Mr. Nagy on fiscal policy and rating agencies in the election period

HUNGARY - In Brief 04 Sep 2025 by Istvan Racz

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Following a brief episode of successful heart surgery during the summer, Economy Minister Márton Nagy is now back in office and is fully operative. In the past few days, he paid a visit to London, primarily to talk to credit rating agencies, as he has just informed the public. Returning from that trip, he stepped out into the limelight and made some interesting public comments. So, he said that it would be naive to think that there will not be any extra spending pressure during the election campaign period. However, extra spending will be allowed to go only as far as not to risk any further downgrade of government debt. Effectively this means that the fiscal deficit will have to be, and will be, kept on a descending path. Additionally, he said that even though the 2025 fiscal deficit ratio has been officially predicted at 4.1% of GDP, in reality the likely outcome is more like a range of 4-4.5%, which we understand is a kind of warning that the deficit will most likely reach 4.5% of GDP, down from the actual 4.9% in the previous year. And in 2026, for which year the approved budget is aiming at a 3.7% deficit ratio, the latter is more likely to end up 'around 4%'. So, Mr. Nagy has effectively raised the fiscal deficit target for both of this year and 2026, while repeatedly committing himself to securing at least a tiny bit of reduction of the deficit ratio in both years. This goes exactly in the direction we have always expected to be most likely: please remember our latest forecast figures of 4.3% deficit in 2025 and 3.9% in 2026. Well, actually the minister is moving a little bit further in the negative direction than us, but the concept is exactly the same. The good...