More news on fiscal policy, more bad than good, today

HUNGARY - In Brief 27 Feb 2025 by Istvan Racz

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On the same day that Cabinet Minister Guyás told the press that the government remains committed to meet this year's 3.7% of GDP fiscal deficit target (after the preliminary actual 4.8% deficit ratio in 2024, both figures referring to general government by Eurostat methodology), the economy ministry issued a statement saying that the fiscal deficit target for 2026 has just been raised to 3.5% of GDP, from the so-far-communicated 2.9% target ratio. The budget plan for 2026 will be prepared shortly, and the government hopes to get parliamentary approval for it by as early as June 16 this year, which would be a return to the Orbán cabinet's usual practice in previous years (this year's budget, which was approved only late last year, was a notable exception). This never means that the annual budget would be implemented in its approved form: under the nine-year old state of emergency, under which Hungary is governed, Mr. Orbán's government decrees, more or less the same thing as president Trump's executive orders in the US, can do a lot to change the plan significantly from time to time, and if it were not sufficient, then the budget can be always flexibly amended by the National Assembly, in which the prime minister keeps pulling all the strings. A brief look at the following table gives a good hint at why next year's deficit ratio target has just been raised by 0.6%-point of GDP: This is our own, freshly updated account of the likely impact of the newly announced social policy measures, which everyone understands as being the government's economic plan to get reelected in 2026. In this table, which heavily relies on the government's recently communicated own estimates, th...