Hungary is targeting a budget deficit of 4.9% of GDP in 2027, down from 7.5% this year, Prime Minister Peter Magyar said in parliament on October 18, outlining the new government's first budget.
The deficit would be cut despite adding over HUF2.1 trillion in spending (€5.8bn) due to higher family allowance and public-sector pay rises and a HUF500bn increase in healtchare funding. The gap would be funded by "cuts to wasteful procurements" and benefits to politically connected companies, as well as spending on communication and public-interest foundations, he added.
The budget bill will be sent to the Budget Office for review, which has no veto power, this week before being submitted to Parliament at the end of the month, financial website Portfolio.hu writes.
Next year's budget will be the budget of Hungary’s reconstruction, justice and development, Magyar said, adding savings from government spending would be redirected towards wages, pensions, healthcare, family support and transport infrastructure, sectors neglected during the Orban era.
The 4.9% deficit target is at the lower band of the forecast by London-based analysts, Telex.hu writes in its preview of the 2027 budget. Bond market investors' median expectation for the budget gap was 5.2%. A deficit of 4.8-5.5% would be seen as acceptable, while a shortfall above 5.5% would be regarded as a major disappointment, according to Telex.hu.
Magyar said the government plans to free up around 4% of GDP in fiscal room in 2027 through spending cuts, the phase-out of one-off pre-election spending, lower interest costs and new taxes on billionaires, polluters and mining companies.
Of this, 1.4pp could fund higher household support, public-sector pay and healthcare spending, while the remaining 2.6pp would help cut the budget deficit from an expected 7.5% of GDP in 2026 to 4.9% in 2027.
Magyar said the government aims to reduce the deficit while increasing support for households by cutting wasteful spending, HUF700bn alone in the 2026 budget and restructuring public expenditure. The 2027 budget will also include a HUF300bn contingency reserve to cover unexpected expenses and economic shocks, improving predictability and ensuring responsible fiscal management.
As the new deficit target was in line with forecasts, the forint barely moved after the Magyar's speech, which lasted more than 2 hours.
Amundi’s investment director Peter Kiss also stressed that the target was broadly in line with market expectations, with the budget’s details key to assessing its assumptions and implications for Hungary’s euro adoption prospects.
Tisza has begun to address the huge injustice inherited from the Orban era, Magyar said, and then listed groups and sectors that could benefit from next year’s budget. The 2027 budget includes an increase in the minimum pension and a 17-21% increase for people working in healthcare (excluding doctors), social and child care and education.
Hungary will spend HUF500bn more on healthcare, a hugely underfunded sector, to move closer to the EU average in per capita GDP spending.
On pensions, affecting some 2.5mn people, Magyar stressed that the government will retain the 13th-month pension and pay the first week’s instalment of a 14th-month pension. This also implies that the Tisza Party will stop there and will not introduce the second, third or fourth instalments over time as planned by the former government.
The government also plans to roll out a leisure card for all pensioners by 2030, allowing them to buy food and medicine, a departure from Tisza’s campaign promise to introduce the benefit immediately.
Workers earning the lowest guaranteed wage and below the national average, 2.5mn combined, will also be better off. The 15% PIT on minimum wage will be reduced to 9%, and workers earning less than HUF680,000 per month will also see their net wage rise sharply.
To make the PIT system more just, tax exemption for mothers will be subject to a gross monthly income cap of HUF1mn, and the exemption will not be extended to mothers over 40 with two children, while existing tax exemptions for under 25 will remain in place.
These measures will spare the budget from serious long-term commitments and fiscal burden. Magyar accused the Orban government of launching the scheme without securing enough funds.
The family allowances for 1.6mn children will be doubled, which alone amounts to HUF300bn in extra spending.
Magyar said the government would finance the welfare measures through spending cuts and higher contributions from the wealth tax that will affect 15,000 and generate HUF200bn in additional revenue.
It also plans to raise the advertising tax from 0% to 3.75% in 2027, generating more than HUF14bn a year. The measure would affect media companies and global technology firms such as Google and Meta.
The government is seeking higher contributions from businesses, including banks, insurers, energy companies and retail chains. It plans to raise an additional HUF100bn from the energy sector, but Magyar did not clarify what taxes would be raised. Energy companies already pay a 31% Robin Hood tax on profits, in addition to corporate income tax. They also paid a one-off levy this year to fund January’s utility bill relief scheme, while MOL faces an additional windfall tax on the Brent-Ural spread.
The retail tax will be revised from 2027, with a 0.45% rate applying to the portion of the tax base between HUF1-50bn in revenue. Businesses with revenue of up to HUF1bn will remain exempt, and the rate on annual revenue over HUF50bn will stay at 4.5% he added The profit margin cap disproporpoirtionally affecting large multinationals would be scrapped from 2027.
The government also plans to raise taxes on tobacco products and spirits and increase charges for natural resource use and polluting activities. Mining royalties are expected to generate an additional HUF37bn.
Companies with annual turnover of HUF180bn will see their effective corporate tax rates rise from 9%, the lowest level among OECD countries, to 11%. Changes to corporate income tax and the innovation levy are expected to generate an additional HUF260bn
The government would leave the popular Csok home subsidy unchanged, but it plans to discontinue the Home Start scheme, which offered borrowers 3% fixed-rate loans. Instead, it would launch a programme (Wekerle programme) very similar to the old one, offering first-time home buyers aged 18-41 a fixed 3% for new homes and 5% for used homes. Homeowners could also receive grants of up to HUF7.5mn for renovations, provided they achieve 30% energy savings. The program also entails large-scale rental housing construction funded from RRF funds.
Another big-ticket item in the budget was retail energy subsidies, which cost the budget around €1.5-2bn each year. Despite IMF calls to overhaul the programme and scale back general support by targeting vulnerable groups, the government left the programme unchanged. According to Magyar, the conditions of the utility reduction scheme would remain unchanged, but he did not give specific figures.
Magyar also discussed developments in the energy, housing, and transportation sectors financed by RRF funds.
Some HUF868bn would be mobilised for electricity grid developments, supporting additional wind and geothermal power, installing smart meters, and adding more battery storage. By 2030, he said 3 GW of battery storage would be installed, and 57,000 households would get support for their own battery storage.
The prime minister said EU funding for development projects will increase by HUF928bn in 2027, potentially boosting business opportunities and investment in Hungary. Funding for business development and innovation will nearly double to HUF230bn from HUF114bn this year.
Magyar said the allocation for water management and environmental protection investments financed with EU funds would reach HUF221bn.
Magyar also spoke of a "21st-century Hungarian New Deal" for businesses aiming to ensure fair competition and reduce political influence over companies.
The prime minister alleged that politically connected contractors secured public tenders with profit margins of up to 200-300% in some sectors, then subcontracted the work at much lower prices, causing hundreds of billions of forints in losses for the budget.
Parliament approved amendments to the 2026 budget that target an ESA deficit of 7.5% of GDP, well above the original 3.7% target but below the 8.3% gap that would have resulted without a change in government, according to the preamble. The amended