Fitch Cuts Hungary’s Outlook to Negative as Fiscal Strains Deepen Ahead of 2026 Elections

Fitch Ratings has revised Hungary’s outlook from stable to negative, citing a steady deterioration in the country’s public finances and renewed fiscal loosening in the run-up to the 2026 national elections. 

The move comes as Budapest struggles through a third consecutive year of economic stagnation and remains unable to unlock billions of euros in frozen European Union funding.

The downward shift, widely anticipated by analysts, reflects concerns that pre-election spending will further strain Hungary’s fiscal position and complicate any post-election recovery effort. Prime Minister Viktor Orbán’s government has introduced a series of expansive measures ahead of what is expected to be a tightly contested race.

Despite the outlook downgrade, Fitch affirmed Hungary’s long-term foreign-currency rating at BBB, a decision the Ministry for National Economy hailed as “an important achievement” given the wave of rating cuts across Europe over the past year.

Fitch warned that Hungary’s repeated revisions to its fiscal targets have weakened policy predictability and heightened financial risks. 

The agency estimates the cost of the government’s fiscal easing measures will reach 2.1% of GDP next year, while national debt, already the highest in the EU outside the eurozone, is projected to climb to 74.6% of GDP by 2027, placing the country well above peers with similar credit ratings.

Budget dynamics are unlikely to improve in the near term. Fitch expects Hungary’s deficit to hit 5.6% of GDP in 2025, exceeding the government’s 5% target. Political dynamics following the election may further limit the country’s ability to raise revenue or scale back generous social programs.

Persistent inflationary pressures continue to add strain. Since Russia’s 2022 invasion of Ukraine, Hungary has grappled with one of the EU’s most severe inflation waves, eroding purchasing power and complicating the government’s fiscal calculations.

 Orbán, in power since 2010, has struggled to revitalize the economy while balancing political priorities and external pressures.

Hungary’s fiscal challenges stand out among European peers. The lag in accessing EU cohesion funds, blocked over rule-of-law concerns, has deprived the country of investment that economists say is critical for reigniting growth.

Other rating agencies have expressed similar concerns. S&P Global shifted its outlook on Hungary to negative in April, pointing to rising financial and external instability risks over the next two years.

Fitch warned that failure to deliver a credible fiscal consolidation strategy, combined with weak economic growth and declining foreign direct investment, could lead to a full credit downgrade.

However, the outlook is not uniformly negative. The agency noted that meaningful progress on fiscal tightening or structural reforms aimed at lifting medium-term growth could prompt a more positive assessment.