Fitch Ratings has reaffirmed Hungary’s sovereign debt rating at 'BBB' with a stable outlook, the lowest tier of investment grade, but significantly cut its 2025 GDP growth projection to just 0.7%, down from the 2.5% it anticipated in December. This is below the government’s 2.5% target, revised from 3.4% earlier this year, and below the median 1% projection by analysts.

The downgrade reflects weakening domestic demand and persistent structural vulnerabilities, despite ongoing strength in sectors like automotive and battery manufacturing. Hungary’s growth outlook is now one of the weakest among BBB-rated peers, it noted.

Fitch continues to see Hungary’s rating supported by strong structural indicators relative to peers, including a per capita GDP well above the BBB median, and strong FDI inflows, particularly in the automotive and battery sectors.

However, these advantages are offset by elevated public debt levels, deteriorating governance indicators and the government’s continued reliance on unorthodox economic policies.

Hungary's economic model remains exposed to global trade tensions. Fitch highlighted that 3.2% of GDP stems from exports to the US, particularly in autos and pharmaceuticals, a growing risk amid potential US tariff hikes.

In the report, it projected a modest recovery next year, forecasting 3.1% growth in 2026 as household consumption rebounds and delayed investment projects come online. Large-scale industrial projects in the pipeline, particularly in battery cell production, are expected to begin contributing to output.

On inflation, Fitch forecasts an average of 4.6% in both 2025 and 2026, far above the 3% target by the MNB and the 2.9% median among BBB-rated economies.  Ongoing price caps and voluntary price freezes are expected to remain in place at least until Q2 2026. In light of persistent price pressures and forint volatility, the MNB is seen cutting its base rate only marginally, to 6.25% by end-2025 and 5.5% by end-2026.

The primary deficit is forecast to narrow slightly to 0.5% of GDP in 2025 and 0.3% in 2026, but headline deficits will remain elevated at 4.6% and 4.1% respectively. Government interest expenditure is expected to decline gradually from a peak of 11.8% of revenue in 2023 to 9.1% by 2026, as domestic bond yields adjust.

Public debt is projected to decline only gradually, reaching 72.2% of GDP by the end of 2026.

The agency also warned that Hungary is unlikely to unlock significant EU funding before mid-2026. It expects only 0.3% of GDP in inflows during 2025-26, compared to 1.8% during 2017-22.

The outlook from Fitch comes amid growing concerns from other credit agencies. In late May, Moody’s also reaffirmed Hungary’s rating, but maintained a negative outlook, citing ongoing rule-of-law concerns, the potential loss of EU funds, and risks of pre-election spending ahead of the 2026 vote.

The Ministry of National Economy framed the confirmation as a vote of confidence in the government’s fiscal policy, which it described as firmly committed to budgetary discipline despite mounting geopolitical and economic pressures.

Despite external headwinds and political pressure from Brussels, Hungary continues to implement "Europe’s largest family-oriented tax relief programme," the statement read, adding that the government remains vigilant against what it called "unjustified price hikes", referring to unorthodox measures such as capping profit margin of food retailers and drug chains selling household items.

The ministry pointed to upcoming dividend revenues from major state-owned companies, including HUF110bn (€270mn) from Budapest Airport and HUF200bn from energy group MVM, as helping to stabilise public finances and contain the deficit. 

The substance of the latest review is clearly negative as in the last six months, Fitch cut its 2025 growth forecast from 2.5% to 0.7%, worsened the expected fiscal trajectory, and flagged greater uncertainty around EU fund inflows, which represent significant deteriorations in economic outlook, according to the financial website Portfolio.hu.

While the stable outlook remains in place, this is likely because Fitch only restored it from negative in December, and the agency may prefer to assess medium-term trends before making further moves, it added. 

According to the website, the three major rating agencies are scheduled to update their ratings again this autumn. If growth prospects fail to improve or if the government loosens fiscal policy ahead of the 2026 elections, a downgrade or at least a shift to a negative outlook becomes increasingly likely.