Elected in mid-May, Peter Magyar will face his first difficulties as head of Hungary. The new prime minister claims that his predecessors hid part of the state deficit, largely limiting his room for maneuver.
Did Viktor Orbán leave Peter Magyar in an intolerable situation? Hungary’s new prime minister accuses the outgoing government team of lying about the country’s economic situation. According to him, the state budget deficit should reach 8% of GDP by the end of the year, which is a far cry from the previous administration’s forecast of 5%.
“They lied to the Hungarians,” complained Peter Magyar in a video posted on Facebook. “The budget deficit figures publicly announced by the Orbán government, those appearing in official documents and those we see today are completely inconsistent.”
In detail, Orbán’s government deficit targets, set at 5% in 2026, will be far from reality. Even his staff didn’t believe it, instead counting on 6.8%, according to the new government, which claims the 8% line would have been crossed if an agreement had not recently been reached to freeze European funds.
The road to the euro promises to be difficult
Despite tight management, Covid would have had a major impact on the previous government’s spending. The deficit hovered between 6 and 7% in recent years before the executive announced it would fall to 4.7% in 2025, months before the election.
This worsened situation does not benefit Hungary, which hopes to adopt the euro in the long term, for which it must have a deficit of less than 3%. The fight against corruption is also set to accelerate as Magyar joined the European Public Prosecutor’s Office and dedicated the first six weeks of his job to strengthening transparency bodies.
The new budget is also due to be announced at the end of August. The current government could take advantage of this to reduce or defer spending related to health or education. Luckily for him, the forint, the local currency, has appreciated 15% in the past year, much of that since the last election.
The data, coupled with government bond yields approaching UK yields, suggests markets have welcomed the presidential change.