The new government has effectively started fiscal adjustment

HUNGARY - In Brief 17 May 2026 by Istvan Racz

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This year's fiscal deficit (by Eurostat definition) is officially expected to reach 6.8% of GDP, against the original 3.7% target, which was amended later to 4.5% and then even later to 5%. This is not an estimate from the new Finance Ministry; it is the estimate with which the outgoing economy minister, Mr. Nagy, handed over the issue to his successor. Mr. Kármán.Just to mention the facts known so far, the central government's cash deficit reached 13% in January-April, pushed up by seasonality and election campaign spending. This compares to 13.4% in the same period of the previous parliamentary election year, i.e. 2022. In that year, the full-year fiscal deficit by Eurostat was 6.2% of GDP.Mr. Magyar's government intends to take stock by end-August and propose to parliament the amendment of this year's budget in September. However, it appears that they have already started fiscal adjustment, in their own style.One way of adjustment will be the ongoing efforts to achieve the release of EU funds to Hungary, although it is completely unclear at this moment, how much of EU funds could actually reach Hungary before the end of this year, and also how much of that would count as fiscal revenue, rather than loans, investment (by the EU) or the redemption of existing Hungarian claims (on the EU). In other words, the potential impact on the fiscal deficit is currently hidden in a deep fog.However, there is a lot to look at on the spending side. PM Magyar has just indicated that his government is hesitant to pay out a HUF38bn instalment, formally due this month, under a HUF1311bn (1.3% of GDP) 10-year contract of unknown content with 4iG, an arguably Fidesz-friendly domestic te...