Hungary defence spending to be increased if Ukraine war drags into 2025 -PM Orban

Hungarian PM Orban holds an annual international media briefing, in Budapest

BUDAPEST (Reuters) - Hungary will need to boost defence spending further next year if the war in neighbouring Ukraine drags into 2025, reducing the amount of funds available for other expenditure, Prime Minister Viktor Orban told public radio on Friday.

Russia's 2022 invasion of Ukraine has triggered a surge in defence spending on NATO's eastern flank led by Poland, which has doubled defence expenditure to 3.9% of economic output by 2023 from 2014 levels based on NATO figures.

While strongly opposing Western military and financial support to Ukraine over concerns of the conflict spilling over into Europe, Hungary has also ramped up its defence spending sharply, to 2.43% of GDP last year, above a 2% NATO guideline.

"If the war drags on into 2025, then the 2023-2024 defence spending levels will not be sufficient and will have to be increased," Orban said in an interview, adding that the move would leave less funding for other purposes.

In power since 2010, Orban has struggled since the COVID-19 pandemic to control Hungary's budget deficit, with the shortfall averaging nearly 7% of gross domestic product over the past four years, well above EU average levels.

His government announced last month it would postpone about 1% of GDP worth of investments to cut this year's shortfall to a recently-increased 4.5% of GDP target.

S&P Global Ratings credit analyst Gabriel Forss told Reuters on Tuesday that was a step in the right direction, but more will be needed, likely after European Parliament and local elections in June.

(Reporting by Gergely Szakacs and Anita Komuves; Editing by Michael Perry)