Tisza won with an extraordinarily strong mandate
The opposition Tisza party, founded only two years ago, achieved a sweeping victory at the regular parliamentary election held early this month. Actually, it won the strongest mandate seen since the fall of communism in 1990. Tisza now has a comfortable two-thirds supermajority, meaning it can amend the constitution and various cardinal laws on its own. This will likely be used intensively, as Tisza is aiming at more than just a government change, and so is the large majority of its supporters.
Despite fears that PM Orbán might refuse to give up power even if he lost the election, there have been no signs of an unusually large occurrence of irregularities in the election process, or of Fidesz’s rejection of the voting result or its reluctance to step down after the defeat. There is still a legal window open for complaints, but the election result becomes final by May 4, and the new parliament will be convened for the first time on May 9. PM Orbán has readily acknowledged the voting result, and President Sulyok has appeared to be prepared to play by the rules, cooperating with Tisza in setting up the new government.
Regarding widespread fears of post-election obstruction by Fidesz, Tisza head Mr. Magyar called upon the President of the Republic and the heads of a number of legally independent national institutions to step down voluntarily because they had acted following a partisan line instead of conducting policy in their respective positions impartially, as required by law. These calls are backed by the threat of Tisza's using its constitutional majority to remove them if they refuse to resign.
Tisza’s landslide election victory has been received positively by the EU mainstream and is expected to open the way to the release of currently withheld European funds to Hungary. This is indeed likely to happen, but it will not happen overnight or unconditionally. Tisza, which is already in active negotiations with the EU on this subject, is expected to carry out a series of key reforms, adopting forceful anti-corruption measures and restoring the independence of the judiciary, the media and universities. The transfer of funds will likely be made against the delivery of these reforms, and there will have to be measures taken to properly manage the funds as well. As a result, transfers are likely to accelerate by this year, but the large part of EU funds may start to reach the economy only in 2027.
A critical area for Tisza’s success will be fiscal policy. The government budget is in a difficult situation, the same as it was after the previous election, in 2022. This means that a substantial amount of fiscal adjustment is required, and the situation is further aggravated by the lasting effects of some of Fidesz’s campaign measures, the extra cost of higher energy imports prices due to the war in the Middle East, and the fact that Tisza also has a list of campaign promises waiting for delivery. On the other hand, two supporting factors on which Tisza will likely be able to rely are the arrival of additional EU funds and the possibility of saving large amounts by reducing the waste and theft of public money experienced under the outgoing government.
Tisza has taken aim at introducing the euro in Hungary over the medium term. Its target is to meet the entry criteria by 2030, which seems far from being easy. As a first step, Tisza intends to propose an amendment of this year’s annual budget, in which it wants to lay down the multi-year framework for euro convergence. In our view, the most critical parts will be meeting the euro-entry government debt ceiling, and the requirement on the harmonization of interest rates, in addition to reconciling the requirement to reduce the fiscal deficit ratio with Tisza’s promises to rapidly improve the quality of key public services.
Importantly, Tisza is not preparing to remove the current management of the MNB, and is expressly aiming at close cooperation with Governor Varga and his management team. The MNB has expressed its readiness to cooperate on euro convergence, and is likely to work with the new government to keep the forint strong, with a view to holding back inflation and keeping the cost of energy imports as low as possible. This approach is unlikely to allow any loosening of central bank policy for the rest of this year. Should the new, elevated level of EURHUF remain in place, we would expect CPI-inflation to remain within the MNB’s tolerance band, despite rising from its current low level later in 2026. We see GDP growth prospects very similar to our previous forecast, with only a moderate recovery this year and a bit more in 2027.
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