BUDAPEST, HUNGARY / RankWire.AI / – Amid a period of economic strain and environmental difficulties, Hungary is set to maintain its 2026 budget deficit goal at 7.5% of gross domestic product as it revises its expenditure plans. The Hungarian Finance Ministry indicated that the updated budget reflects weaker fiscal conditions, a severe drought, and escalating energy costs. Previously, the budget aimed for a deficit of 3.7% of GDP. A subsequent review suggested the shortfall could have risen to 8.3% without additional measures. The revised framework ensures the deficit remains below that level while accommodating new expenses.
To improve fiscal stability, the government has included roughly 400 billion forints in measures aimed at fiscal consolidation. An additional around 300 billion forints are planned to be saved from state operations throughout the rest of 2026. Together, these actions amount to about 700 billion forints in spending cuts. Officials emphasized that the updated plan would sustain funding for essential public services while adjusting other expenditures. The draft amendment was submitted to the Fiscal Council for initial review on August 17 before its intended submission to parliament.
A newly established emergency reserve of 500 billion forints, called the Havária fund, is part of the revised budget. This reserve is designed to cover unforeseen costs primarily linked to drought impacts and disruptions within the energy sector. Hungary experienced exceptionally low water levels on the Danube during the summer, which heightened pressures on agriculture, water management, and power generation. These conditions also impacted electricity supply, prompting the government to account for additional energy-related expenses. The reserve provides the amended budget with a dedicated allocation to address these pressures.
Low Danube levels strain energy supply
The reduced water levels in the Danube led to decreased output at the Paks nuclear power plant, a key provider of Hungary’s electricity. Since the plant depends on Danube water for cooling, sustained low water levels posed operational challenges. Production dropped significantly during the most intense period in August but later improved as conditions stabilized. Engineering interventions and higher water availability facilitated a gradual recovery of energy output. The disruption increased electricity costs because Hungary had to depend more on imported power while domestic nuclear generation remained limited.
The revised fiscal plan also maintains several social initiatives previously announced by the government. These include a school-start support of 100,000 forints for around 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 be doubled under the updated framework. These measures are incorporated alongside the new emergency reserve and the broader expenditure cuts planned for the remainder of the year.
Public debt projection increases in revised outlook
Hungary now forecasts that public debt will reach 77.5% of GDP in 2026, up from the previous estimate of 74.6%. Officials attributed this rise to the larger budget deficit and weaker nominal GDP assumptions used when formulating the original plan. The central government recorded a deficit of 2.858 trillion forints through July, representing 67.7% of the annual deficit target set in the current budget law. These figures highlight the significant fiscal adjustments incorporated into the revised plan.
Performance of the budget improved from May through July after an initial larger shortfall in the first four months. The government reported a combined surplus of 991.9 billion forints over those three months. In July alone, a surplus of more than 500 billion forints was recorded, 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.