Is April a pivotal point? Here is a vital table for Hungary for the year 2026

Hungary dodges rating downgrade in 2025

A year ago, Hungary was not directly threatened with a downgrade to 'junk' status. However, in April, S&P downgraded the country's BBB- rating outlook to negative, putting it just one step away from a painful decision:

a rating below BB+ would mean that the country would no longer be recommended for investment.

S&P primarily justified the move by pointing to the increased risk of stagflation in the Hungarian economy. The agency also argued that further spending ahead of the 2026 parliamentary elections would increase fiscal risks and worsen the outlook for an already high debt ratio.

The credit rating agency could subsequently have decided to downgrade Hungary's credit rating to junk status in mid-October, but this was avoided

Moody's reviews reflected an uneventful year for Hungary, with the rating agency last making a change in November 2024 when it downgraded the outlook on its Baa2 rating to negative. This rating is one notch higher than S&P's.

Fitch Ratings upgraded the outlook for the Baa2-equivalent BBB rating to stable at the end of 2024, but downgraded it back to negative a year later, putting Hungary in the same position with them as with Moody's.

Election puts rating agencies in a wait-and-see mode

In other words, Hungary is heading into 2026 with a negative outlook from all three major credit rating agencies, with a rating one notch lower at S&P than at the other two. This is significant because, in such cases, companies have 24 months to make a decision. With a negative outlook, this could result in a downgrade or an upward revision of the outlook. Experience shows that,

in about two-thirds of cases, the former occurs, meaning that a negative outlook does indeed predict a downgrade.

By the end of December, the rating agencies had published their preliminary calendars for 2026. These included the dates on which the agencies planned to review Hungary's credit rating.

They are not obliged to change the rating or outlook on these dates, and may decide to leave them unchanged. However, they can only deviate from the previously published dates in exceptional circumstances. This means that it is very unlikely that action will be taken at other times.

The most interesting thing is that

S&P has postponed the date of its first planned review by around one and a half months.

Until now, reviews have generally been conducted every six months, which means that, based on the opinion published in mid-October, the next review would be due in April. However, the economic outlook is uncertain due to the upcoming parliamentary elections. This is probably why the company has decided to postpone publication of its first rating review until the end of May. By then, the election results will be known, as will the economic policy plans of the new government, both of which are essential for assessing the situation.

Moreover, it is precisely S&P that we should most expect to downgrade, as this could have painful consequences. If Hungary were to be downgraded to 'junk' status, certain institutional investors would be forced to sell their Hungarian assets, as they are only permitted to hold assets that are recommended for investment. This would likely lead to an increase in Hungarian government bond yields, as the lost financing would need to be replaced by other means, and these investors would undoubtedly demand a high price for this.

Furthermore, by the end of May, more than a year will have passed since S&P issued its negative outlook. This may be prompting them to act sooner rather than later, probably by the end of November at the latest. The same can be said of Moody's, where the first review in 2026 would take place a year and a half after the negative outlook was issued. However, Fitch downgraded its outlook at the end of 2025, so they are not under as much time pressure for the time being.

What could the rating agencies focus on primarily?

The year 2026 could also be significant because elections could lead to major changes in economic policy. In other words, the caution of credit rating agencies prior to April may be justified. The Tisza Party's campaign placed significant emphasis on improving access to EU funds and resolving EU disputes that could impact the prospects of the Hungarian economy.

Additionally, in recent months, the opposition party has openly championed the adoption of the euro, promising that, if elected, the new government will present a credible plan for Hungary's introduction of the common European currency. This represents a significant shift from previous years, when the ruling government was reluctant to address the matter. In fact, just a few months ago, Prime Minister Viktor Orbán stated that "the introduction of the euro will definitely not happen on my watch".

The above issues may also influence the decisions of credit rating agencies. Another important issue is the outlook for economic growth, given that Hungary has not achieved any meaningful GDP growth for three years. Meanwhile, almost everyone agrees that fiscal adjustments will be necessary after the elections, regardless of the outcome. This is partly to avoid being downgraded to 'junk' status, since a high budget deficit could make it uncertain whether the debt trajectory will decline. In other words, these issues are likely to be key in the 2026 credit rating reviews.

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