Hungary Complies with EU Budgetary Requirements Amidst Economic Adjustments
The Hungarian government’s budgetary plan receives approval from EU finance ministers, ensuring adherence to stipulated deficit and debt thresholds.
The finance ministers of the European Union have unanimously approved a resolution regarding the budgetary expenditure limits for Hungary.
This follows a period where the European Commission had previously delayed decision-making due to Hungary's initially reported GDP growth figures being deemed excessive.
Subsequently, the Hungarian government re-evaluated its calculations and effectively adopted the projections from Brussels.
According to EU treaties, member states are required to adhere to specific budgetary discipline criteria, which dictate that their fiscal deficits cannot exceed 3% of their Gross Domestic Product (GDP), and their national debt must remain below 60% of GDP. Last summer, it was determined that Hungary, among other states, was not in compliance with these stipulations, leading to the initiation of what is termed an excessive deficit procedure, often referred to as the "European shame corner.” Hungary was first placed in this procedural status soon after it joined the EU, which it managed to exit in 2013, a feat the Orbán administration touted as a significant achievement.
As of 2023, however, Hungary's fiscal deficit rose to 6.7%, prompting the European Commission to commence the procedure.
In the autumn, the government submitted its medium-term budgetary structural plan, which was initially not approved by Brussels.
Officially, the review required additional time, as the proposed plan was based on data, particularly high GDP forecasts, that did not reconcile with the European Commission's assessments.
The Hungarian government subsequently revised its figures to align with Brussels’ expectations.
According to the document approved by EU member states, Hungary must ensure that the nominal growth rate of net expenditures does not exceed 4.3% in 2025 and 4.0% in 2026. This growth rate is expected to be supported by the revised GDP figures.
The proposal allows for an average annual expansion of 1.6% during the period from 2025 to 2028.
If the planned net expenditure path and the underlying assumptions are realized, Hungary's public debt is projected to decrease from 74.0% of GDP in 2024 to 68.2% by the end of the adjustment period in 2028. Following this adjustment period, it is forecasted that the debt-to-GDP ratio will continue to decline, reaching 54.5% by 2038. Regarding the fiscal deficit, under this model, the deficit as a percentage of GDP is expected to reduce from 4.9% in 2024 to 2.5% by 2026 and to 1.5% by 2028.
The European Commission and the member states will monitor the situation closely regarding Hungary’s budget and expenditure developments.
Notably, the plan includes aspirations for utilizing approximately €18 billion in EU funds, from which Hungary is currently excluded due to concerns over corruption risks.
This follows a period where the European Commission had previously delayed decision-making due to Hungary's initially reported GDP growth figures being deemed excessive.
Subsequently, the Hungarian government re-evaluated its calculations and effectively adopted the projections from Brussels.
According to EU treaties, member states are required to adhere to specific budgetary discipline criteria, which dictate that their fiscal deficits cannot exceed 3% of their Gross Domestic Product (GDP), and their national debt must remain below 60% of GDP. Last summer, it was determined that Hungary, among other states, was not in compliance with these stipulations, leading to the initiation of what is termed an excessive deficit procedure, often referred to as the "European shame corner.” Hungary was first placed in this procedural status soon after it joined the EU, which it managed to exit in 2013, a feat the Orbán administration touted as a significant achievement.
As of 2023, however, Hungary's fiscal deficit rose to 6.7%, prompting the European Commission to commence the procedure.
In the autumn, the government submitted its medium-term budgetary structural plan, which was initially not approved by Brussels.
Officially, the review required additional time, as the proposed plan was based on data, particularly high GDP forecasts, that did not reconcile with the European Commission's assessments.
The Hungarian government subsequently revised its figures to align with Brussels’ expectations.
According to the document approved by EU member states, Hungary must ensure that the nominal growth rate of net expenditures does not exceed 4.3% in 2025 and 4.0% in 2026. This growth rate is expected to be supported by the revised GDP figures.
The proposal allows for an average annual expansion of 1.6% during the period from 2025 to 2028.
If the planned net expenditure path and the underlying assumptions are realized, Hungary's public debt is projected to decrease from 74.0% of GDP in 2024 to 68.2% by the end of the adjustment period in 2028. Following this adjustment period, it is forecasted that the debt-to-GDP ratio will continue to decline, reaching 54.5% by 2038. Regarding the fiscal deficit, under this model, the deficit as a percentage of GDP is expected to reduce from 4.9% in 2024 to 2.5% by 2026 and to 1.5% by 2028.
The European Commission and the member states will monitor the situation closely regarding Hungary’s budget and expenditure developments.
Notably, the plan includes aspirations for utilizing approximately €18 billion in EU funds, from which Hungary is currently excluded due to concerns over corruption risks.
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