Fitch Downgrades Hungary's Stable Outlook to Negative

On Friday evening, Fitch Ratings left Hungary's debt rating at BBB, but downgraded its stable outlook to negative. This concludes the series of reviews for 2025, with the major credit rating agencies expected to review Hungary again next spring, the business website portfolio.hu reports.

The following factors are behind the rating and outlook: (1) Fitch significantly downgraded its forecast for the Hungarian budget in response to measures announced ahead of the 2026 parliamentary elections; (2) According to the company's experts, the deficit could reach 5% of GDP this year and then rise to 5.6% in 2026. Meanwhile, the median for BBB-rated countries is 3% for this indicator.

Analysts estimate that the impact of fiscal easing measures will be 0.3% of GDP in 2025, rising to 1.2% next year, with most of these measures becoming permanently embedded in the budget. They highlight that the government has extended the scope of sectoral taxes and increased the burden on banks. Furthermore, they do not rule out the possibility of further expenditure-increasing measures at the beginning of 2026.

With regard to fiscal policy, they also point out that frequent revisions of government targets undermine predictability and increase risks.

Previously, the government considered a declining debt ratio to be sustainable with a balanced primary balance, but now Fitch expects a primary deficit of 0.4% of GDP this year and 1.4% next year, which could put debt on an upward trajectory. According to the credit rating agency's forecast, public debt as a percentage of GDP could rise from 73.5% in 2024 to 74.6% by the end of 2027, which is significantly above the median of 61.5% for BBB-rated countries.