The first step towards understanding economic policy always starts by looking at the expenditure side of the budget. Each expenditure line shows which areas are the priorities and, when examined over time, it is even possible to see how and due to what effects changes have been made to the priorities. Successive Orbán governments have had one-off measures on both the revenue and expenditure side, but family policy, overhead cost reduction and reductions in taxes on labour have remained a permanent feature. This post aims to make some observations on the 2025 budget.
The central subsystem of government expenditure (calculated according to the cash-flow methodology) has a total expenditure of HUF 42,862 billion, a total revenue of HUF 38,739 billion and a deficit of HUF 4,122 billion for 2025. An important feature of the 2025 budget is that it is based on a more stable construction, as the relatively later adoption of the budget allowed for a more reliable basis for planning the 2025 figures. The aim of reducing the deficit of recent years is also clearly visible, as the expected HUF 4,790 billion cash deficit of 2024 is decreased to HUF 4,122 billion in 2025. This means that the deficit calculated as a share of GDP and according to the ESA methodology will shrink from 4.5% in 2024 to 3.7%. The government aims to achieve a slightly higher debt reduction (0.6%) in 2025 compared to last year (0.2%).
The main expenditure component of the 2025 budget increases only very modestly compared to the previous year, so in this respect the budget is not expansionary, but it does contain significant stimulus effects, so in a sense it has a stimulative character. Restrictive elements (slowing down the economy) are also in evidence, in that the increase in certain taxes is from now on linked to the inflation rate. In addition, the budget shows a demand-oriented fiscal policy, which seeks to influence the economy as a whole through the factors that determine aggregate demand, and a supply-oriented economic policy. The latter seeks to influence the macroeconomic situation by changing the conditions of production. The budget is essentially about improving the balance, and there is also a shift towards stimulating certain actors and sectors, which definitely gives fiscal policy a new character.
The 2025 budget takes into consideration the increasing family tax credit and a new element, the workers’ credit, which herald a shift towards stimulating the internal market, households and businesses. The government’s 21-point economic stimulus package seeks to simultaneously boost household purchasing power, alleviate housing problems and support small and medium-sized enterprises (SMEs).
Four thousand billion forints start to move
In the 2025 budget, we see the first signs that more than HUF 4,000 billion will be mobilised in the near future, and through the Demján Sándor Programme, SMEs will receive HUF 1,410 billion of this in 2025 alone. New preferential loans with an interest rate of up to 3.5% will become available under the Széchenyi card programme, and the focus will also be on export promotion, support for digitalisation and reducing administration. Through the provision of capital, SMEs will be given capital to raise loans, enter new markets, invest and grow. The doubling in size touted by the government is due to the fact that participation in the programme(s) can lead to truly spectacular growth at company level.
In the coming period, HUF 2,632 billion will be targeted at households (families). With the help of the workers’ credit, roughly 300,000 young people will be targeted. The government has set aside a total of HUF 500 billion to help young workers start their careers. The tax and contribution relief for families, together with the first-marriage allowance, will exceed HUF 440 billion in 2025. The government will spend HUF 215 billion to provide personal income tax exemption for under-25s and a further HUF 20 billion for women under 30 who have children. HUF 250 billion is earmarked for the baby allowance in 2025. One of the priority items in the 2025 budget is the amount available for family allowances, for which the government will provide a total of more than HUF 3,750 billion.
Support for businesses
The government has made decisions about significant investments in the 2025 budget. The aim is to boost the economy and create jobs. Over the next year, hundreds of investments will be launched, underway or delivered, including in transport infrastructure, education and health.
To be precise, more than 300 new investments will be launched in 2025, at a total cost of more than HUF 8,100 billion. The share for 2025 is HUF 480 billion.
In the 2025 budget, there are more so-called discretionary instruments, which are ad hoc interventions in the economy, more specifically in the area of fiscal policy. As far as theoretical considerations are concerned, these include public works, public employment programmes, ad hoc payments or changes in tax rates. In the present case, the workers’ credit or the Sándor Demján Programme are discretionary measures, which the government expects to provide a major boost to the economy.
The latter is also important because, for example, the disappointingly weak performance of external demand has not only weighed on industrial production and exports, but has also had a negative impact on investment intensity. SMEs have been reluctant to invest because of the negative outlook, and the government has also cut back on investment in view of the budget deficit. All the ingredients were therefore in place for negative investment perceptions, with the result in 2024 that gross fixed capital formation could fall by more than 10%. With the stimulus of HUF 1,410 billion, we can at least expect this trend to be reversed and there will be no fall in investment. Moreover, the capital injections will be targeted, allowing businesses to make technological and productivity improvements as well as creating the potential for wage increases.
Boosting consumption
However, the government has particularly high expectations regarding private consumption. In 2024, growth in the first three quarters of the year was already over 4% on an annual basis, mainly due to a significant increase in real wages, although actual household consumption and final consumption grew less. In 2025, further real wage growth is expected, as the minimum wage will increase by 9% and the guaranteed minimum wage by 7%, while inflation is expected to average between 3-4% per year. According to the MNB, the increase in the family tax allowance would be spent by more than 50% of households concerned, and the possibility of tax-free withdrawals from the voluntary pension fund is sure to be a stimulus. The MNB argues that 15% of the members of the fund would withdraw all their savings and 10% would withdraw part of their savings. On the other hand, the central bank points out that the 2024 third quarter household savings surveys suggest that government measures could further stimulate consumption.
In 2025, the Government Debt Management Agency (ÁKK) will be paying roughly HUF 1,700 billion in interest to the public, and the MNB survey cited earlier suggests that roughly a third of the total payment could be consumed. Another important aspect is that the propensity to borrow among the population seems to be improving. At the same time, some of the nominal and real wage growth could boost savings. However, this may be countered by the fact that the nominal wage increase affects lower income earners with a higher propensity to consume the most. Taking these factors into account, nominal wage growth of 9% and 7% and real wage growth of 4-5%, expected at the intersection of inflation rates hovering around 3-4%, will certainly accelerate consumption dynamics further.
The 2025 budget includes stimulus elements that seek to boost domestic consumption. They stimulate households and SMEs at the same time, so there are both demand-side and supply-side elements. The budgetary philosophy is increasingly guided by the need to counteract deteriorating external economic conditions by stimulating strong domestic consumption, investment and exports. The Sándor Demján Programme mentioned could provide a HUF 1,410 billion stimulus, the workers’ credit a HUF 500 billion stimulus, while interest payments could provide a roughly HUF 1,700 billion stimulus to the economy. Given that the 2025 total expenditure is HUF 42,862 billion, these three factors alone, representing more than 8% of spending, could provide a meaningful boost to the economy in 2025.
The figure can be referenced here: https://infogram.com/eng-koltsegvetes-2025-1h0n25ogrxvwz4p
Szabolcs Pásztor is an associate professor at the Department of Economics and International Economics of the University of Public Service (Budapest, Hungary). Previously he worked at the Central Bank of Hungary and as an advisor for the Hungarian Banking Association. He joined the Oeconomus Economic Research Foundation in 2020. He has taught at various universities in Australia, China, Belgium, France, Czechia, Italy, Russia, Turkey, Republic of South Africa, Kenya, Ethiopia and other countries. His main research interests are related to the issues of economic and financial transformation in developing countries.
