BUDAPEST, HUNGARY / RankWire.AI / – Hungary has decided to maintain its 2026 budget deficit goal at 7.5% of gross domestic product as it updates its fiscal plans. The Hungarian Finance Ministry explained that the revised budget accounts for deteriorating fiscal conditions, a severe drought, and rising energy costs. Originally, the budget aimed for a deficit of 3.7% of GDP. However, a subsequent assessment suggested the shortfall could have reached 8.3% without implementing additional measures. The new framework ensures the deficit stays below that level while accommodating new expenses.
Approximately 400 billion forints have been allocated by the government toward measures to improve fiscal stability. Additionally, around 300 billion forints are planned in further savings from state operations for the remainder of 2026. These combined efforts total roughly 700 billion forints in expenditure reductions. Officials stated that the revised plan would sustain funding for essential public services while adjusting other spending areas. The draft amendment was submitted for preliminary review to the Fiscal Council on August 17, ahead of its intended submission to parliament.
Part of the updated budget includes a new 500 billion forint Havária emergency fund. This reserve is designed to cover unforeseen expenses primarily related to drought conditions and disruptions in the energy sector. During the summer, Hungary experienced notably low water levels on the Danube, which put additional stress on agriculture, water management, and power generation. These conditions also impacted electricity supply, prompting the government to account for higher energy-related costs. The reserve provides a dedicated allocation within the revised budget to address these pressures.
Low Danube Levels Strain Energy Supply
The Danube’s low water levels led to a reduction in output at the Paks nuclear power plant, a significant source of Hungary’s electricity. The plant depends on Danube water for cooling, making sustained low water levels an operational concern. Production declined sharply during the most challenging period in August but later improved as conditions stabilized. Engineering interventions and increased water levels facilitated a gradual recovery of power output. This disruption contributed to higher electricity costs because Hungary had to rely more on imported power while domestic nuclear generation remained limited.
The updated fiscal plan also preserves several social measures previously announced by the government. These include support for school start-up costs amounting to 100,000 forints for approximately 400,000 children in eligible households. The package also eliminates value-added tax from prescription medications and reduces the tax rate on firewood. Funding for the social firewood program will double under the new framework. Officials incorporated these measures alongside the emergency reserve and broader spending cuts planned for the rest of the year.
Revised Fiscal Outlook Shows Rising Public Debt Ratio
Hungary now projects the public debt to reach 77.5% of GDP in 2026, an increase from the earlier estimate of 74.6%. Officials attributed this rise to the larger-than-anticipated budget deficit and weaker nominal GDP projections used when formulating the original plan. The central government recorded a deficit of 2.858 trillion forints through July. This figure represented 67.7% of the annual deficit target set by the current budget law. These numbers highlight the scale of fiscal adjustments integrated into the revised plan.
Performance of the budget improved from May through July following a substantial deficit during the first four months. The government reported a combined surplus of 991.9 billion forints over those three months. In July alone, the surplus exceeded 500 billion forints, based on official fiscal data. The authorities intend to submit the amended 2026 budget to parliament by August 31. The proposal maintains the 7.5% deficit target while factoring in costs related to drought, energy pressures, expenditure reductions, and the new emergency reserve.