Gergely Gulyas: Next Year’s Budget Is the Budget of Families Raising Children

The government met before Easter, here are the key decisions made at the cabinet meeting.

Gergely Gulyas, minister heading the Prime Minister’s Office (Photo: MTI/Noemi Bruzak)

The government focused on the budget, Gergely Gulyas, minister heading the Prime Minister’s Office, reported after the cabinet meeting. "Difficult years are behind us, and we are submitting a budget that is built on peace and supports families raising children," he said.

Previous measures are also sources of this, the tax relief for families raising children will be doubled next year, and mothers with 3 and 2 children will enjoy personal income tax exemption.

We will maintain the utility cost reduction scheme, the 13th-month pension, hikes to the minimum wage, and we will reduce the deficit and public debt. The tax system will also be simplified. Wage increases will continue, and we hope that changes in the global economic situation and the creation of peace will also be reflected in economic growth, he said.

He also indicated that the government meeting included discussion of the consultative vote. Every citizen with a registered address in Hungary will receive a letter regarding Ukraine’s accession. "Voters’ opinions are decisive in this crucial matter," said the minister, expressing hope that as many people as possible will share their views.

Budget: Here Are the Numbers!

Economy Minister Marton Nagy outlined the macroeconomic conditions under which the budget was prepared.

For next year, a 4.1 percent growth in real GDP is projected, following 2.5 percent this year, with 3.6 percent inflation, down from 4.5 percent this year.

The state budget deficit will be further reduced next year. This indicator is expected to be around 4 percent this year, and it is planned to decrease to 3.7 percent in 2025. Public debt is expected to decline from 73.1 percent of GDP this year to 72.3 percent next year. This is based on a nominal GDP of 88 trillion forints this year and 95 trillion forints next year. Total expenditures will be around 35 trillion forints in 2025, and total revenues are expected to reach about 34 trillion forints. The cash-flow deficit is projected to be around 4.1 trillion forints.

They are maintaining the principle that the deficit should decline in parallel with interest expenditures, and the budget’s overall effect on the economy should be neutral—meaning the size of the deficit equals the cost of interest payments.

The central focus of the budget is family policy, with 4.8 trillion forints allocated to this area. Utility cost protection will receive 800 billion forints, making the total family support component of the budget 5.6 trillion forints.

For the doubling of the family tax allowance, 210 billion forints will be allocated.

Interest on retail government bonds will amount to 800 billion forints. For pensions, the government will spend 7.7 trillion forints, with an additional 24 billion forints set aside for a pension premium. The 13th-month pension will also be paid.

Defense remains a priority, requiring a proper armed force. The government will maintain the 2 percent of GDP spending level. Economic development will receive 4.9 trillion forints, of which 2.7 trillion will come from the central budget. Agriculture will receive 1.3 trillion forints.

EU funds are expected to flow into the budget; for 2026, 2.36 trillion forints in EU funding is projected. The budget also includes the costs of "weapon money", a 13 per cent increase in the minimum wage is projected, and teachers' salary increases will continue.

Marton Nagy added that the central bank base rate remains at 6.5 percent. Half of the 360 billion forint bank tax will be deductible if banks purchase government bonds. The windfall tax will remain in place as long as the affected economic actors are realizing extra profits.

The minister also spoke about tax simplification and announced the digitalization of on-site inspections. He addressed R&D tax incentives as well: a 150 million forint deductible tax base will be available if entrepreneurs spend the funds on research and development.

He highlighted that the EU is considering exempting defense spending from fiscal rules. While all the details are not yet known, the government is preparing for it and will establish a defense reserve, which can be activated with parliamentary authorization, making the budget more flexible.

The 2025 budget was planned as a "peace time budget", which is why it is based on higher macroeconomic numbers. The government believed that after Trump’s re-election, economic security would accompany physical security. The government continues to believe Hungary will stay out of the war, and peace will come, which will set the economy on a growth trajectory.

"If this year's budget hadn't been designed as a peace time budget, we wouldn't have been able to implement pension and wage increases this year," the economic minister pointed out.