According to an analysis by the Oeconomus Economic Research Foundation, based on the OECD’s latest Interim Economic Outlook released in September, and the Hungarian National Bank’s (MNB) recent Inflation Report, the growth outlook for the Hungarian economy continues to be significantly affected by weak external markets, high energy prices, and a growing budget deficit. The OECD urges fiscal and structural reforms in the long term, including in the areas of the pension system, taxation, and energy subsidies for households.
According to the OECD’s September 2026 Interim Report, the global economy proved more resilient than expected following a slowdown in the first half of the year. In contrast, growth in the euro area remains subdued, held back by persistently high energy prices, a tight interest rate environment, and structural difficulties in key countries, including Germany.
From Hungary’s perspective, this external environment has a dual effect:
the weakness of the German economy directly constrains the country’s export-oriented manufacturing sector, while domestic factors are keeping the country on a growth trajectory.
Based on the OECD’s forecast from late July 2026, Hungarian GDP could accelerate from the low 2025 baseline of 0.5% calculated by the OECD to 1.9% in 2026 and 2.2% in 2027. In contrast, the Hungarian National Bank’s September 2026 Inflation Report outlines a trajectory with somewhat different dynamics: the central bank forecasts GDP growth of 1.8% for 2026 and a more robust 2.9% for 2027.
Managing Hungary’s budget deficit and public debt poses a major challenge for economic policy.
According to the MNB’s latest forecast, Hungary’s budget deficit could rise to 6.9% of GDP in 2026, while the government’s own projection is 7.5%, due to expansionary measures. At the same time, gross public debt as defined by the Maastricht criteria could reach 77.7% of GDP by the end of 2026, based on the MNB’s forecast.
Hungary’s public debt over the past 15 years. Sources: Eurostat and MNB. Graphic by Viktória Németh
The OECD is urging reforms; failure to implement them could put debt on an unsustainable path in the long term due to elevated spending levels.
To address structural problems and ensure sustainable growth,
the OECD’s latest country-specific assessment and recommendations call for decisive fiscal reforms in Hungary.
The organization emphasizes that, given the long-term costs of an aging population and climate change, reforming the pension system and linking the retirement age to life expectancy will be necessary. In addition, it recommends broadening the tax base, making the personal income tax more progressive, reviewing tax breaks, phasing out subsidies for fuel and natural gas, and eliminating energy price caps.
Photo: Pexels
According to the report,
regular property taxes, inheritance taxes, and health-related taxes could also help increase budget revenues.
The OECD emphasizes that government-imposed energy price caps should be replaced with targeted cash subsidies for households in need, thereby increasing budget efficiency and encouraging the green transition. This type of shift would represent a fundamental change from Hungarian economic policy over the past decade and a half.
However, the Oeconomus analysis also highlights several potential risks associated with implementing the OECD’s recommendations. The introduction of a progressive, multi-rate tax system and a review of family tax credits could reduce incentives to work and weaken the middle class’s ability to save.
The elimination of government-imposed energy price caps, that is, the current system of utility bill reductions, without adequate compensation could lead to a decline in household purchasing power. Raising the retirement age and implementing fiscal tightening measures may also pose short-term economic and social challenges.
The impact of the reforms may thus depend to a significant extent on their timing, as well as on the measures the government takes to offset the burdens placed on households and businesses.
Via Oeconomus Economic Research Foundation; Featured photo: Pexels
The post OECD Proposes Major Tax and Pension Reforms appeared first on Hungary Today.
OECD Proposes Major Tax and Pension Reforms 2026
IUSTITIA.BG – Investigations 2009-2026 2026-10-06 15:15:49
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