Fitch Ratings Say 2023 Deficit Revision Makes 2024 Target Challenging

Hungary’s substantial revision of its general government deficit target for this year to 5.2% of GDP from 3.9% makes reaching next year’s target of 2.9% more challenging, Fitch Ratings says.

• “The scale of the 2023 revision is bigger than Fitch had anticipated, as no new measures to improve budgetary performance in the reminder of the year were announced at the time of the revision. We now forecast the deficit to only fall below 3% of GDP in 2025.”
• “Disbursement of EU funds would take some pressure off the public finances and would be growth-positive… While an agreement with the EC is our baseline expectation, we remain cautious regarding the timing and size of eventual disbursements.”
• “Fitch expects headline inflation to continue to ease and to average 17.9% in 2023, 5.3% in 2024 and 3.1% in 2025.”
• “We expect most of the easing cycle to be delivered next year and we see the key rate stabilising at 5%-6% by end-2024.”