BUDAPEST, HUNGARY / RankWire.AI / – In Budapest, during July 2023, Hungary confirmed its decision to maintain the revised 2026 budget deficit goal at 7.5% of gross domestic product. The Finance Ministry validated this figure as the government prepares to amend this year’s fiscal plan. Officials explained that the adjustment reflects pressures from the current fiscal position, severe drought, and rising energy costs affecting public finances. Originally, Hungary’s 2026 budget aimed for a deficit of 3.7% of GDP, but the new projection aligns with the latest assessment of revenue, expenditure, and economic conditions.
A review of the budget in July indicated that without further intervention, the deficit could have reached 8.3% of GDP. To address this, the government has included approximately 400 billion forints of measures targeted at improving the fiscal balance. Additionally, about 300 billion forints of savings from state operations are planned for the remaining months of 2026. Altogether, these initiatives amount to roughly 700 billion forints in reduced government spending. The draft of the revised budget 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 revised budget. This fund is designated to cover unexpected fiscal costs mainly arising from drought conditions and energy supply issues. During the summer, water levels along the Danube River dropped sharply, intensifying these pressures. The drought disrupted agricultural activities and strained electricity generation and water management systems. Official figures indicate that the government’s budget must absorb these additional costs while still funding existing public programs.
Drought and Energy Challenges Drive Changes to 2026 Budget
The energy sector faced increased difficulties when low Danube water levels limited the operation of the Paks nuclear power plant. Typically, Paks supplies a significant portion of Hungary’s electricity and relies on river water for cooling. In August, output at the plant dropped sharply due to record-low water levels reducing cooling capacity. During the most critical period, the plant operated at only a fraction of its normal capacity. Operators have since resumed turbines as engineering work and improved water conditions have supported a gradual recovery.
The revised budget also incorporates several social measures announced by the Hungarian government. These include a support grant of 100,000 forints for around 400,000 children in households eligible for assistance when school starts. The package also removes value-added tax from prescription medications, reduces the tax rate on firewood, and doubles funding for the social firewood initiative. Despite the increased drought and energy-related expenditures, the government states these measures will remain consistent with the revised fiscal framework.
Debt Level Expected to Rise with Fiscal Target Adjustments
Under the updated fiscal outlook, Hungary’s public debt ratio is projected to increase to 77.5% of GDP in 2026, compared to 74.6% previously. The Finance Ministry linked this rise to the larger deficit and lower nominal GDP assumptions in the new budget. By July, the central government recorded a deficit of 2.858 trillion forints, which accounted for 67.7% of the annual deficit target specified in the current budget law.
Between May and July, public finances showed signs of improvement after a substantial deficit in the first four months of the year. Official data indicates a combined surplus of 991.9 billion forints over those three months, with July alone posting a surplus exceeding 500 billion forints. The government plans to present the amended 2026 budget to parliament by August 31. The new framework retains the 7.5% deficit goal while factoring in drought-related costs, energy pressures, savings measures, and the establishment of the emergency fund.