BUDAPEST, HUNGARY / RankWire.AI / – In its updated fiscal plan, Hungary has confirmed a 2026 budget deficit goal of 7.5% of gross domestic product, despite revising its expenditure strategy. The Hungarian Finance Ministry explained that the revised budget reflects deteriorating fiscal conditions, a severe drought, and rising energy expenses. Originally, the budget aimed for a deficit of 3.7% of GDP. A subsequent review indicated that the shortfall could have reached 8.3% without implementing additional measures. The new framework aims to keep the deficit below this level while accommodating new costs.
The government has allocated approximately 400 billion forints to measures intended to improve fiscal stability. Additionally, around 300 billion forints are planned in savings from state operations for the remainder of 2026. Altogether, these actions amount to about 700 billion forints in expenditure cuts. Officials stated that the revised plan would preserve 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 before its expected presentation to parliament.
A newly created emergency fund of 500 billion forints, called Havária, forms part of the updated budget. Its purpose is to cover unforeseen costs mainly caused by drought conditions and energy system disruptions. During the summer, Hungary experienced extraordinarily low water levels on the Danube, which intensified pressures on agriculture, water management, and power generation. These conditions also impacted electricity supply and led the government to account for additional energy-related expenses. The reserve allocates a separate fund within the amended budget to address these pressures.
Low Danube levels challenge energy supply reliability
The Danube’s reduced water levels hampered operations at the Paks nuclear power plant, a key electricity source for Hungary. The facility relies on Danube water for cooling, making prolonged low water levels an operational concern. During August’s critical period, power generation sharply declined before conditions improved. Engineering interventions and increased water availability gradually supported the recovery of output. This disruption resulted in higher electricity costs, as Hungary needed to depend more heavily on imported power, while domestic nuclear output remained constrained.
The updated spending plan also maintains several social initiatives previously announced by the government. Among these are school-start grants worth 100,000 forints for roughly 400,000 children in eligible households. The package additionally eliminates value-added tax from prescription medications and reduces the tax rate on firewood. Under the revised framework, funding for the social firewood program will double. Officials have incorporated these measures alongside the emergency reserve and the broader spending cuts planned for the rest of the year.
Revised fiscal outlook sees public debt increase
Hungary now projects that its public debt will reach 77.5% of GDP in 2026, up from an earlier estimate of 74.6%. Officials attributed this rise to the larger budget deficit and weaker nominal GDP estimates used when the original plan was formulated. The central government recorded a deficit of 2.858 trillion forints through July, which represented 67.7% of the annual deficit target set by the current budget law. These figures underscore the extent of fiscal adjustments incorporated into the revised plan.
Performance improved from May through July after a significantly larger shortfall during the initial months. The government reported a combined surplus of 991.9 billion forints over those three months, with July alone generating a surplus of more than 500 billion forints, according to official fiscal data. The amended 2026 budget is scheduled for submission to parliament by August 31. While maintaining the 7.5% deficit target, the proposal accounts for costs associated with drought, energy pressures, spending cuts, and the new emergency fund.