Fitch Ratings Predicts Hungary’s Stable Economic Growth for Next Year
Fitch Ratings, an international rating agency, predicts that the Hungarian economy will experience steady growth starting next year. This growth is expected to help reduce the country’s public debt ratio. Fitch also anticipates a significant slowdown in inflation.
According to Fitch’s sector analysis, although this year’s deficit target has been revised to 5.2 percent of GDP due to increased spending, the deficit is expected to decline over the next two years. The Hungarian public deficit is projected to be below three percent by the end of the period.
Furthermore, Fitch Ratings expects the general government deficit to fall to 3.7 percent of GDP in 2024 and 2.8 percent in 2025, reflecting a boost in growth momentum. The agency also predicts that Hungary’s GDP will grow by an average of three percent annually in the 2024-2025 period. After a projected decline of 0.9 percent in 2023, this growth signifies a positive outlook for the country’s economy.
Despite these positive projections, Fitch notes that the sovereign debt-to-GDP ratio will remain above the median BBB sovereign debt level for now. However, with stable nominal GDP growth and the re-emergence of primary surpluses, the gradual decline in the public debt ratio is expected to continue from 2023 to 2025.
Fitch Ratings also anticipates that Hungary will reach an agreement with the European Commission on the resumption of EU cohesion funding. Although the exact level and timing of disbursements remain uncertain, this agreement would be a significant development for the country.
In terms of inflation, Fitch projects a significant slowdown in Hungary. The agency expects 12-month inflation to average 5.3 percent in 2024 and 3.1 percent in 2025. Consequently, the benchmark central bank interest rate could fall to 5-6 percent by the end of 2024.
These projections by Fitch Ratings provide optimism for Hungary’s economic future, highlighting expectations of steady growth, reduced public debt, and lower inflation. However, it is important to note that uncertainties remain, particularly regarding EU cohesion funding. Overall, these projections indicate a positive outlook for the country’s economy in the coming years.
