Peter Magyar told lawmakers he is aiming for a 4.9% of GDP deficit next year, narrowing the gap from an expected 7.5% this year through increased taxes on high earners and big firms alongside tighter spending. He described the budget push as both "justice and development," adding, "Reconstruction starts now."
Breaking it down, he said the package would deliver roughly 1.4% of GDP by reversing what he labeled unfunded pre-election pledges; 1.5% by cutting waste and corruption; about 1% via a wealth tax along with higher corporate levies; and a further 1% to 2% from reduced interest expenses. In addition, he plans an extra 1.5 trillion forint cut in expenditure next year, building on about 700 billion forint already penciled into the 2026 budget, and expects fresh intake of 560 billion forint via a wealth tax and higher burdens on banks, insurers, energy firms, and big retail chains.
"Those cuts are for good," Magyar said, arguing that money previously "wasted on private jets, yachts, castles, overpriced public tenders, and filling friends' pockets" will be freed up. He said the household energy subsidies introduced by the previous government will stay, and that promised pay rises for front-line staff across health care, social services, education, and the police, together with tax reductions for those on the lowest wages, are also part of the plan.
The forint flipped between gains and losses during the remarks as investors weighed the plan and was little changed against the euro by 5 p.m. in Budapest, keeping its 5.8% advance this year. Hungarian assets have rallied this year after Magyar's April landslide ended Viktor Orban's 16-year rule. He has vowed to lead Hungary into the euro area, though he did not directly address euro adoption in the speech.
Officials previously set a target of meeting the euro-area benchmarks in 2030, a timeline that the central bank says might allow a switch of currency about two years thereafter. Budapest will ultimately need to push the shortfall under 3% of GDP before the close of Magyar's four-year term to comply with the accession requirements. The government and central bank said the plan represents a key marker for markets and could fuel additional gains, and on Tuesday Magyar will appear alongside Finance Minister Andras Karman to update reporters on the budget's mid-term path.
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The government expects stronger investor confidence to lower borrowing costs, with Magyar penciling in 1% to 2% of GDP in interest savings. Macro Hive's Simon Quijano-Evans said the "4.9% budget deficit to GDP target was the most important number for markets," adding, "Now markets will assess the viability of the numbers." The bottom line: credible follow-through would be a tailwind for local bonds and a steadier forint, the combo that sets the tone for Hungary exposure in your portfolio.
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