Good news for today: fiscal deficit target set at 4.9% GDP, retail margin caps will be lifted

HUNGARY - In Brief 19 Oct 2026 by Istvan Racz

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PM Magyar presented the Tisza's 2027 government budget in a two-hour parliamentary speech this afternoon, which he himself previewed the other day as one of his most important public appearances so far.Starting with the main point, the deficit target has been set at 4.9% of GDP, following the amended target of 7.5% for 2026. This is in line with the expectations of the more optimistic part of the market, truly positive from the point of view of medium-term euro-convergence prospects. As the Reader will recall, we were at the more pessimistic end of the spectrum of expectations, with a 5.5% deficit target forecast even last week. The difference between our forecast and the actual target is that the draft presented today represents a markedly more profound and courageous restructuring of a rather big part of the government budget than the one we were hoping for.In essence, the government expects a 1.4% of decrease of the deficit ratio next year from the very fact that the impact of Fidesz' election campaign spending is running out this year, so that it will not affect 2027 anymore. This number had been known already since the Finance Ministry's late-July review of the fiscal situation. In addition, Tisza intends to reduce spending on the government's own operations by the equivalent of 1.5% of GDP, on top of the 0.8% of GDP of savings from the same source achieved already this year. They described this item as consisting mainly of the elimination of theft and waste, such as overpriced procurement, long-term service concessions, government (or party) communication, government media, spending on public interest trusts, etc. Another 1% of GDP is expected to come from tax me...