By Gergely Szakacs
BUDAPEST (Reuters) -Hungary’s Prime Minister Viktor Orban on Thursday said his government was working “full steam” on a pension top-up, which could cost around $1.6 billion, heightening concerns that pledged deficit cuts are slowing ahead of a 2026 election.
Faced with the weakest economic stretch of his 15-year rule, the veteran leader has launched tax cuts for families, wage hikes and other measures ahead of the vote, which S&P Global estimates are already worth some 2% of economic output.
The top-up would see pensioners who already receive an extra month’s worth of pension per year receive an extra “14th month” payment.
Fitch Ratings told Reuters on Wednesday that Hungary’s deficit cuts would be slower than previously expected and recently-flagged tax cuts create additional risk to its deficit and debt projections amid weak growth.
“We are working full steam on a 14th month pension,” Orban said on Facebook. Most polls show his nationalist Fidesz is trailing opposition challenger Tisza some six months before the vote.
An extra month’s worth of pension benefit that has been in place since Orban took power, cost 536 billion forints ($1.60 billion) in February, adding on to a large shortfall at the start of 2025, with Orban now targeting a deeper budget deficit of 4.5% this year.
Nearby Poland pays a 14th month pension, which has contributed to central Europe’s largest economy racking up the EU’s second-highest budget deficit behind Romania.
Hungary is saddled with the EU’s largest debt pile outside the euro zone and its debt servicing costs rose due to an inflationary surge following Russia’s invasion of Ukraine.
“Additional spending initiatives are likely in the coming months, raising the risk of significant fiscal slippage in 2025–2026 and a potential downgrade in Hungary’s credit ratings,” said Andrius Tursa, an analyst at think tank Teneo.
($1 = 334.33 forints)
(Reporting by Gergely SzakacsEditing by Alexandra Hudson)
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