The key facts

  • The 2027 draft budget envisages reducing the deficit from 7.5% to 4.9% of GDP through spending cuts of 1.5% of GDP and tax increases of about 1% of GDP
  • Fitch forecasts a deficit of 5.4% of GDP in 2027 and below 3% by 2030, with public debt peaking at 77.7% of GDP in 2027–2028
  • Eurozone entry, in addition to fiscal targets, requires meeting inflation, interest rate and exchange rate criteria, plus at least two years in ERM II; Eurasia Group sees 2032 entry as possible

2027 budget supports the goal of eurozone entry by 2030

Hungary's 2027 draft budget and medium-term deficit targets support the government's ambition to meet the conditions for joining the eurozone by 2030, according to a Fitch Ratings assessment published on Thursday. According to the draft budget presented on Monday by Prime Minister Péter Magyar, the government intends to reduce the general government deficit to 4.9% of GDP from an expected 7.5% this year.

Spending cuts and tax increases

The budget provides for spending cuts of 1.5% of GDP next year. A further 1.4% could come from the termination of temporary and one-off pre-election measures. The budget also counts on a reduction in interest payments to 0.2% of GDP — according to Fitch, this reflects the falling value of inflation-indexed bonds and declining yields on Hungarian government bonds amid improving market sentiment. In addition, the government plans to raise taxes and take other revenue-increasing measures worth about 1% of GDP. The cuts will affect economic development subsidies, government communications, public media, as well as state investment and operating expenses, including a reduction of at least 10% in the operating costs of ministries and state-owned companies. Tax increases are expected to yield 0.25% of GDP from corporate and innovation taxation, 0.2% from a wealth tax and 0.1% from a levy on energy companies; smaller amounts are expected from higher mining royalties, a company car tax and an advertising tax.

Fitch warns of risks to implementing the plan

Fitch warned that implementing the deficit-reduction plan will be challenging due to 'a large number of relatively small measures and the need for sustained consolidation'. Part of the savings remains uncertain, while new spending commitments and tax breaks worth about 1.4% of GDP will partially offset the gains. The agency stressed the importance of meeting the 2027 budget target, calling it 'an important indicator of confidence in the government's strategy of early fiscal consolidation' within plans to meet the euro adoption criteria by 2030. The government's plan envisages a deficit of 4% of GDP in 2028, 3.4% in 2029 and 2.8% in 2030. Fitch's own forecasts show a similar trajectory: the deficit will fall to 5.4% of GDP in 2027 from 7.3% in 2026 and drop below 3% by 2030.

Debt, growth and EU funds

According to the agency's forecasts, Hungary's public debt will peak at 77.7% of GDP in 2027–2028 — notably above the median of 57.5% for 'BBB' category countries. The further debt trajectory will depend on the forint's exchange rate and economic growth. Growth since 2023 has lagged behind countries with comparable ratings, which Fitch attributes to weak external demand, high political uncertainty, delays in EU funds and the impact of fiscal consolidation on investment. The government expects GDP growth of 2.4% in 2027, accelerating above 3% by 2030, including thanks to EU-financed investment. The EU recently unlocked €4.2 billion for Hungary under a broader €16.4 billion agreement, with access to the remaining funds still requiring approval. Fitch's forecasts — real GDP growth of 2.5% in 2027, accelerating to about 3% from 2028 — broadly match the government's.

Fiscal targets alone are not enough; a 2032 scenario is possible

Meeting the fiscal targets alone will not allow Hungary to adopt the euro: countries must also meet criteria on inflation, long-term interest rates, exchange rate stability and national legislation. Consulting firm Eurasia Group, according to its report, also considers Hungary's eurozone entry in 2032 possible. If Hungary joins ERM II — the exchange rate mechanism required before euro adoption — in 2030, it could potentially join the eurozone in 2032 or later. Countries are required to spend at least two years in ERM II without serious exchange rate turbulence or devaluation of the central rate against the euro, as well as to meet the other accession conditions.