficit of 3.7% of GDP; however, a subsequent review indicated that, without new measures, the shortfall could have reached 8.3%. The current framework ensures that the deficit remains below this level while accommodating additional costs.
To support fiscal stability, the government has allocated roughly 400 billion forints toward measures aimed at improving the fiscal balance, along with an additional approximately 300 billion forints in savings from state operations during the remainder of 2026. Together, these measures amount to about 700 billion forints in spending cuts. Officials have stated that the revised plan will sustain funding for essential public services while adjusting other expenditures. The draft amendment was submitted for preliminary review to the Fiscal Council on August 17 before its planned presentation to parliament.
Included in the updated budget is a new 500 billion forint Havária emergency fund, designed to cover unforeseen costs mainly associated with drought conditions and energy system disruptions. During the summer, Hungary experienced extremely low water levels on the Danube, which heightened pressures on agriculture, water management, and power generation. These conditions also impacted electricity supply, forcing the government to account for additional energy-related expenses. This reserve provides the amended budget with a dedicated allocation to address these pressures effectively.
Low Danube water levels exert additional strain on energy supplies
The reduced water levels in the Danube led to a decline in output at the Paks nuclear power plant, a key source of electricity for Hungary, since the plant depends on Danube water for cooling purposes. Prolonged low water levels posed operational challenges, resulting in a significant drop in production during the most difficult period in August before conditions improved. Later, engineering interventions and higher water levels facilitated a gradual recovery in output. The disruption contributed to increased electricity costs because Hungary had to rely more heavily on imported power while domestic nuclear production was constrained.
The revised budget also maintains several social measures previously announced by the government. These include providing school-start support of 100,000 forints for roughly 400,000 children in eligible households. Additionally, the package eliminates value-added tax from prescription medications and reduces the tax rate on firewood. Funding for the social firewood initiative will be doubled under the new framework. These measures have been incorporated alongside the new emergency reserve and broader spending cuts planned for the rest of the year.
The public debt ratio increases under the new fiscal projections
Hungary now projects its public debt to reach 77.5% of GDP in 2026, up from an earlier estimate of 74.6%. Authorities attributed this rise to the larger-than-expected budget deficit and weaker nominal GDP projections used when drafting the original plan. As of July, the central government recorded a deficit of 2.858 trillion forints, representing 67.7% of the annual deficit target outlined in the current budget law. These figures underscore the significant fiscal adjustments embedded in the amended plan.
While the first four months of the year saw a sizeable shortfall, fiscal performance improved from May to July, with the government reporting a combined surplus of 991.9 billion forints over those three months. July alone contributed a surplus exceeding 500 billion forints, according to official fiscal data. The government intends to submit the revised 2026 budget to parliament by August 31. The proposal retains the 7.5% deficit target, accounting for drought-related expenses, energy pressures, spending reductions, and the newly established emergency fund.