The Hungarian government has proposed a significant increase to its financial reserves, raising the amount to 192 billion HUF as part of the 2026 budget draft, which has been found compliant with the constitution's debt regulation by the Budget Council.

The draft budget, rooted in the theme of peace, outlines what is described as Europe’s largest tax reduction program, aimed particularly at supporting families and pensioners, as well as projections for substantial wage increases.

This approach is intended to improve the fiscal position of Hungarian citizens moving into the future.

Key components of the budget include tax exemptions for mothers, the reinstatement of the 13th month pension, continued utility cost reductions, and sectoral wage increases.

The Budget Council convened on May 4 to review the proposal, concluding with a unanimous decision that indicates compliance with the debt stipulations prescribed in the constitution.

The projected public debt level is expected to decrease from 73.1% of GDP at the end of 2025 to 72.3% by the end of 2026.

The Council did not identify fundamental objections to the budget draft that would necessitate dissent.

The draft anticipates the government sector's cash-based deficit at 3.7% of GDP for 2026. Consequently, the primary balance excluding interest expenditures is projected to remain stable, akin to the actual figures from 2024 and expected figures for 2025.

However, the Council cautioned about potential risks impacting the achievement of these goals, highlighting uncertainties in the global economic environment and persistent high customs tariffs that could adversely affect Hungary's export sectors.

Nonetheless, domestic consumption is expected to remain robust due to high employment levels, rising real wages, and government measures increasing household net incomes.

The Council noted the challenges associated with risk management, citing that the provision for extraordinary governmental measures stands at only 50 billion HUF, which is substantially lower than historical levels and insufficient relative to the magnitude of the anticipated risks.

In response, the Council recommended a significant increase to the provision for these measures.

The Ministry of National Economy affirmed the country’s stable and secure financial position, emphasizing the government’s commitment to strong budgetary control, which supports the reduction of both the budget deficit and public debt.

The government aims to achieve maximum economic growth despite challenges such as ongoing conflicts and negative external situations in Europe.

It asserts that it will fulfill all social policy and economic policy objectives outlined in the budgets for both 2025 and 2026, including measures such as the tax exemption for mothers, support for small and medium enterprises through the Demján Sándor Program, and the establishment of 150 new factories.

Critics have pointed to the EU's economic policies as problematic, particularly the support for the ongoing war and financial aid to Ukraine, which they argue detracts from Hungary’s economic outlook.

Deteriorating external conditions have resulted in downward pressures on the domestic economy.

However, domestic consumption remains stable, contributing positively to the budget's VAT revenue.

Currently, the government does not see a necessity to reassess the underlying macroeconomic trajectory that supports the budget, viewing summer as an appropriate time for such evaluation.

In light of the Council's suggestions, the government has accepted the recommendation to increase financial reserves, augmenting the extraordinary governmental measures provision from 50 billion HUF to 192 billion HUF, while simultaneously implementing an equivalent reduction in expenditures within the draft budget, maintaining overall fiscal balance while enhancing resilience.

With the Budget Council's feedback, the government plans to submit the 2026 budget to the National Assembly on May 6, 2025, as indicated by the Ministry of National Economy.