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Fitch: The Hungarian economy will still fail this year

Fitch: The Hungarian economy will still fail this year

According to a sector analysis conducted by Fitch Ratings on Friday, although the increase in this year’s deficit target announced the other day “represents a challenge” in terms of achieving a deficit below 3 percent, it will begin to decline in two years. Next up is Hungary. The general budget deficit will be less than 3% by the end of the period. The international credit rating agency expects stable growth in the Hungarian economy starting next year, and expects this to contribute to reducing the national debt ratio. Fitch also expects a sharp slowdown in inflation.

There may still be surprises. Image: Deposit images

The Ministry of Finance announced this week that in light of the significant increase in expenditures, the government will change the GDP deficit target for this year to 5.2 percent. The ministry stressed – and this was also reflected in Fitch’s analysis in London on Friday – that the new deficit target also means an improvement of one percentage point compared to last year’s deficit.

The credit rating agency – which gives Hungary’s public debt obligations an investment grade rating of “BBB” with a negative outlook – expects the public budget deficit, measured as a share of GDP, to decline to 3.7 percent in 2024 and 2.8 percent in 2024. 2025. Activating growth momentum has a role to play in this.

Fitch Ratings announced that, according to its forecasts, after the expected decline of 0.9 percent for the whole of 2023, the value of Hungarian GDP could increase by 3 percent on average in the period 2024-2025.

Due to stable nominal GDP growth and the re-emergence of primary surpluses, the gradual reduction in the public debt ratio is expected to continue in the period 2023-2025, although sovereign debt as a share of GDP will currently be above the average level of public debtors in the category “BBB” – Fitch Ratings says in its outlook on Friday.

The credit rating agency also stated that, according to its baseline forecast, an agreement will be reached with the European Commission on continued EU cohesion financing, although the size and timing of payments remain uncertain.

Fitch also expects a significant slowdown in inflation in Hungary: according to its forecast on Friday, twelve-month inflation will average 5.3 percent in 2024 as a whole, and 3.1 percent in 2025. In this environment, interest rates may fall Central Bank to 5-6 percent by the end of 2024, according to the credit rating agency. (MTI)

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