Hungary’s new government says it has inherited a significantly worse fiscal position than expected, but argues that its first months in office already point to a change in direction. With the government targeting euro adoption by 2030, reducing the budget deficit and public debt is set to become one of the defining economic challenges of the coming years.
From a 3.7 per cent target to an 8.3 per cent warning
The 2026 budget was originally approved with a deficit target of around 3.7 per cent of GDP. According to the new government’s review, however, the deficit could have reached approximately 8.3 per cent without corrective measures. The Finance Ministry now expects the deficit to be around 7.5 per cent of GDP, while MBH Analysis Centre forecasts a slightly more favourable figure of about 7 per cent.
The government says EU funds and other measures have helped prevent the situation from deteriorating further. The budget review also identified additional pressures, including higher local government, road development and healthcare spending, as well as EU recovery funds previously included in calculations but ultimately inaccessible.
At the same time, stronger forint exchange rates, lower yields and the recovery of EU funding have helped improve the fiscal outlook. The government plans to amend the 2026 budget and set a new deficit target by the end of August. A 2027 budget and medium-term fiscal plan are expected by the end of October.
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The deficit could fall substantially in 2027
There are several reasons to expect the deficit to decline next year. Some exceptional expenditures weighing on the 2026 balance will disappear. The so-called “weapon money” payment, for example, is expected to worsen this year’s deficit by roughly half a percentage point of GDP, as reported by Index.
Interest costs could also fall faster than previously anticipated. Lower government bond yields and potential interest-rate cuts would reduce the cost of servicing Hungary’s debt, providing another boost to the budget. Recent figures have offered an early sign of improvement. Finance Minister Kármán András reported a HUF 524 billion (EUR 1.44 billion) budget surplus in July and highlighted a significant reduction in the deficit.
However, he also warned against drawing premature conclusions. Some of July’s improvement resulted from lower-than-planned spending, and certain payments may simply have been postponed rather than eliminated. The real test will therefore be whether fiscal discipline remains in place once these temporary effects disappear.
The 2030 euro target raises the stakes
The government’s ambition to introduce the euro in 2030 gives the fiscal debate a longer-term dimension. If Hungary is to meet the conditions for euro adoption, it will need sustained progress on its deficit and public debt. A single year of improvement will not be enough; the country would need a credible, multi-year fiscal trajectory.
This is why analysts argue that a predictable consolidation plan could be more valuable than a dramatic one-year deficit reduction. Temporary spending cuts or one-off revenues might improve the headline figure, but would not necessarily resolve the underlying structural problem.
A realistic multi-year programme would show investors, businesses and credit-rating agencies how the government intends to reduce the deficit and debt while maintaining economic stability.
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Wider economic challenges remain
Fiscal consolidation alone will not solve Hungary’s broader economic problems. MBH analysts point to weak external demand, particularly subdued German industrial performance, as a continuing risk. Hungary’s dependence on imported energy also leaves the economy exposed to international oil and gas prices, while geopolitical tensions could add further pressure.
Tax and competitiveness measures, investment decisions and expectations surrounding possible euro adoption will therefore also influence Hungary’s growth prospects. For now, the government can point to early signs of fiscal improvement. But the decisive question is whether these developments mark a lasting change rather than a temporary adjustment.
If the 2030 euro ambition is to become more than a political target, Hungary will need years of consistent fiscal discipline, steadily falling deficits and a credible path for reducing public debt.
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