Orban Lays Out Plans to Narrow Hungary Budget Deficit Next Year

Marton Kasnyik
·2-min read

(Bloomberg) -- The Hungarian government pledged to further reduce the budget deficit next year, according to the draft plan presented to parliament on Monday, with a recession and upcoming elections creating a continued risk of overshoots.

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The cabinet is targeting a shortfall of 3.7% of gross domestic product after this year’s 4.5% goal, according to the draft Finance Minister Mihaly Varga filed to parliament on Monday. It’s based on projections for 3.4% annual economic growth.

The plan is buffeted by risks, according to the state Fiscal Council’s opinion published last week, which cited an optimistic growth forecast, limited budget reserves and uncertainty about the government’s ability to tap European Union funds that largely remain frozen on graft and rule of law concerns in Hungary.

“There are doubts about whether the government can reach its budget goals, due to downside risks to its ambitious plans on GDP growth,” said Mariann Trippon, an economist at Intesa Sanpaolo’s CIB Bank unit.

With limited space for fiscal stimulus and the forint’s weakness denying the central bank room to spur the economy via rate cuts, Prime Minister Viktor Orban is betting that a global economic recovery will pull his country out of recession.

Orban’s government has a history of overshooting its budget targets in recent years. The stakes are higher this time because of parliamentary elections in 2026, which are shaping up to be the most fiercely contested since the nationalist leader’s return to power 14 years ago.

Orban’s Fidesz party is trailing political challenger Peter Magyar’s upstart Tisza party, according to several recent polls. Orban secured a victory in the last general elections in 2022 after going on a spending spree that’s still weighing on the budget.

Hungary’s cash-flow deficit widened to more than 3 trillion forint, or about $8 billion, in the January-October period of this year, separate data published on Monday showed.

“The growth estimates seem too optimistic and even so, it doesn’t give much room for a fiscal stimulus,” Erste Bank economist Orsolya Nyeste said.

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