BUDAPEST, HUNGARY / RankWire.AI / – In 2026, Hungary will stick to a budget deficit of 7.5% of gross domestic product as it adjusts its financial plans. According to the Hungarian Finance Ministry, the revised budget reflects weakened fiscal conditions, severe drought, and increased energy expenses. Initially, the budget aimed for a deficit of 3.7% of GDP. A subsequent review indicated the shortfall could have reached 8.3% without implementing further measures. The updated framework ensures the deficit remains below that level while accommodating new costs.
The government has allocated approximately 400 billion forints to measures aimed at strengthening fiscal stability. Additionally, around 300 billion forints are planned to be saved from reductions in state operations for the remainder of 2026. These combined efforts amount to roughly 700 billion forints in spending cuts. Officials confirmed that the revised plan would sustain funding for essential public programs while modifying other expenditures. The draft amendment was submitted for preliminary review to the Fiscal Council on August 17 ahead of its planned parliamentary approval.
A newly established 500 billion forint Havária emergency fund is integrated into the revised budget. This reserve will address unforeseen expenses mainly related to drought and disruptions in the energy sector. During summer, Hungary experienced exceptionally low water levels on the Danube, which intensified challenges for agriculture, water management, and electricity generation. The situation also impacted power supply, prompting the government to account for additional energy-related costs. The reserve provides the amended budget with a dedicated allocation to manage these pressures.
Low Danube levels threaten energy supplies
The decline in river water levels led to reduced output at the Paks nuclear power plant, a primary source of Hungary’s electricity. Since the facility relies on Danube water for cooling, prolonged low water levels posed operational risks. During August’s most critical period, energy production sharply decreased before conditions improved. Later, engineering measures and higher water levels facilitated a gradual return to normal output. This disruption increased electricity costs, as Hungary had to rely more on imported power while domestic nuclear generation was constrained.
The revised expenditure plan also preserves several social initiatives previously announced by the government. These include school-start support of 100,000 forints for roughly 400,000 children in eligible households. The package further exempts prescription medicines from value-added tax and reduces the tax rate on firewood. Funding for the social firewood program will double under the new framework. These measures are incorporated alongside the emergency reserve and the broader spending reductions planned for the rest of the year.
Public debt forecast increases amid revised fiscal outlook
Hungary now projects the public debt-to-GDP ratio at 77.5% in 2026, up from an earlier estimate of 74.6%. Authorities attributed this rise to the larger budget deficit and weaker nominal GDP figures used when the initial plan was developed. By the end of July, the central government recorded a deficit of 2.858 trillion forints, representing 67.7% of the annual deficit target specified in the current budget law. These figures highlight the significant fiscal adjustments now embedded within the amended plan.
Between May and July, budget performance showed improvement following a substantial shortfall during the first four months. The government reported a combined surplus of 991.9 billion forints over those three months, with July alone generating more than 500 billion forints in surplus, 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 cuts, and the new emergency reserve.