A significant increase in Hungary’s budget deficit, combined with rising inflation and currency pressures, could put the country’s credit rating at risk, says S&P Global, especially as public spending commitments grow ahead of the closely contested 2026 election.

Confronted with the weakest period of his 15-year tenure, Prime Minister Viktor Orban has introduced family tax cuts, salary increases, and other measures ahead of the vote, which S&P Global estimates total roughly 2% of the nation’s economic output.

Last week, Orban announced that his government will introduce a pension bonus starting in January, providing an extra month’s payment to a key group, despite a recent caution from Fitch Ratings that Hungary’s deficit reduction is likely to be slower than anticipated.

“One of the downside dimensions that we are watching, among others, is the developments to Hungary's near- and medium-term fiscal position,” S&P Global told Reuters news agency.

In April, it revised Hungary’s BBB- credit rating outlook from stable to negative.

Furthermore, S&P noted that its central forecast anticipates budget deficits exceeding the government’s targets, factoring in the likelihood of extra public spending commitments.

In mid-October, S&P projected Hungary’s deficit at 4.5% of GDP for this year and 4.25% for 2026. By comparison, the government now expects a deficit ranging from 4% to 4.5% this year and roughly 4% next year.

“Should Hungary's fiscal path materially deviate from our forecast, and particularly if coupled with elevated inflation and compounding currency market pressures, risks to the rating level would build,” the agency stated.

Illustrating the fiscal strain, Hungary disbursed 536 billion Forints ($1.61 billion) in February under its current pension top-up program, contributing to a substantial deficit at the start of 2025.

Meanwhile, the central bank has maintained its benchmark interest rate at 6.5%, the highest in the European Union, for over a year, reflecting uncertainty about the inflation trajectory. Government price controls have helped keep inflation in check ahead of the election.