Hungary’s Orban Seeks to Boost Growth Above 3% Ahead of 2026 Election, Reports Reuters

By Gergely Szakacs and Krisztina Than

BUDAPEST – Hungary’s Prime Minister Viktor Orban announced on Wednesday that the country aims to achieve economic growth within the range of 3% to 6% next year, as his government addresses a weaker-than-expected recovery from the recession driven by last year’s inflation.

Having been in power since 2010, Orban has faced challenges in reviving Hungary’s economy following a downturn that saw inflation exceed 25% in the first quarter of 2023, marking the highest rate in the European Union.

In conjunction with this announcement, the National Bank of Hungary recently adjusted its economic forecasts, reducing its predictions for growth to between 1% and 1.8% for this year and to 2.7% to 3.7% for 2024, both significantly lower than previous estimates. On Tuesday, the central bank also lowered its base interest rate by 25 basis points to 6.5%.

Orban emphasized the goal of achieving growth rates between 3% to 6%, stating, "We need to lift economic growth into the 3% to 6% range. We can enter this range already next year, stay there in 2026, and target the high end of the band thereafter," as he prepares for the parliamentary elections in 2026.

He reiterated the necessity for a disciplined fiscal policy while also reaffirming plans to double tax benefits for families and initiate a significant capital injection program for small businesses in 2025.

Since the COVID-19 pandemic, Hungary’s budget deficit has consistently averaged nearly 7% of GDP. Despite recent government measures to reduce the deficit, ratings agency Moody’s forecasts it will reach 5.5% of GDP this year.

Orban also announced the establishment of a new ministry to oversee the economy and state finances, coinciding with plans to nominate a new central bank governor to replace his former ally Gyorgy Matolcsy.

Finance Minister Mihaly Varga is widely expected to be appointed as Matolcsy’s successor early next year, while Economy Minister Marton Nagy, a former central banker, may take the lead in managing public finances under the newly merged ministry.

Zoltan Arokszallasi, an economist at MBH Bank in Hungary, noted that one potential risk from these leadership transitions could be a shift towards a more dovish policy stance, particularly with Hungary currently maintaining the highest benchmark interest rate in the EU alongside Romania.

He commented, "The question is whether the orientation of monetary policy could be substantially looser next year," adding that an unexpected rate cut could undermine the forint and exacerbate inflationary pressures.