Dec 5 (Reuters) – Fitch Ratings cut Hungary’s credit rating outlook to ‘negative’ on Friday, citing a worse trajectory for public finances amid fiscal loosening in the run-up to a 2026 national election and the risk of more measures to come.
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The outlook downgrade from ‘stable’ signals concerns pre-election spending will deepen Hungary’s fiscal troubles and complicate any post-vote recovery.
Still, Fitch affirmed Hungary’s credit rating at ‘BBB,’ which the Economy Ministry said was a “significant accomplishment” given a wave of ratings downgrades across Europe over the past year.
DEBT PILE TO RISE TO 74.6% BY 2027, ABOVE PEERS
The total cost of fiscal easing measures would rise to 2.1% of economic output next year, Fitch said, while Hungary’s debt pile, the European Union’s largest outside the euro zone, would increase to 74.6% of output by 2027, above equally rated peers.
“Frequent revisions to government’s targets have weakened policy predictability and increased fiscal risks,” Fitch said.
Fitch projected Hungary’s budget deficit at 5.6% of output next year, above the government’s 5% target.
It said there was a risk that political considerations could limit the space to boost revenues or reduce generous social support measures after the elections.
S&P Global had also revised Hungary’s outlook to negative in April, citing rising risks to fiscal and external stability over the next two years.
Fitch said the lack of a credible fiscal consolidation strategy, or prolonged weak economic growth due to lower foreign direct investment, could lead to a credit downgrade.
Faster than expected fiscal consolidation or reforms boosting medium-term growth prospects could lead to a positive rating action, it said.
Reporting by Krisha Bhatt and Gergely Szakacs; Editing by Krishna Chandra Eluri and Bernadette Baum
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