Budapest - Hungary's incoming prime minister, Peter Magyar, on Tuesday said the nation's budget shortfall is forecast to reach 6.8% of gross domestic product this year, far above an original official target of 3.9% that was later adjusted to 5%.
Magyar told reporters his party had obtained a government decree that, in his view, demonstrates the outgoing cabinet led by Viktor Orban intends to draw down public funds before power transfers this weekend. He pledged that his Tisza party will restore fiscal discipline after assuming control of government.
Investors have already shown expectations of policy change under Magyar. Hungary's currency and government bonds have rallied this year amid hopes the incoming administration will alter economic policy and unlock access to billions of euros in European Union funds.
At the same time, Fitch Ratings has cautioned the new government faces budget and growth challenges, flagging risks the administration will need to confront.
Gergely Gulyas, who manages the prime minister's office under Viktor Orban, pushed back on Magyar's characterization, saying the outgoing cabinet stopped taking on new spending obligations after April's elections. Gulyas added that current expenditures are limited to essential services only.
Viktor Orban is due to hand over government at the end of this week, marking the formal transfer of power. The dispute between the incoming and outgoing administrations centers on the state of public finances in the run-up to that handover and how discretionary spending was managed in the interim period.
Context and market reaction
Market moves this year - stronger currency and bond performance - reflect investor anticipation that Magyar's government will change course on fiscal policy and negotiate resumed access to EU financial support. Fitch's statement underscores that, regardless of market optimism, the new administration faces concrete fiscal and growth-related tasks.
The competing accounts from Magyar and the Orban administration leave uncertainty over near-term public spending patterns until the formal transition is completed at the end of the week.
Next steps
With the handover imminent, attention will focus on the incoming government's fiscal plans and how it addresses the projected deficit figure Magyar has presented.