BUDAPEST (Reuters) -Hungarian government measures launched over the summer, such as public sector wage hikes, housing support for civil servants and a subsidised mortgage scheme could boost households’ net income by 1.5% of economic output in 2026, the central bank said.
In power since 2010, eurosceptic Prime Minister Viktor Orban faces what political analysts say could be his toughest election next year, with the economy stagnating and stubborn inflation preventing interest rate cuts.
Orban aims to fend off a challenge from a surging opposition rival with large-scale tax cuts for families, cheap loans to first-time home buyers and pension rises.
“The additional incomes are expected to lead to an increase in consumption,” the bank said in its quarterly inflation report on Thursday, adding, however, that government interest expenditures to households would decrease significantly.
On Tuesday the bank left its base rate steady at the European Union’s highest of 6.5%, saying tight policy was needed to curb inflation it now sees higher in the 2026 election year partly due to government measures fuelling consumption.
Orban’s latest flagship measure, a subsidised loan provided to first-time home buyers at 3% interest for a maximum of 25 years with a 10% downpayment, will contribute to consumption growth and trigger a surge in lending, the bank said.
“As a result of the Home Start programme, household loans outstanding may increase significantly, albeit with considerable uncertainty, and the annual growth could be 17–20% at the end of 2025 and 18–22% in 2026,” it said.
The Monetary Council said its baseline scenario, which projects average 2026 inflation at 3.8%, above its 3% medium-term target, was surrounded by mostly upside risks to inflation and downside risks to growth.
(Reporting by Gergely Szakacs; Editing by Christian Schmollinger)
