By Gergely Szakacs
BUDAPEST (Reuters) - Prime Minister Viktor Orban faces unprecedented headwinds as he embarks on a fourth consecutive term in office when the Hungarian nationalist will have to navigate his self-styled 'illiberal state' through an economic slowdown and growing isolation over Ukraine.
Orban's fourth landslide victory on Sunday against a united opposition, which joined forces against him for the first time, has solidified the 58-year-old leader's support at a time when he is losing allies abroad.
Russian President Vladimir Putin's invasion of Hungary's eastern neighbour on Feb. 24 upended Orban's decade-long efforts to deepen business and political ties with Moscow and set his campaign on a new course.
Since then, Orban's ambivalent stance on European Union sanctions and failure to condemn Putin have distanced him from Polish and Czech allies but his messages of peace appear to have resonated with many Hungarians at a time of conflict.
Sunday's victory against a united opposition, which won 57 of seats in parliament against 135 for Fidesz based on preliminary results, granted Orban yet another sweeping majority that had enabled him to rewrite the constitution and major laws.
"We have scored a victory so big, that it can be seen even from the Moon, but definitely from Brussels," Orban, who has built a career on portraying himself as a combative leader battling EU bureaucrats, told jubilant supporters after Sunday's election victory.
Orban has said his stance on the war in Ukraine was aimed at preserving Hungary's military and economic security, but this is increasingly called into question by long-time allies in Warsaw, who have been instrumental in backstopping Orban's battles with Brussels.
Orban's challenge is complicated by the central European country relying on Moscow for most of its oil, gas and nuclear energy, even after some improvement in cross-border energy links with neighbouring countries over the past decade.
"The decision to stake the country's energy future (both fossil and nuclear) on close ties to Russia is backfiring," economists at UniCredit said in a note. "Hungary might find itself even more isolated inside the EU."
Poland's ruling party leader Jaroslaw Kaczynski said last week he was not pleased with Orban's cautious stance on Russia, while a meeting of defence ministers of the Visegrad Four alliance in Budapest was cancelled this week after the Czech and Polish ministers pulled out.
ECONOMIC HEADWINDS
Orban's new term also poses tough challenges domestically, with the central bank projecting economic growth at the slowest rate in any election year since Orban came to power in 2010.
With inflation on track to run at its highest in at least 15 years, the economy slowing amid the war and EU funds in limbo due to a row over democratic standards, Orban will have no honeymoon period after his election victory.
Since taking power in 2010, Orban has stabilised the economy with a host of unorthodox measures and unemployment has fallen to record lows due to billions of euros worth of foreign investment attracted by Hungary's low corporate tax rate.
But high government borrowing to drag the economy out of the pandemic has eroded much of the improvement in central Europe's largest debt pile and underlying indicators show the increase in living standards has trailed those in Poland or Romania.
The EU has suspended payments to Poland and Hungary from its pandemic recovery funds over democratic shortcomings, which economists say could begin exerting pressure on Budapest and Warsaw from the second half of the year, barring a compromise.
A 1.8 trillion forint ($5.45 billion) pre-election spending spree, a surge in energy costs and the looming expiry of price caps to keep inflation under control will also complicate Orban's efforts to keep the economy stable after the vote.
"The pandemic was a walk in the park compared to what's coming," said political analyst Zoltan Novak at the Centre for Fair Political Analysis think tank.
"All economic growth and stability indicators are drifting in the wrong direction," he said.
($1 = 330.29 forints)