Fitch Ratings' outlook on their BBB sovereign rating went from Stable to Negative yesterday

HUNGARY - In Brief 06 Dec 2025 by Istvan Racz

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Fitch Ratings held the H2 review of their Hungary sovereign rating yesterday, also ending the late-in-the-year review season for the Top-3 rating agencies as regards 2025. The agency affirmed the government's BBB rating, but changed the outlook to Negative from Stable on this occasion:Fitch attributed the negative decision to the government's most recent increase of its fiscal deficit targets. They are predicting 5% of GDP fiscal deficit for this year and 5.6% for 2026, also expecting the gross debt ratio to rise moderately, to 74.6% of GDP by end-2027, from 73.5% at end-2024. They are adding that the median value for BBB-rated countries' in their rating portfolio is 3% for the deficit and 61.5% for the debt ratio.Fitch expects the impact of the government's fiscal campaign measures at 0.3% of GDP this year and 1.2% in 2026. This is actually a bit conservative (we see 0.4% impact this year and 1.6% for 2026 currently), but they are adding that further similar measures initiated early next year cannot be excluded. The agency is also forecasting 0.3% GDP growth this year, accelerating to 2.3% in 2026 and 2.6% in 2027. We think the 2027 GDP forecast is actually quite optimistic, given the likely fiscal adjustment due after the election.Fitch does not like the frequent revisions of fiscal targets, saying this practice reduces predictability and increases risks.At least one domestic economic news portal has referred to the Fitch decision as an 'unpleasant surprise'. In our view, it may be unpleasant indeed, but it is not surprising at all. So far, Fitch has maintained the most optimistic view on Hungary out of the Top-3 agencies, and it was quite logical to expect that they...