Fiscal outlook
Hungary recorded a 5% deficit and a debt-to-GDP ratio of 73.5% in 2024. Hungary stays below the EU’s extreme deficit process (EDP), after working a deficit of practically 5% of GDP in 2024, with the Council of the European Union requiring gradual correction by 2026. The European Fee’s June 2025 approval of Hungary’s long-delayed funds plan unlocked EU funds however didn’t raise the EDP.
Deficit measures the extent of borrowing in a given yr. Debt-to-GDP compares the whole public debt to the dimensions of the economic system. Each are at present used to find out how a lot borrowing a member state is allowed to undertake. Nonetheless, neither measure in itself determines a authorities’s capability to maintain larger ranges of public funding. Fiscal sustainability is determined by progress, the multiplier results of funding, rates of interest, inflation, the construction of the economic system and exterior dangers reminiscent of local weather change. NEF advocates shifting away from strict numerical debt targets.
Rising local weather prices
Heavy storms and rainfall have turn out to be extra frequent. Final summer season’s storms brought about the greatest energy outage in 30 years, in addition to injury to houses and the nation’s infrastructure. Agriculture is the sector most uncovered to the consequences of local weather change, with repeated droughts and heatwaves having a big affect on crop yields. Between 1990 and 2023, there have been 11 years through which greater than 50% of Hungary’s territory was affected by drought. In 2025, the estimated injury to corn fields alone was no less than €600m. Throughout the 2025 heatwave, the unusually low water ranges on the Danube affected delivery and agriculture, which means cargo ships might solely function at 30% – 40% capability.
What NEF’s modelling exhibits
Organisation for Financial Co-operation and Growth (OECD) projections present Hungary’s GDP declining by 12% by 2050 and 17% by 2070 below present insurance policies. Our modelling exhibits the next:
- Underneath present insurance policies (BAU – enterprise as common), Hungary’s debt is 70 pps larger than the climate-agnostic baseline in 2050 and 228 pps larger in 2070.
- With early EU mitigation and enough adaptation spending, debt is 53 pps larger in 2050 and 88 pps larger in 2070.
- Delayed EU investments and inadequate adaptation leads to larger debt ranges of 64 pps in 2050 and 114 pps in 2070.
- EU early motion mixed with international cooperation leads to 6 pps larger debt ranges than the climate-agnostic baseline in 2050 and 15 pps decrease ranges in 2070.
- Progressive taxation, reminiscent of a wealth tax, mixed with EU early motion would cut back debt by 20 pps in 2050 and by 52 pps in 2070 in comparison with the baseline.
Picture: iStock
