Fitch Downgrades Hungary's Credit Outlook Amid Pre-Election Spending Spree

Fitch Ratings Cut Hungary's Credit Outlook to Negative Amid Budget Loosening Fitch Ratings announced a cut in Hungary's credit outlook to negative from stable, citing the government's decision to loosen budget targets to accommodate pre-election spending. This move comes after the government revised its budget shortfall target to 5% of gross domestic product (GDP) this year, up from a previous target of 4.1%. According to Fitch, the long-term rating was affirmed at BBB, but the negative outlook reflects concerns over Hungary's fiscal policy and its potential impact on the country's creditworthiness. The rating agency noted that the government's decision to relax budget targets may lead to increased borrowing and higher debt levels, which could negatively affect Hungary's credit rating in the long term. Hungary's bond yields jumped last month after the government announced the revised budget shortfall target. The yield on the country's 10-year government bond rose to 4.5% in November, up from 4.2% in October. This increase in yields reflects investors' growing concerns over Hungary's fiscal policy and its potential impact on the country's creditworthiness. The revision in Hungary's budget shortfall target is part of a broader trend of governments around the world loosening their fiscal targets ahead of elections. In Hungary's case, the government is seeking to boost spending ahead of the 2026 parliamentary elections, which could lead to increased borrowing and higher debt levels. Hungary's credit rating has been under scrutiny in recent months, with Moody's and S&P Global Ratings also downgrading the country's credit outlook. Moody's left its assessment at Baa2 with a negative outlook, while S&P Global Ratings has its score one step lower at BBB-. The negative outlook from Fitch reflects concerns over Hungary's fiscal policy and its potential impact on the country's creditworthiness. The business implications of Fitch's decision are significant, as a negative credit outlook can lead to higher borrowing costs for Hungary and make it more difficult for the country to access international capital markets. The government's decision to loosen budget targets may also lead to increased scrutiny from international investors and rating agencies, which could further exacerbate the country's credit woes. In conclusion, Fitch's decision to cut Hungary's credit outlook to negative reflects concerns over the country's fiscal policy and its potential impact on its creditworthiness. The government's decision to loosen budget targets ahead of elections has raised concerns among investors and rating agencies, which could lead to higher borrowing costs and increased scrutiny for Hungary in the coming months.