By Gergely Szakacs

BUDAPEST (Reuters) - Hungary's opposition could score its biggest political win in a decade if liberal hopeful Gergely Karacsony manages to unseat ruling party incumbent Istvan Tarlos in the Budapest mayoral election on Sunday - and the race appears to be tightening.

The Oct. 13 vote will not affect Prime Minister Viktor Orban's grip on power as his cabinet has been bolstered by a strong economy, fierce anti-immigration rhetoric and double-digit wage rises. His ruling Fidesz party remains wildly popular in rural areas.

Furthermore, no general election is due until 2022 and Orban, who rose to power in 2010, holds a huge majority in parliament.

But if the 44-year-old Karacsony, currently mayor of one district of the capital, were to beat 71-year-old Tarlos, it would nevertheless expose a crack in the right-wing leader's support in the capital.

"This election cannot weaken the government's position, but it can weaken faith in its invincibility," said Zoltan Novak, an analyst at the Centre for Fair Political Analysis, a think tank.

Budapest is home to about a fifth of Hungary's population of 10 million, but it is responsible for more than a third of its economic output and plays an outsized role in all walks of national life.

In European Parliament elections in May, Orban's Fidesz won 52.6% of votes cast but only 41.2% in Budapest, where thousands have taken to the streets in recent years to protest some of his reforms that critics say erode democratic standards.

Sunday's nationwide local elections will be a key test of an opposition strategy of rallying behind a single candidate against Fidesz, which has scored seven consecutive landslide election wins since 2010 on the national, municipal and European levels.

Opposition parties have united behind joint candidates in some other big cities as well. The election could show whether popular demand for a mainstream opposition in Hungary is rising, said Otilia Dhand, an analyst at think tank Teneo Intelligence.

"The centre-left has been totally discredited economically, and those faces have not disappeared from the background," she said. "They need to provide a real alternative to rule the country. They can do so if they run local things well and convince voters that their votes are not wasted."

Most polls put Tarlos, mayor of Budapest since 2010, ahead of Karacsony, although the latest survey by think tank Median indicated that the race could be a very close call.

Defeat there for the opposition, however, could call into question the viability of the opposition strategy of fielding joint candidates, seen thus far as the best way to crack Fidesz's dominance, said Andras Biro-Nagy, an analyst at think tank Policy Solutions.

(Reporting by Gergely Szakacs and Krisztina Fenyo; Editing by Hugh Lawson)

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