Orbán cabinet admits Hungarian economy in serious trouble as forint may weaken

At a background briefing with journalists, Márton Nagy, Hungary’s senior minister for the economy, effectively acknowledged that pre-election spending, combined with weak inflation control and poor domestic production figures, has significantly widened the budget deficit — placing the Hungarian economy in jeopardy. He also revealed who will bear the cost of the government’s pre-election cash outflows and what is expected from the National Bank, a situation that could see the forint enter a weakening trajectory.

Handouts continue despite bleak economic data

Telex attended the briefing and provided an in-depth analysis of the discussion. Márton Nagy essentially conceded that the budget figures planned for 2024 and 2025 must be scrapped, treating pre-election giveaways as untouchable sacred cows — including the 14th monthly pension, discounted home and business loans, and one million forints in support for public servants.

This may appear surprising to outsiders in a country where GDP is projected to grow by only 0.5% — far below the expected 3.7% — inflation remains higher than planned at around 4.6%, and household consumption shows little sign of expansion. Still, thanks to a range of welfare benefits, consumer confidence has begun to rise.

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However, it appears that the desire for victory in the 2026 elections overrides all other concerns. According to independent pollsters, Magyar Péter and the Tisza Party, Fidesz has not faced such dire polling figures in two decades, despite having maintained a strong lead for at least a year.

Indirect austerity measures will impact citizens

To secure victory, the Hungarian economy must be brought under strict control, according to the briefing. It comes as little surprise that the government expects Hungary to post the fifth-largest budget deficit in the European Union in both 2025 and 2026 — around 5% of GDP, the threshold before excessive deficit procedures begin.

The government forecasts stronger growth of 3.1% and lower inflation of 3.7% for 2026, though markets predict worse outcomes on both fronts.

However, these macroeconomic trends alone will not suffice; the government also needs to find new sources of revenue. In that context, the bank tax will be increased on the grounds that banks’ windfall profits remain high. After the rise, banks would be required to pay:

• 10% tax on profits up to 20 billion forints from two years prior,
• 30% tax on profits exceeding 20 billion forints,
• and they could only deduct 30% of government bond purchases, down from 50%.

It is well known that banks rarely absorb such extra costs, and sooner or later pass them on to customers — whether individuals or businesses. As a result, these measures act as indirect taxes that ultimately weigh on households and families, with the government doing little to prevent this, likely because it lacks the capacity to do so.