S&P Global Ratings has affirmed Hungary’s investment-grade rating of ‘BBB minus/A-3’ for both foreign and local currency long- and short-term sovereign debt obligations.
Along with this rating affirmation, announced late Friday in London, the international credit rating agency maintained Hungary’s stable outlook.
The Hungarian sovereign rating is also classified in the investment-grade category by the other two major global credit agencies, Fitch Ratings and Moody’s Ratings, though they rate Hungary one notch higher at ‘BBB/Baa2’. While Fitch assigns a negative outlook to Hungary, both S&P and Moody’s maintain a stable outlook.
In its rationale accompanying Friday’s rating affirmation, S&P Global Ratings highlighted that the stable outlook reflects expectations that Hungary’s economic recovery, continued disinflation, and stabilizing borrowing costs will support the government’s fiscal consolidation efforts over the medium term, thereby also allowing Hungary’s debt-to-GDP ratio to stabilize.
S&P projects that Hungary’s budget deficit, as a percentage of GDP, will begin to decrease from 2025, averaging 3.7 per cent annually between 2025 and 2027. For this forecast, the agency considered Hungary’s strengthening real economic outlook and the active consolidation measures outlined for this year, amounting to approximately 1.3 per cent of GDP. However, S&P also emphasizes that, in regional comparison, Hungary’s debt-to-GDP ratio is among the highest. The agency forecasts that this ratio will reach 74.6 per cent this year, with interest expenses averaging 9 per cent of budget revenues over the 2025–2027 period.
Inflation Down, Growth Up
Nonetheless, S&P’s baseline expectation is for inflation to continue its downward trajectory, with the current account balance showing moderate surpluses. This context allows the National Bank of Hungary (MNB) to cautiously normalize its monetary policy, according to the agency’s analysis.
S&P Global Ratings forecasts a real growth rate of 1.6 per cent for the Hungarian economy this year, accelerating to approximately 3 per cent next year, driven by an expected increase in the pace of investment and external demand, coupled with resilient private sector consumption. Next year, stronger consumer confidence and the release of previously withheld high household savings in Hungary are also expected to boost growth momentum, supported by the ongoing monetary easing cycle. The fiscal tightening from government consolidation efforts will only partially offset this growth, S&P noted in its Friday analysis.
Risks
At the same time, the agency cautions that Hungary’s growth outlook remains somewhat uncertain, given the country’s dependence on external developments due to its open, trade-driven economy. This includes the growth performance of Germany, a key trading partner, as well as potential cost-push effects from any spillover of geopolitical tensions. Furthermore, tensions in Hungary’s relations with the EU could lead to delays in EU funding, with some funds possibly withheld, according to the credit rating agency.
S&P also underscores that the EU has released 12.2 billion Euros—approximately 6 per cent of Hungary’s GDP—for the 2021-2027 period, while foreign direct investment is expected to increase, particularly with substantial investments underway in the electric vehicle manufacturing sector.
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