BUDAPEST, HUNGARY / RankWire.AI / – The Hungarian government has decided to keep its revised budget deficit target for 2026 at 7.5% of gross domestic product. The Finance Ministry confirmed this decision as officials prepare to amend this year’s budget. The government pointed to pressures from the fiscal situation, a severe drought, and increased energy costs as key factors impacting public finances. Originally, Hungary’s 2026 budget aimed for a deficit of 3.7% of GDP. The updated figure reflects the government’s latest evaluation of revenue, expenditure, and economic conditions.
A review of the July budget indicated that, without corrective actions, the deficit might have reached 8.3% of GDP. Since then, the government has implemented measures totaling around 400 billion forints aimed at improving fiscal stability. Additionally, it plans to save about 300 billion forints from state operations during the remaining months of 2026. Combined, these steps will reduce government spending by roughly 700 billion forints. The revised budget proposal was submitted for preliminary review to the Fiscal Council on August 17.
Furthermore, Hungary intends to establish a 500 billion forint Havária emergency fund under the new budget plan. This fund will address unforeseen fiscal costs mainly related to drought and energy supply issues. These pressures intensified during the summer, as water levels along the Danube River dropped sharply. The drought affected agriculture and increased the strain on electricity generation and water management systems. Government officials stated that the budget must absorb these additional costs while continuing to fund existing public programs.
Impact of Drought and Energy Constraints on Hungary’s 2026 Budget
The energy situation worsened when low Danube levels restricted operations at the Paks nuclear power plant. This plant provides a significant portion of Hungary’s electricity and relies on river water for cooling. During August, output sharply declined as record-low water levels limited its cooling capacity. For a period during the most critical days, the plant operated at only a fraction of its usual capacity. Operators began restarting turbines once engineering repairs were completed and water conditions improved, enabling a gradual recovery.
The updated budget also incorporates several social initiatives announced by the government. These include providing 100,000 forints for about 400,000 children in aid-eligible households to support school start-up. The package also removes value-added tax from prescription medicines and reduces the tax rate on firewood. Additionally, funding for the social firewood program has been doubled. Officials assured that these measures will stay within the revised fiscal framework, despite the increased expenditure due to drought and energy-related costs.
Public Debt Projection Grows Alongside Fiscal Adjustments
As part of the new fiscal outlook, Hungary’s public debt ratio is expected to increase. The government now forecasts the debt to reach 77.5% of GDP in 2026, up from 74.6%. The Finance Ministry linked this rise to the larger deficit and weaker nominal GDP figures than initially assumed in the original budget. By July, Hungary’s central government subsystem recorded a deficit of 2.858 trillion forints, representing 67.7% of the annual deficit target set in the current budget law.
Between May and July, Hungary’s public finances showed signs of improvement after a larger-than-expected deficit in the early months. The government reported a combined surplus of 991.9 billion forints over those three months. In July alone, the budget ended with a surplus exceeding 500 billion forints, according to official data. The government plans to submit the amended 2026 budget to parliament by August 31. The revised plan maintains the 7.5% deficit target while factoring in drought-related expenses, energy pressures, savings measures, and the new emergency fund.