Hungary’s budget for the 2026 election depends on a dangerous growth forecast, according to a fiscal watchdog

The president of the Fiscal Council, a monitor on budgets, told Reuters that if the Hungarian government’s economic growth projections turn out to be overly optimistic, its budget plans for the 2026 election year may be in jeopardy.

The government of Prime Minister Viktor Orban predicts 4.1% economic growth in the upcoming year, which is significantly higher than the 2.6% IMF prediction and the 3.2% consensus of analysts in a Reuters survey.

Citing concerns about fiscal stability, S&P Global downgraded Hungary’s credit rating outlook from stable to negative last month. The company predicts 2.5% growth in the upcoming year.

In comments approved for publishing on Sunday, Gabor Horvath, the chairman of the Fiscal Council, stated that “the most important downside risk to the budget is if the projected growth trajectory proves to be too optimistic for 2026 as well.”

“There are significant uncertainties around this year’s GDP growth, and definitely the uncertainties are not smaller regarding 2026 growth.”

In the next elections, when he is anticipated to have the most formidable opposition challenge in well over a decade, Orban has relied on economic improvement to help him win another term.

The government has been forced to reduce spending, raise taxes, and lower its 2025 growth prediction because the upturn that was first anticipated last year has not yet materialized.

With output remaining unchanged from the previous year and inflation reaching the highest levels in the European Union, Hungary’s economy was enmeshed in stagflation during the first quarter.

The Economy Ministry told Reuters that it intended to present the budget to parliament using its initial economic assumptions in response to the first-quarter data, which was lower than anticipated. A follow-up review of its projections is scheduled for June.

Following a higher-than-expected 4.9% shortfall in 2024 and a freshly raised 4% objective in 2025, the administration hopes to lower the budget deficit to 3.7% of GDP next year. However, Reuters polled economists who predicted a 4.2% deficit the following year.

According to Horvath, the early passage of the 2026 budget did not assist given the magnitude of uncertainty in the global economy.

Similar to the 2025 budget, the amount of reserves was still insufficient to handle emergencies.

“The level of the reserves is very low again, which, compared to the very high uncertainties, might be insufficient,” he stated.

Central European economies that rely heavily on exports would be negatively impacted by tariffs, according to Moody’s Analytics, with the Czech Republic, Romania, and Hungary being the countries most severely affected. Those have also been identified as a risk by Hungary’s central bank.

Horvath added that it was dangerous for the government to believe that while special company taxes would continue to exist, its significant tax cuts for people could be funded by more robust growth.