S&P changed the outlook for its BBB- sovereign credit rating to Negative from Stable

HUNGARY - In Brief 13 Apr 2025 by Istvan Racz
This happened at this year's first pre-set review date for Hungary, as regards any of the top three rating agencies: At the same time, S&P affirmed its BBB- credit rating, but even so, the agency's decision pushed Hungary to the very brink of losing its investment grade credit rating. S&P lowered its Hungary rating to BBB- a bit more than two years ago, taking a more pessimistic view on the country than any of the other two top three rating agencies. On this occasion, S&P's negative decision was based on the growing volatility / potential deterioration of external economic conditions, the uncertainty about the availability of EU transfers, recurring inflation, and the prospect of further fiscal loosening ahead of the 2026 election, which would increase the country's already high government debt ratio. The S&P also said that they could lower Hungary's rating further in case of a further slippage of fiscal performance against their current forecast, or if external conditions deteriorate further, e.g. through the escalation of the global trade war, or in case of an eventual cancellation of EU transfers, or in case of a misconduct in the area of monetary policies. However, they could move back to Stable outlook in case of an acceleration of fiscal consolidation, with a significant decrease of the government debt ratio, or if Hungary managed to restore its access to a significantly larger share of EU financial funds. From all this, it is quite clear in our view that the probability of S&P moving back to a Stable rating outlook is quite low for now, whereas the likelihood of further rating deterioration is much more significant. At any rate, this decision from S&P significan...

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