Following the estimated 53.6% victory of the Tisza party in Sunday’s election, led by Peter Magyar, the market is establishing its expectations for the country’s economy.
The current landscape is not positive. In December, Fitch revised Hungary’s sovereign credit rating outlook to negative. S&P Global Ratings pulled back on Hungary in April, assigning it BBB-. Moody’s gave the country a negative outlook even earlier, rating it Baa2 in November 2024. Both have negative outlooks.
Only Morningstar DBRS currently gives Hungary a stable outlook, as of June 2025, with a BBB rating.
Hungary’s economy has been close to stagnant since 2023, the agency states – in 2026 it expects to see 2% growth, with an increase to 2.4% growth in 2027. This is attributed to pre-election fiscal easing and subsequent greater private consumption, investment recovery, and new automotive and battery export capabilities.
That fiscal easing could also have a negative effect on the central government cash deficit, however, especially given the fact that aspects of the easing package are permanent. The deficit has already exceeded its 3.7% target, reaching 4.7% in 2025. Fitch expects this to worsen to 5.6% this year, due to energy support measures and pre-election fiscal easing – which the agency estimates cost about 2.1% – and fall to 5% in 2027.
Risks to the forecast include high energy costs as a result of conflict in the Middle East.
“The uncertainty about the inflation outlook is still likely to be dominated by the outlook for global energy commodity prices and domestic administrative price measures,” Morgan Stanley analysts said in a research note.
“While polls pointed to a Tisza victory, a supermajority was not the base case and came as a genuine surprise. Markets should interpret the outcome positively, as it materially reduces Hungary’s risk premium on a structural basis,” stated EMD sovereign analyst Nafez Zouk at Aviva Investors.
“We think the market was already pricing some chances of Tisza victory but with supermajority there is decent room for Hungarian assets to outperform. Even though the external backdrop is not supportive, these results would be quite positive to reduce the risk premium in the currency and the rates curve. We expect the long end of the curve to materially outperform and the whole curve could reprice lower by 100-150bps,” added Morgan Stanley analysts.
The country may also benefit from improved EU relations, which could lead to the unlocking of frozen EU funds. The impact of this may not be seen instantly, however; “It is unclear how quickly a full resumption of fund disbursements would translate into higher growth prospects,” Fitch warns.
“The potential to unfreeze access to EU funds, one of Tisza’s policy goals, could result in 1-1.5 percentage points higher potential GDP growth,” Morgan Stanley analysts added.
Planned alignments with the EU by the new government include an inflation target reduction from 3% to 2%, and the adoption of the euro within the decade.
“In our view, it remains still too early to say whether this will come to fruition, however we believe that putting this plan into motion will ultimately lead to fiscal reforms that will benefit the nation’s economic standing irrespective of whether the Euro is eventually adopted,” Zouk commented.
“The unexpected strength of the mandate for regime change reduces short-term policy uncertainty while raising expectations of institutional repair, EU relations and fiscal credibility more quickly than expected,” added Peter Virovacz, senior economist for Hungary at ING.
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