Credit ratings agency Fitch upgraded Hungary's outlook from “negative” to “stable,” on Friday, citing a reduction in macroeconomic imbalances due to better alignment between fiscal and monetary policies.

“The National Bank of Hungary (MNB) has maintained a tight monetary policy stance, while the government has taken steps to reduce the primary deficit since 2023,” Fitch said in a statement.

Hungary's economy minister stated in October that the country has overcome its inflation crisis, Reuters news agency reports, with price growth slowing toward the central bank's target after having the highest inflation rate in the EU last year.

Fitch predicts a gradual recovery for Hungary's economy, fuelled by stronger private consumption, investment, and exports.

In November, Finance Minister Mihaly Varga presented the draft budget for 2025 to parliament, addressing concerns raised by the budget watchdog regarding inadequate reserves to manage potential risks and revenue shortfalls linked to weak economic growth.

Despite these concerns, Varga dismissed them, affirming that the government's fiscal strategy would remain robust.

Under the leadership of Prime Minister Viktor Orban, the government is targeting a reduction in the budget deficit for 2025, aiming to bring it down to 3.7% of GDP, a decrease from the 4.5% target set for this year.

“The expected decline in interest expenditure will support a further decline in the fiscal deficit to 4.2% in 2025 and 3.7% in 2026,” Fitch went on to add.

In preparation for the 2026 parliamentary elections, Prime Minister Orban's government plans to enhance tax benefits for families and maintain the provision of an additional month's pension, with a focus on supporting key demographics.

The government is forecasting a 3.4% economic growth rebound in 2025, although the Fiscal Council views this projection as optimistic based on current economic forecasts.

In addition, the ratings agency reaffirmed Hungary's credit rating at “BBB.”