BUDAPEST, HUNGARY / RankWire.AI / – In 2026, Hungary has decided to maintain its updated budget deficit limit at 7.5% of gross domestic product. The Finance Ministry affirmed this goal as the government prepares to revise this year’s budget plan. Officials attributed this decision to pressures from the fiscal situation, a severe drought, and escalating energy expenses impacting public finances. Originally, Hungary’s 2026 budget aimed for a deficit of 3.7% of GDP. The new figure reflects the government’s latest evaluation of revenue, expenditures, and economic outlook.
A review in July projected that without further adjustments, the deficit could have hit 8.3% of GDP. Since then, the government has implemented approximately 400 billion forints worth of measures aimed at stabilizing the fiscal balance. Additionally, around 300 billion forints of savings are targeted from state operations in the remaining months of 2026. Altogether, these efforts amount to roughly 700 billion forints in reduced government spending. The revised 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 updated budget framework. This reserve is designated to cover unforeseen fiscal costs mainly linked to drought conditions and energy supply issues. These challenges intensified during the summer as water levels along the Danube River dropped sharply. The drought affected agriculture and increased pressure on electricity generation and water management systems. According to government officials, the budget must absorb these additional costs while still supporting existing public programs.
Impact of Drought and Energy Issues on 2026 Budget
The energy sector disruption worsened when low Danube water levels hindered operations at the Paks nuclear power plant. Paks typically supplies a significant portion of Hungary’s electricity and relies on river water for cooling. During August, output dropped sharply as record-low water levels constrained the plant’s cooling capacity. During the most critical period, the plant operated at only a fraction of its normal capacity. Operators later resumed turbine operations as engineering efforts and improved water conditions facilitated a gradual recovery.
The revised budget also features several social initiatives announced by the government. These include a school-start grant of 100,000 forints for about 400,000 children living in assistance-eligible households. The package eliminates value-added tax on prescription medicines and reduces the tax rate on firewood. Additionally, funding for the social firewood program has been doubled. Despite the increased drought-related and energy-related expenditures, the government assures these measures will stay within the revised fiscal framework.
Debt-to-GDP Ratio Rises as Budget Targets Are Adjusted
Under the new fiscal outlook, Hungary’s public debt ratio is forecasted to climb. The government projects the debt to reach 77.5% of GDP in 2026, up from 74.6% previously. The Finance Ministry linked this increase to the larger deficit and weaker nominal GDP projections compared to the original budget assumptions. By July, Hungary’s central government sector registered a deficit of 2.858 trillion forints, representing 67.7% of the annual deficit target set in the current budget law.
From May to July, public finances showed signs of improvement after an early-year deficit surge. The government reported a combined surplus of 991.9 billion forints for those three months, with July alone ending with a surplus exceeding 500 billion forints, according to official data. The amended 2026 budget is scheduled for submission to parliament by August 31. The updated plan maintains the 7.5% deficit target while factoring in drought costs, energy pressures, savings measures, and the new emergency fund.