Hungary's deficit could rise to nearly 7 percent
Hungary’s budget deficit could widen to 6.8 percent this year, significantly exceeding official targets. Prime Minister-designate Péter Magyar made this statement on May 5, citing documents available to his team, as reported by the financial portal Portfolio.hu.
In a social media post, Magyar explained that the expected deficit is well above the government’s original target of 3.9 percent and also exceeds the later revised forecast of 5 percent.
The deficit, calculated on a cash flow basis, rose to 1.3 trillion forints in March, equivalent to 3.45 billion euros. That was the highest monthly deficit ever recorded. As a result, the budget shortfall had already reached 3.4 trillion forints, or 83 percent of the annual target, as the Ministry of Economy had announced two days before the election.
Dispute over final spending
Magyar accused the outgoing cabinet of accelerating spending in the final weeks of its term. Among other things, this involved new financial commitments and additional liabilities prior to the handover of power. Gergely Gulyás, the head of the Prime Minister’s Office, rejected these allegations.
In recent days, the controversy surrounding the National Cultural Fund has intensified. The fund, administered by the Ministry of Culture and Innovation, allocated 17 billion forints to public figures, organizations with ties to the Fidesz party, and various projects. These included, among other things, eating contests and the composition of a Champions League anthem by folk musicians for the final on May 30 in Budapest. A portion of the funds was transferred after the election.
Magyar warned that short-term spending by the outgoing cabinet could place an additional burden on the new government’s budget. He urged ministry officials not to enter into any new commitments and to limit spending to what is necessary for basic government operations until a new government is formed.
New Government Under Pressure
Should the deficit path outlined by Magyar’s team be confirmed, the result would exceed previous market expectations. Analysts had already anticipated a significant deterioration, but most forecasts ranged from 5.5 to 6 percent.
A deficit of nearly 7 percent would require a much more significant fiscal adjustment than previously assumed. This increases the pressure on the new government to stabilize Hungary’s public finances while simultaneously supporting economic growth.
Some analysts have already criticized the Tisza Party’s campaign promises, including the planned reduction of the income tax rate from 15 to 9 percent for minimum-wage earners and low-income workers. István Kapitány, the designated Minister of Economy and Energy, did not, however, provide a specific date for this. The measure is not expected to take effect until 2027 at the earliest.
Magyar announced that his government would quickly ensure greater budget discipline. He said the government plans to review spending, contracts, and state-owned enterprises to reduce waste and increase efficiency. He had previously stated that Tisza would conduct a comprehensive budget review and present a revised version of the budget within the first 100 days.
