Hungary’s government significantly increased the contingency reserves in its draft 2026 budget to 192 billion Forints ($538 million) on Monday, more than tripling the original amount, after the fiscal watchdog warned the initial buffer was insufficient to address potential risks to economic growth.

The head of the Fiscal Council told Reuters on Sunday that Prime Minister Viktor Orban’s 2026 budget, set for an election year, could face challenges if the government's growth projections turn out to be overly optimistic.

S&P Global downgraded Hungary’s credit rating outlook to negative from stable last month, citing concerns over fiscal stability. The agency forecasts 2026 growth at just 2.5%, significantly below Prime Minister Orban’s projection of 4.1%.

Furthermore, a government-anticipated economic rebound last year has yet to occur, prompting spending cuts, tax increases, and a downward revision of the 2025 growth forecast. The economy remained stagnant in the first quarter.

“The (government) accepts the Council's proposal to raise the level of buffers,” according to the Economy Ministry on Monday, going on to say it would increase them from 50 billion Forints to 192 billion, which was half the level set for 2025.

Hungary’s finance ministry stated that unspecified spending cuts would offset the increased budget buffers, allowing the government to maintain its deficit target for 2026.

However, the fiscal watchdog noted that nearly all of the 220 billion Forints allocated as a buffer in the 2024 budget had already been used, and the deficit still surpassed the government’s target.

The fiscal watchdog reported that 26.7% of the 2025 buffer was already depleted in Q1.

Orban's government is aiming to lower next year’s budget deficit to 3.7% of GDP, down from the recently raised 4% target for 2025, and a higher-than-expected 4.9% deficit for 2024. However, economists surveyed by Reuters news agency project next year’s deficit to reach 4.2%.