Fitch Ratings: Hungary could meet eurozone entry criteria by 2030

The Hungarian government's draft budget for 2027 and its medium-term deficit targets support its aim of meeting the conditions for joining the eurozone by 2030, Fitch Ratings said in an assessment published on Thursday.

According to the 2027 draft budget presented by Prime Minister Péter Magyar on Monday, the government intends to cut the general government deficit to 4.9% of GDP, from the 7.5% expected for this year.

The budget includes planned spending cuts worth 1.5% of GDP next year. On top of this, the expiry of temporary and one-off pre-election measures could save a further 1.4%. The budget also counts on lower interest payments of up to 0.2% of GDP, "reflecting declining costs on inflation-linked bonds and lower Hungarian sovereign yields amid improved market sentiment," Fitch said.

The government also plans tax increases and other measures to raise additional revenue worth about 1% of GDP.

The proposed spending cuts would affect some economic-development subsidies, government communications, public media, and state investment and operating costs. These include a planned reduction of at least 10% in the operating expenditure of ministries and state-owned companies.

The government expects tax increases to raise 0.25% of GDP through higher corporate and innovation taxation, 0.2% from a wealth tax, and 0.1% from a levy on energy companies, with smaller amounts coming from increases in mining royalties, company-car tax and advertising tax.

However, Fitch warned that putting the overall deficit-reduction plan into practice would be challenging, given the "large number of relatively small measures and the need for sustained consolidation".

Some savings remain uncertain, while new spending commitments and tax relief worth about 1.4% of GDP would offset part of the gains.

Fitch emphasised the importance of meeting Hungary’s 2027 fiscal target, describing it as "an important measure of the credibility of the government’s frontloaded fiscal consolidation strategy under its plans to meet euro-adoption criteria by 2030". The government's plan sets out a deficit of 4% of GDP in 2028, falling more gradually thereafter, to 3.4% in 2029 and 2.8% in 2030.

Fitch's own forecasts put Hungary’s budget deficit on a similar path, narrowing to 5.4% of GDP in 2027, from 7.3% in 2026, and eventually falling below 3% by 2030.

According to the agency’s projections, Hungary’s public debt will peak at 77.7% of GDP in 2027–2028, well above the 57.5% median for countries in Fitch’s “BBB” sovereign rating category. The subsequent path of Hungary’s debt will also depend on the forint’s exchange rate and economic growth, Fitch said.

Growth has lagged behind that of countries with a similar rating since 2023, Fitch said, putting it down to weak external demand, heightened policy uncertainty, delayed EU funding inflows, and the impact of efforts to reduce the deficit on investment.

The Hungarian government expects GDP growth of 2.4% in 2027, accelerating to above 3% by 2030. This could come in part from higher EU-funded investment. The EU recently unfroze €4.2 billion in funding for Hungary, part of a wider €16.4 billion agreement, with access to the remaining funds still subject to approval.

The government’s growth outlook is broadly in line with Fitch’s forecasts of real GDP growth of 2.5% in 2027, accelerating to about 3% from 2028, supported by stronger investment and private consumption as EU funds are deployed, and by a recovery in external demand.

Meeting the budget targets alone would not qualify Hungary to adopt the euro. Countries must also meet conditions covering inflation, long-term interest rates, exchange-rate stability and national legislation.

Political and economic risk consultancy Eurasia Group also considers it possible that Hungary could join the eurozone in 2032, according to a report of its assessment.

If Hungary were to enter ERM II, the exchange-rate mechanism that is mandatory before adopting the euro, in 2030, it could potentially join the eurozone in 2032 or later. Countries must spend at least two years in ERM II without severe exchange-rate tensions or devaluing their currency’s central rate against the euro, and meet the other entry conditions.