Hungarian government plans refined as budget figures shift 🔄
MTI-ECONEWS – The government targets a general government deficit, relative to GDP, of 4.1pc for 2025 and 3.7pc for 2026, a state secretary at the National Economy Ministry said at a press conference on Tuesday. Here are the changes to the budget figures:
The improving condition of the economy paves the way for strict fiscal policy and a reduction in the deficit, Kornél Kisgergely said. He added that a reduction in Hungary’s state debt levels would continue in the coming years as the primary deficit, which excludes debt maintenance costs, remained close to zero. He noted that credit rating agencies had acknowledged the results Hungary had achieved while the European Commission had established that the country had fulfilled its commitments.
Kisgergely said macroeconomic trends had produced a minor deviation in the budget: GDP growth is expected to be under 2.5pc, compared to the earlier projected 3.4pc. Hungary’s cash flow-based general government deficit is expected to reach HUF 4,774bn now, compared to the HUF 4,123bn gap in the budget act, as the result of a tax revenue shortfall, wider application of family support measures, overspending for some items, delays in the transfer of European Union funding and freezes on some expenditure items, he said. The delay in getting EU funding will not impact Hungary’s general government deficit calculated according to the EU’s accrual-based accounting rules, he added.
Changes to the budget figures
Mihály Hoffmann, the CEO of the Government Debt Management Agency (ÁKK), said the agency’s financing plan had been modified to accommodate the bigger cash flowed-based deficit. At present, the financing plan relies on net institutional forint issues for 50pc of financing, institutional FX issues for 30pc and household purchases of retail securities for 20pc, he explained.
He said a decision had been taken to raise ÁKK’s net FX issues from HUF 838bn to HUF 1,685bn. That calculates as gross EUR 3.2bn and net EUR 2.2bn of FX issues, he added.
FX issues are the “optimal financing instrument” at present, he said, adding that the higher FX proceeds would relieve pressure on the forint market to meet the need for additional resources. The modification will lift FX financing to 30.2pc of state debt, a fraction over the 30pc target threshold, he said. No changes are planned on the market for retail securities, he added.
Kisgergely said the matter was “manageable” and presented “no challenge” to ÁKK. ÁKK will cover the HUF 651bn increase in the cash flow-based deficit with FX issues, he said. The timing, currency and maturities of the gross EUR 3bn of bond issues will depend on market conditions, he added.
Net issues of forint securities for institutional investors will fall by HUF 344bn, while net retail issues remain unchanged, he said. Benchmark thresholds for the makeup of state debt will also stay the same, he added.
Kisgergely said 88pc of the modified full-year net issuance plan had been fulfilled in January-May. In line with the bigger cash flow-based deficit target, net issues, relative to GDP, will rise from 4.7pc to 5.3pc, still under 7.7pc average for the period 2020-2024, he added.
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UPDATE
ÁKK sells HUF 60bn of three-month T-bills at auction, double plan
ÁKK sold HUF 60.0bn of discount three-month T-bills at auction on Tuesday, doubling its original offer.
Primary dealers bid for HUF 112.4bn of the securities.
Average yield was 6.30pc, 14bp over the secondary market benchmark yield but 1bp lower than the yield at the previous auction of the bills one week earlier.
UPDATE 2
Parliament approves main figures of 2026 budget
Hungary’s Parliament on Tuesday approved an amendment to the bill on the 2026 central budget, which includes the main figures of the budget.
Parliament approved the motion with 119 votes in favour and 41 votes against.
The amendment sets the deficit of the central budget at HUF 4,218bn, unchanged, but total expenditure is set at HUF 43,781bn compared to the originally targeted HUF 43,764bn, and total revenue is set at HUF 39,562bn compared to the original HUF 39,546bn.
Due to the introduction of stricter anti-drug laws, budgetary support for the penitentiary system, the police and the civil guard has increased.
The final vote on next year’s budget is expected to take place next Tuesday.