The path to euro membership is currently obstructed by a deteriorating fiscal position. Under unchanged policies, Hungary’s budget deficit is projected to widen from 4.7% of GDP in 2025 to 6.2% in 2026. This trajectory deviates sharply from the January 2025 medium-term fiscal-structural plan, which envisaged a gradual decline in the deficit to 2.5% by 2026. Consequently, net public-expenditure growth is expected to significantly exceed the limits set under the EU excessive deficit procedure, raising concerns about macroeconomic stability and risking a negative compliance assessment from Brussels.
Despite these fiscal constraints, the government of Prime Minister Viktor Orbán’s successor has committed to preserving several expensive measures, including personal tax exemptions, a 14th-month pension, and energy subsidies. To finance these commitments alongside increased healthcare and education spending, the administration plans to rationalise public expenditure, eliminate inefficiencies in public procurement, and introduce a wealth tax on forint billionaires. The new Prime Minister has stated that the previous administration obscured roughly half of the actual budget deficit, a claim that underscores the magnitude of the fiscal correction required.
Analysts indicate that there is substantial room to streamline spending without harming economic growth. A comparison of Hungary’s 2024 public expenditure with that of other EU countries reveals that while total spending at 47% of GDP is not unusually high, its composition is problematic. Hungary allocates exceptionally high funding to state operating costs and economic affairs, such as industrial support, while spending comparatively little on social protection and healthcare. Aligning selected state operational and economic expenditure categories with the averages of Central and Eastern European peers could generate savings of approximately 4.3% of GDP.
Economic researchers warn that successful euro adoption requires more than meeting the Maastricht criteria; it demands a restructuring of the state apparatus to address structural weaknesses. Currently, Hungary meets only the inflation criterion. The economy has faced stagnation from the end of 2022 through 2025, with growth reaching 1.7% in the first half of 2026. Productivity gains remain modest despite significant wage growth, and the transition to a knowledge-based economy is lagging, with low-value-added production accounting for a substantial share of activity. High energy intensity and concentrated sourcing further increase the economy’s vulnerability to external shocks.
Market pricing suggests investors already anticipate Hungary joining the euro relatively quickly with limited disruption, reflected in a significant decline in government bond yields and risk premiums. The expected benefits include permanently lower interest rates, a more stable financial system, and the elimination of exchange-rate volatility. However, abandoning the forint would mean losing the ability to respond independently to country-specific economic shocks through domestic monetary policy. Euro-area membership would create an irreversible link with the wider monetary union, necessitating a stable international environment for a successful transition—a condition that is currently uncertain due to high energy prices and rising global yields.
The primary challenge for the government is to deliver a credible spending review and curb waste without losing public trust. Reconciling the desire to maintain social programmes with the need for fiscal sustainability will require more than incremental adjustments. The success of Hungary’s economic policy framework in the coming years will depend on its ability to reallocate resources towards growth-enhancing priorities while stabilising the budget before the deadline for full euro integration.
