BUDAPEST (Reuters) -Hungary’s Prime Minister Viktor Orban said on Friday his government would launch a pension top-up, stepping up his political campaign ahead of national elections in 2026.
Faced with the weakest economic stretch of his 15-year rule, Orban has already announced tax cuts for families, wage hikes and a massive subsidized housing loan programme ahead of the vote, stretching the state budget at a time when the economy is stagnating.
Hungary’s third-quarter GDP data came in flat on Thursday, missing expectations and signalling a stagnating economy.
Orban told state radio on Friday that growth this year could be between 0.6% and 1%. This is way below earlier government projections for 3.4% growth in 2025, which was cut later to 2.5% and then 1%.
He also said the economy cannot be boosted by cutting spending as some economists suggest.
“We should do what is good for people….and not what straightens the numbers. So I believe Hungary’s economy cannot be put on the growth track with saving steps,” Orban said.
He said the only question was in how many steps the so-called “14th-month pension” could be introduced. The top-up would see pensioners who already receive an extra month’s worth of pension per year receive an extra “14th month” payment.
While the economic recovery remains weak, stubborn inflation is preventing interest rate cuts. The central bank’s base rate stands at 6.5%.
Orban also faces strong competition from a new centre-right opposition party which currently leads most polls.
Peter Virovacz, an economist with ING Bank, said introducing the pension top-up would cost an equivalent to 0.6% of Hungary’s GDP.
Hungary’s fiscal consolidation will be slower than expected, Fitch Ratings said earlier this month, adding that recently flagged tax cuts could create additional risk to its deficit and debt projections amid weak growth.
(Reporting by Krisztina Than and Anita Komuves; Editing by Sharon Singleton)
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