BUDAPEST, HUNGARY / RankWire.AI / – In its revised fiscal plan, Hungary intends to keep the 2026 budget deficit at 7.5% of gross domestic product, adjusting spending strategies accordingly. The Hungarian Finance Ministry explained that the revised budget accounts for softer fiscal conditions, a severe drought, and rising energy costs. Originally, the budget aimed for a deficit of 3.7% of GDP, but a subsequent review indicated the shortfall could have reached 8.3% without further measures. The updated framework maintains the deficit below this level while incorporating new expenses.
To improve the fiscal balance, the government has allocated around 400 billion forints for measures, along with approximately 300 billion forints in additional savings from state operations for the rest of 2026. Altogether, these actions amount to roughly 700 billion forints in spending cuts. Officials stated that the revised plan would preserve funding for essential public programs while making adjustments to other areas of expenditure. The draft amendment was submitted for preliminary review to the Fiscal Council on August 17 before its scheduled parliament presentation.
A new emergency fund of 500 billion forints, called Havária, forms part of the updated budget, designed to cover unforeseen costs mainly related to drought and energy disruptions. Hungary experienced unusually low water levels on the Danube during summer, which increased pressure on agriculture, water management, and power generation. These conditions also impacted electricity supply and necessitated additional energy-related expenditures. The reserve allocates separate funds within the revised budget to address these challenges.
Low Danube levels strain energy supply
Reduced water levels at the Danube led to decreased output at the Paks nuclear power plant, a significant source of Hungary’s electricity, which relies on the river for cooling. Prolonged low water conditions posed operational concerns, causing a sharp drop in production during the most challenging period in August, before conditions improved. Later, engineering measures and higher water levels supported a gradual recovery in output. This disruption increased electricity costs because Hungary had to rely more on imported power as domestic nuclear production remained limited.
The revised budget also maintains several social initiatives announced earlier, such as school-start support of 100,000 forints for about 400,000 children from eligible households. It also removes value-added tax from prescription medicines and reduces the tax rate on firewood. Under the new framework, funding for the social firewood program will double. These measures are included alongside the emergency reserve and the broader spending cuts planned for the remainder of the year.
Revised fiscal outlook raises public debt forecast
Hungary now projects the public debt-to-GDP ratio will reach 77.5% in 2026, up from an initial estimate of 74.6%. Officials attributed this increase to the larger budget deficit and weaker nominal GDP assumptions used when drafting the original plan. The central government recorded a deficit of 2.858 trillion forints through July, representing 67.7% of the annual target established by the current budget law. These figures highlight the scope of fiscal adjustments incorporated into the updated plan.
After a significant shortfall during the first four months, budget performance improved from May to July, with the government reporting 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. The proposal maintains the 7.5% deficit target, factoring in drought-related costs, energy pressures, spending reductions, and the new emergency reserve.