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As we argued in the previous edition of Finance Matters (“Magyar Government’s Mission Impossible: Spend Less while Spending More,” Sept. 4, 2026), the new cabinet “will eventually need to demonstrate sustained fiscal discipline, favorable debt dynamics, price stability and exchange-rate credibility.”
In a two-hour-long speech in Parliament, Prime Minister Péter Magyar presented the main figures of the budget for 2027 on Oct. 19. He outlined the difficulty of the task: repair the country’s public finances and deliver on promises to put more money into people’s pockets.
The starting point looks grim. The government’s revised estimate for the 2026 budget deficit rose to 7.5% of GDP, more than double the original target of 3.7%. Without corrective measures, the shortfall could have reached 8.3%. Public debt, meanwhile, is expected to rise from 74.6% of GDP in 2025 to 77.5% this year.
The new administration has blamed election-related spending, unfavorable state contracts, waste, and weaker-than-expected economic performance. It has also set aside HUF 500 billion for drought damage and unforeseen energy-security costs.
Under its budget proposal, the government aims to bring the deficit down to 4.9% of GDP next year, to 4% in 2028, and below the European Union’s 3% limit by 2030. It forecasts economic growth of 2.4% in 2027 and public debt of 77.2% of GDP. The direction is clear, although some still deem the numbers optimistic.
The cabinet has made a visible effort to avoid austerity measures. It plans to cut state operating costs, reduce spending on its own communications and public media, review subsidies and pursue savings through anti-corruption measures. At the same time, it wants to spend more than HUF 2 trillion on new programs and tax relief.
Among the headline measures are a reduction in personal income tax on the minimum wage from 15% to 9%, doubled family allowances, higher minimum pensions and HUF 677 billion for public-sector pay rises. The personal income tax exemption for mothers will be capped at monthly gross earnings of HUF 1 million.
The bill is expected to be shared partly with wealthier individuals and large businesses. The government proposes a wealth tax that it says could generate around HUF 200 billion, alongside higher taxes on large corporations and additional levies on energy companies.
The political message is straightforward: ordinary households should not be the only ones expected to tighten their belts. The economic challenge is equally clear. Savings from reducing waste and corruption look attractive on paper, but they are harder to turn into predictable budget revenue than taxes that arrive automatically.
As for monetary policy, the Hungarian National Bank (MNB) kept its base rate at 5.5% at its September and October meetings, despite low inflation. Consumer prices rose by 1.6% year-on-year in September, while core inflation eased to 1.9%. The bank expects average inflation of 1.8% in 2026, rising to 3.1% in 2027, mainly due to fuel prices.
The MNB has made clear that fiscal policy, the forint and the market reaction to government measures will also influence its decisions. Meanwhile, a government that spends heavily while promising to cut the deficit can put monetary policymakers in a difficult position. Cheaper credit would help households and businesses, but premature rate cuts could put pressure on the currency and ultimately push borrowing costs back up.
That brings us to a significant long-term change: the euro is becoming a more concrete part of Hungary’s economic debate. Minister of Finance András Kármán said in October that Hungary could potentially adopt the single currency in 2032, provided it meets the necessary conditions by 2030.
The government plans to establish a central bank working group in 2027 to prepare for entry into Exchange Rate Mechanism II, the “waiting room” period required before euro adoption. Kármán has also warned against rushing into the process before the economy is ready.
Fitch Ratings offered a cautiously encouraging assessment on Oct. 23, saying Hungary could meet the euro-entry criteria by 2030. The rating agency expects the 2027 deficit to reach 5.4% of GDP, above the government’s 4.9% target, and sees public debt peaking at 77.7% in 2027–2028. In short, the destination may be within reach, but the journey will be hard.
This article was first published in the Budapest Business Journal print issue of October 30, 2026.
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