S&P Global Ratings reaffirmed Hungary’s ‘BBB-/A-3’ long- and short-term foreign and local currency sovereign credit ratings on Friday, maintaining a stable outlook. The agency cited Hungary’s economic recovery, decreasing inflation, and stabilizing debt costs as key factors supporting fiscal consolidation efforts.
“The stable outlook reflects our expectation that Hungary’s economic recovery, ongoing disinflation, and stabilizing cost of debt will support the government’s fiscal consolidation efforts in the medium term,” S&P stated.
The agency projects Hungary’s fiscal deficit to narrow starting in 2025, averaging 3.7% of GDP through 2027, with consolidation measures totaling approximately 1.3% of GDP in 2024.
According to S&P, Hungary’s state debt ratio is forecast to reach 74.6% of GDP in 2024, with interest expenses representing an average of 9% of government revenue over the next three years. The agency also noted that inflation is expected to continue subsiding, supporting a gradual normalization of monetary policy by the National Bank of Hungary.
S&P predicts GDP growth of 1.6% in 2024, accelerating to around 3.0% in 2025 as investment and external demand improve alongside sustained private consumption. However, the agency highlighted uncertainties stemming from Hungary’s trade-dependent economy and potential risks from geopolitical factors, as well as growth conditions in Germany, Hungary’s primary trading partner. Additionally, constrained relations with the EU could lead to delayed funding disbursements, affecting economic projections.
Despite these concerns, S&P foresees an uptick in foreign direct investment, particularly in the electric vehicle sector, bolstering overall investment.
The National Economy Ministry lauded S&P’s reaffirmation, attributing Hungary’s resilience to economic stability and robust performance. Hungary’s growth rate exceeds the EU average, outperforming countries like Belgium, France, Italy, and Germany, the ministry stated. It projected GDP growth at 1.5% for 2024, underpinned by rising retail sales, tourism, high employment, and real wage gains.
The Hungarian government has outlined a series of 21 new economic policies aimed at lifting GDP growth to a range of 3-6%, focusing on increasing purchasing power, ensuring affordable housing, and strengthening small- and medium-sized enterprises. The ministry said these measures could lift GDP growth above 3% as early as Q1 2025.
Finance Minister Mihály Varga also highlighted the resilience of Hungary’s economy, noting that since the onset of the Ukraine conflict, credit rating agencies have consistently affirmed Hungary’s investment-grade rating. He stated that the country’s economy is now on a path to sustained growth, returning to pre-pandemic levels.
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