Official: Hungary’s 2026 budget is set, economic recovery postponed to next year – UPDATE

The 2026 budget is based on peace and can rightly be called a “peace budget”, Gergely Gulyás, the head of the Prime Minister’s Office, said at a weekly press briefing on Thursday.

Gulyás said the biggest beneficiaries of the budget would be families raising children. He said the budget draft was the result of “cautious planning”, assuming global economic and political changes, primarily the establishment of peace, would produce economic growth. He added that the budget would offer everybody the chance to “take a step forward”.

Gulyás said the system of regulated utility prices for households and the annual pensioners’ bonus would be maintained in the 2026 budget, while salaries would continue to rise and Hungarians in uniform would get a six-month premium.

He said fiscal deficit and state debt levels would decline, while inflation would fall. He added that changes to tax laws would be made to streamline the tax system.

Funding for announced family support measures have been factored into the budget, he added.

Meanwhile, Gulyas noted that the referendum on Ukraine’s accession to the European Union started earlier this week. All Hungarian citizens with a permanent address in Hungary will be mailed a voting slip on the question, he said.

He insisted that the European Union wanted to prevent the people from deciding on Ukraine’s EU accession.

Gulyas said that in Hungary, the people’s opinion would determine the country’s position on the matter.

“We can’t take responsibility for the other countries.”

He called on everyone to vote, saying the outcome would be key to the future of the EU and Hungary. A large turnout, he added, was of critical importance.

Gulyas said he had already voted “no” to Ukraine’s accession, “but those wanting to vote ‘yes’ will have the chance to do so.”

Answering questions, Gulyas said the government’s stance was clear on Ukraine’s EU accession. “It’s good if people can voice their opinions and the government sees that opinion as binding.”

The government’s stance is that “Ukraine’s accession in its current form would be harmful for the EU and tragic for Hungary,” he said.

Gulyas insisted that the Tisza party had manipulated a recording from nine years ago by editing out Prime Minister Viktor Orban’s statement that Ukraine’s EU membership was not on the agenda. “Despite the fact that Ukraine is not at fault in becoming a victim of a Russian attack, a fast-tracked [EU accession] procedure is unacceptable…” he said.

He said it was out of the question that Ukraine could comply with the requirements of EU membership “by any objective measure”.

Regarding EU funding, Gulyas said that the years since 2010 had been the busiest since the fall of communism when it came to the modernisation, development of hospitals, as well as equipment procurement. “But the government wants to revamp even more hospitals. And we will because Hungary is entitled to the EU monies, but they could be coming faster.”

Gulyas noted that the state secretary for health care last week “presented” hospitals where development plans are ready but reconstruction cannot start “because Hungarian MEPs, who earn some 2 million forints a month in Brussels, are working to prevent the renovation of those hospitals.”

Government Spokeswoman Eszter Vitalyos said that the last stretch of the M44 motorway was inaugurated on Tuesday, completing a 127km network of four-lane roads linking the southeastern town of Bekescsaba to the M5 highway. The length of motorways in Hungary has grown 1.5-fold since 2010, she added.

Gulyas said the election law could not be amended in the year before an election, so this would not happen. At the same time, he added that this rule did not apply to procedural rules.

In response to a question concerning the EU audit office having found problems connected with NGO financing, he said Brussels employed double standards. Whereas it was raising various requirements in countries that already guaranteed transparency, such as Hungary, it neglected to enforce some basic transparency requirements when it came to its own practices, he said.

He said that when the EU commissioner overseeing rule-of-law matters visited Hungary, he was asked to bring Brussels closer to “good Hungarian practices”.

In response to another question, he said the government was open to amending the law on central bank foundations.

He said that so far it had not been proved that the central bank foundations had failed to act with due caution in their business operations. When the government wanted to extend the powers of the central bank supervisory board to them, the “notification attempt” sent to the European Central Bank had not got anywhere, he added.

Gulyas said any significant loss of assets due to poor financial management was “unacceptable” and any breach of the law would not be tolerated. An investigation by the public prosecutor must reveal the facts, he said. Gulyas also noted that the central bank never operated under the auspices of the government.

Until 2018, State Audit Office had not found any irregularities regarding the financial operations of central bank’s foundations.

Commenting on the removal of Antal Rogan, the head of the Prime Minister’s Cabinet Office, from a US sanctions list, he said it was untrue that Rogan had been added to the list in connection with corruption and no such evidence was available. He added that evidence was available in the case of others included on the list, but the decision to blacklist Rogan had been political.

Gulyas said he was not aware of anybody ever having been on the list for less than 18 months, so the fact that Rogan had been removed in three months was an admission that his inclusion had been baseless.

He denied that the case had been connected in any way to the removal of some of his ministry’s powers. He added that the prime minister had decided that the minister in charge of the cabinet office and the prime minister’s office should be primarily involved in government coordination and preparations for the general election.

Commenting on bridge protests organised by independent MP Akos Hadhazy, Gulyas said police banned the demonstration and they now awaited a related court ruling, adding that a few hundred protesters must not be allowed to curb the rights and freedoms of hundreds of thousands of people. If the Kuria, Hungary’s supreme court, “takes a different position”, further legal steps would be considered, he said.

Gulyas confirmed that the Hungarian section of the Budapest-Belgrade railway line is expected to be completed by the end of the year. The line is 91 percent complete technically and 72 percent complete financially, the economy minister added.

Asked whether Hungary would be represented at the May 9 Moscow Victory Parade, Gulyas said it was “out of the question” that the Hungarian government would be represented at a political level, adding that the event celebrated had not been a victory for Hungary.

Responding to a question about a ministerial commissioner who insisted that moving abroad “is treason”, Gulyas said his statement did not coincide with the government’s position, namely that anyone who “tries their luck in another country should be appreciated”. He said it was up to the defence minister to decide whether or not to accept the commissioner’s resignation, should he proffer it.

Regarding reported nickel contamination in the town of God, north of Budapest, he said it was up to the authorities to investigate if the suspicion of contamination arose, and the polluter would face the consequences stipulated in the law if found responsible.

Government approves main figures of 2026 budget

The government has approved the main figures of the 2026 budget, National Economy Minister Márton Nagy said after the cabinet meeting. At the press briefing, Nagy said the budget draft would be sent to the Fiscal Council in the coming week and submitted to lawmakers on 2 May. Expenditures are close to HUF 35,000bn and revenue around HUF 34,000bn in the draft, he added.

The draft targets a 3.7pc-of-GDP deficit, he said. Calculated with the European Union’s accrual-based accounting rules, the deficit target stands at HUF 3,700bn, while the cash flow-based gap is set to reach HUF 4,100bn, he added. The draft budget assumes GDP growth of 4.1pc and average annual inflation of 3.6pc.

In absolute terms, GDP is set to rise to HUF 95,000bn from HUF 88,000bn in 2024. The chance of peace gives the government the chance to return to a policy tax cuts, a policy that will be focused on families, he said.

Fielding questions, he said the 2024 4pc-of-GDP deficit was achievable, adding that the primary deficit would be zero. He said the deficit target was raised on the extension of personal income tax exemptions for mothers and VAT rebates for pensioners. He added that payouts on government securities and support for the regulated utilities price scheme during the winter months had weighed on fiscal expenditures early in the first months of the year.

He said interest payments on retail government securities would reach HUF 800bn in 2026. Support for families raising children will reach HUF 4,800bn, or HUF 5,600bn including support for the regulated utilities price scheme for households, he added.

Broader eligibility for PIT exemptions for mothers with children will cost HUF 270bn, and the doubling of tax allowances for families raising children will cost HUF 210bn, he said.

Pension expenditures will reach HUF 7,770bn, while pensioners can expect a growth-linked premium as GDP growth is expected to be over 3pc, he added.

He said HUF 4,900bn would be earmarked for economic development, including HUF 220bn in EU in funding. The farm sector will get HUF 1,300bn, including HUF 1,000bn from Brussels, he added.

The government expects EU transfers to reach HUF 2,360bn in 2026, up from HUF 2,000bn in 2025, he said.

He also noted a 15pc pay rise for municipal council employees in settlements with fewer than 10,000 residents, the continuation of salary increases for teachers, and HUF 450bn for a six-month bonus for Hungarians in uniform among expenditures.

Defence expenditures are set at HUF 1,920bn, equivalent to 2pc, of GDP, he said, adding that a “defence reserve” had also been established in the budget if EU rules were modified to allow a 1.5pc-of-GDP adjustment for defence spending.

He said the budget contained measures streamlining and digitalising the tax system, adding that corporate tax preferences would be expanded with the aim of incentivising developments.

He said windfall profit taxes would remain in a number of sectors, including the banking sector where it would raise HUF 360bn in 2026. He added that lenders could write off government securities purchases up to half of the payable tax. The government could weigh phasing out the tax when the base rate falls from 6.5pc at present to 2-3pc, he said.

Sectoral taxes will remain in place for the retail and insurance sectors, too, he said. The tax on the spread between Urals and Brent crude will also remain in place, he added. Nagy said the government was mulling extending a cap on markups from food to non-food products, such as cosmetics. Responding to a question, Nagy said the 2026 budget was drafted assuming a HUF/EUR rate of around 400.

Responding to a question, Nagy said fake invoices had been submitted in a home renovation subsidy scheme in a number of places. He added that the scope of the National Tax and Customs Authority (NAV) would be expanded to address the matter.

Asked about the foundations of the National Bank of Hungary (NBH), Nagy said he had no knowledge of assisting with them, adding that he had been a managing director at the central bank when the foundations had been established. Becoming a member of a foundation board of trustees after his appointment as deputy-governor at the central bank, Nagy said he quickly resigned that membership.

Nagy said the NBH’s management was not involved with the operation of the foundations, and they were under the oversight of the central bank’s supervisory board and the State Audit Office (ASZ).

Speaking about a recent visit to Japan, Nagy said Japanese companies were present in Hungary’s automotive and pharmaceutical industries, and pointed to opportunities for cooperation in the railway, energy and nuclear energy sectors. Hitachi has expressed interest in a rapid rail line connecting Budapest’s Liszt Ferenc International Airport with the city centre, while Suzuki wants to produce electric vehicles locally and Nippon Paper aims to expand its capacity in Hungary, he added.

He said Japanese tourism turnover in Hungary had climbed 40pc, adding that a direct flight between the two countries would be beneficial.

Nagy said a 3.5pc real wage rise in February was “unacceptable” and the aim was to keep real wage growth around 5pc. He added that a wage agreement reached earlier would ensure pay rises, but the government still needed to fight higher prices.

He affirmed that pensioners would get an inflation-linked top-up in November, if data showed higher than expected CPI. If inflation reaches 4.5pc, that top-up will reach HUF 91bn or around HUF 40,000 per pensioner, he added. The government will weigh the central bank governor’s request to wind up the NBH’s foundations, he said, adding that the governor would have to initiate an amendment to the central bank act.

Nagy said price regulation was having a far bigger impact on bringing down inflation at present than monetary policy, as inflation was not driven by consumption, but by dearer commodities and an “excessive appetite” for profit in some sectors.

Nagy blamed the high pro rata deficit on interest payouts on retail government securities and expenditures related to the regulated utilities price scheme boosted by higher gas prices and increased gas consumption. He added that nothing in the budget performance in January-March indicated a structural problem.

He said the cap on markups had cut prices on a range of affected products by 18.8pc, well over the 10-12pc decline the government had expected. The ministry expects headline CPI to be around 4pc in April as food price inflation falls to 5pc, he added.

Nagy said the government would decide on extending the cap on markups to non-food products, such as washing powder, nappies or body wash, at the end of May.

The margin on such products stands over 30pc at present, he added. Nagy said around 280 big investments were in the running for the Hundred New Factories Programme, and a decision on the first hundred could be taken within weeks. Investments in the machinery and food industries, as well as in R+D, have the best chances, he added.

Commenting on S+P Global Ratings’ recent review of Hungary’s sovereign rating, he said it was “a bit of an anomaly” and that the other big rating agencies had assigned Hungary higher ratings. He added that the government took all such indications seriously.

Asked about the expected impact of the tariff war, Nagy said his ministry had made calculations, but it was still too early to make estimates because of the quickly developing situation. He added that Hungary had not been asked to join a tariff war against China and pointed to Hungary’s policy of economic connectivity and openness.

Asked about the future of steelmaker Dunaferr, Nagy blamed the steel mill’s problems on the failed policies of Brussels, sanctions and the green transition. He noted that Liberty Steel had made an attempt to turn around the company, supported by HUF 31bn in wage guarantees and credit from Magyar Eximbank. He said Dunaferr’s assets, now under liquidation, would be sold by the end of May, adding that there were 4-5 interested parties.

Speaking about a trade agreement with the United States, Nagy said the matter was a complicated one involving issues from visas to a double taxation avoidance agreement, but also extending to investments and energy. He added that more could be said about the matter by summer.

He said the government had launched a HUF 300bn capital programme to support new home construction as demand for homes was on the rise, driving up prices. The government will do everything in its power to promote housing, he added, calling out local councils for doing too little to address the issue in recent years.

Gulyás: EU wants to prevent people from deciding on Ukraine’s EU accession

The European Union wants to prevent the people from deciding on Ukraine’s European Union accession, Gulyás said. Noting that the referendum on the matter started earlier this week, he said that all Hungarian citizens with a permanent address in Hungary will be mailed a voting slip on the question of Ukraine’s EU accession. Gulyás said the people’s opinion would determine Hungary’s position on the matter. “We can’t take responsibility for the other countries.”

He called on everyone to vote, saying the outcome would be key to the future of the EU and Hungary. A large turnout, he added, was of critical importance. Gulyás said he had already voted “no” to Ukraine’s accession, “but those wanting to vote ‘yes’ will have the chance to do so.”

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