Orban Signals Continued 5% Budget Deficit Amid Election Spending

Hungary's Budget Deficit and Economic Outlook

BUDAPEST, Feb 6 (Reuters) - Hungary's budget deficit could stay around 5% of output for the fourth successive year in 2027, Prime Minister Viktor Orban said on Friday, amid heavy pre-election spending and the lack of a clear strategy on how to curb the shortfall in a weak economy.

Impact of Election Spending

In power since 2010, Orban faces what could be the toughest challenge to his rule at an April election from a centre-right rival following three years of near-stagnation and the European Union's worst price surge after Russia's invasion of Ukraine.

Credit Rating Concerns

Orban has launched a string of voter-pleasing measures, which will cost 2.1% of economic output this year based on an estimate from Fitch Ratings, which cut Hungary's credit rating outlook to 'negative' last year on Orban's spending moves.

Future Fiscal Strategies

"Fiscal planning is sound," Orban told public radio. "The Hungarian economy can expect a budget deficit of some 5% last year, this year and I think next year as well."

Orban last week denied the need for spending cuts after the April 12 ballot and said Hungary's deficit, which has exceeded government forecasts in recent years, would have to be lowered "calmly, slowly and gradually" as economic prospects improve.

Fitch Ratings has said a sustained rise in Hungary's debt, the EU's largest outside the euro zone, or the lack of a credible deficit reduction strategy could lead to a ratings downgrade.

S&P Global, which also has a negative outlook on Hungary's credit rating, on Thursday said potentially slower fiscal consolidation was a key risk for several central European countries -- projecting Hungary's deficit at 4% next year.

"Our baseline assumption is that financial markets, EU fiscal rules, and recovering GDP growth will likely support fiscal consolidation in the medium term," it said.

"However, the negative rating outlooks for Romania, Hungary, and Slovakia signal that risks to this assumption are particularly high for these countries."

(Reporting by Krisztina Than and Anita Komuves; Writing by Gergely Szakacs; Editing by)