BUDAPEST, HUNGARY / RankWire.AI / – Hungary has decided to uphold its revised budget deficit target for 2026 at 7.5% of gross domestic product. The Finance Ministry confirmed this figure as the government prepares to amend this year’s budget plan. Officials cited the country’s fiscal situation, the severe drought affecting agriculture and water resources, and rising energy costs as key pressures impacting public finances. Initially, Hungary’s 2026 budget had set a deficit ceiling at 3.7% of GDP, but the current revision reflects the government’s latest evaluation of revenue, expenditures, and economic outlook.
A review conducted in July projected that, without additional corrective actions, the deficit could have reached 8.3% of GDP. Since then, the government has introduced measures totaling around 400 billion forints aimed at improving fiscal stability. Additionally, it plans to implement approximately 300 billion forints of further savings through reductions in state operational costs during the remaining months of 2026. Collectively, these measures amount to roughly 700 billion forints in decreased government spending. The updated budget proposal was submitted to the Fiscal Council for initial review on August 17.
Furthermore, Hungary intends to establish a 500 billion forint Havária emergency fund within the scope of the revised budget. This fund is designed to address unforeseen fiscal costs primarily linked to drought conditions and energy supply issues. These challenges intensified during the summer, as water levels along the Danube River plummeted, disrupting agriculture and placing additional strain on electricity generation and water management infrastructure. Official figures indicate that the budget must absorb these costs while ensuring continued funding for existing public programs.
Drought and Energy Challenges Influence 2026 Fiscal Planning
The energy sector faced increased difficulties when low water levels along the Danube restricted operations at the Paks nuclear power plant, which typically supplies a significant portion of Hungary’s electricity and relies on river water for cooling. During August, the plant’s output sharply declined due to record-low water levels that limited its cooling capacity, resulting in operations at a fraction of normal capacity during the most critical period. Operators began gradually restarting turbines as water conditions improved and engineering work was completed, supporting a recovery of some capacity.
The revised budget also encompasses several social initiatives announced by the government. These include a school-start support of 100,000 forints for approximately 400,000 children from households eligible for assistance. The package also eliminates value-added tax on prescription medicines and reduces the tax rate on firewood, while doubling funding for the social firewood program. Despite the increased drought-related and energy-related expenditures, the government assured that these measures will stay within the framework of the revised fiscal plan.
Rising Debt Ratio as Fiscal Goals Are Adjusted
Under the updated fiscal outlook, Hungary’s public debt ratio is also projected to increase, with the government estimating it will reach 77.5% of GDP in 2026 compared to the previous estimate of 74.6%. The Finance Ministry attributed this rise to the larger deficit and weaker nominal GDP than initially projected in the original budget. As of July, Hungary’s central government subsystem recorded a deficit of 2.858 trillion forints, accounting for 67.7% of the annual deficit target set in the existing budget law.
Between May and July, the public finances showed signs of improvement after experiencing a much larger deficit during the first four months, with the government reporting a combined surplus of 991.9 billion forints for those three months. July alone concluded with a surplus exceeding 500 billion forints, based on official budget data. The government intends to present the amended 2026 budget to parliament by August 31. This revised framework retains the 7.5% deficit goal while incorporating costs related to drought, energy pressures, savings measures, and the newly established emergency fund.