S&P Global Ratings on Friday confirmed its 'BBB-/A-3' long- and short-term sovereign credit ratings for Hungary in both foreign and local currencies, while leaving the outlook negative.
The negative outlook, S&P said, reflects risks to Hungary's fiscal and economic stability over the coming two years. The ratings agency pointed to large budgetary deficits, a high level of public debt and elevated interest expenditure as factors that constrain policy flexibility when responding to both domestic and external pressures.
S&P projects the general government deficit will widen to 6.75% of GDP in 2026. The agency attributes that deterioration to pre-election spending, which it says includes untargeted subsidies and tax relief measures focused on household energy consumption.
Hungary's recently installed center-right majority government - which has been in office for less than three weeks and holds a parliamentary supermajority - has publicly set its sight on joining the euro area by 2030. S&P said it expects the government to take steps over the next two months to meet milestones and targets required to unlock an estimated 6 billion of grants from the EU Recovery and Resilience Fund over 2026.
On the growth outlook, S&P forecasts that Hungary's real GDP will expand by 1.6% in 2026 and by 2.4% in 2027, with growth driven by domestic demand, a rebound in exports and an improvement in confidence. Market indicators noted by the agency include an appreciation of the forint of about 6% against the euro and a drop in the 10-year government bond yield from around 7.5% in late March to roughly 5.7% by mid-May.
Fiscal path assumptions in the S&P assessment show net general government debt peaking at 74% of GDP in 2027 before entering a declining trajectory.
Despite the projected recovery and favorable movement in currency and yields, S&P emphasised Hungary's vulnerability to external shocks because of its energy-intensive economy. More than 90% of Hungary's oil and gas imports are sourced from Russia and are transported via pipelines running through Ukraine, Bulgaria and Serbia. Household energy subsidies remain a material fiscal burden, costing approximately 1% of GDP, the ratings agency noted.
Context and implications
The affirmation of the rating with a negative outlook signals that, in S&P's view, the sovereign remains investment grade but faces meaningful near-term risks tied to fiscal policy choices and external exposure. Key variables that will influence the outlook include the government's implementation of measures to secure EU Recovery and Resilience Fund support and the management of pre-election fiscal measures that are expected to widen the deficit in 2026.