Hungary implements tax reforms and shifts monetary policy

Hungary is implementing several fiscal and monetary shifts. The country currently maintains the highest standard VAT rate in the European Union at 27 percent, significantly higher than neighbors like Austria, France, and Germany.

Recent government policy has focused on targeted tax reductions for essential goods. As of September 1, 2026, the VAT on prescription drugs was reduced from 5 percent to 0 percent. Additionally, starting September 15, the VAT on firewood, including heating pellets and briquettes, will drop from 27 percent to 5 percent, a move expected to impact approximately 600,000 households.

In the financial sector, the Hungarian forint saw significant volatility, recovering strongly after a period of weakness. This resurgence followed reports that the Magyar Nemzeti Bank (MNB) intends to maintain its current 5.5 percent interest rate and lower its inflation target from 3 percent to 2.5 percent.