Hungary’s potential U.S. financial backstop difficult to factor in, says Fitch

Investing.com -- A potential U.S. financial backstop package for Hungary remains difficult to assess without more details, according to Fitch Ratings, which added that such support should be unnecessary given Hungary’s continued access to borrowing markets.

Erich Arispe, Head of Emerging Europe Sovereign Ratings at Fitch, said the recently announced increase in Budapest’s deficit forecast was larger than expected but hasn’t triggered market concerns so far.

Hungarian Prime Minister Viktor Orban, who is facing a competitive election next year, met with U.S. President Donald Trump earlier this month. During this meeting, Orban secured a year-long exemption from sanctions related to Russian energy purchases and claimed to have reached an agreement on a potential $10-$20 billion U.S. support package. The White House has not yet commented on this arrangement.

"What you have to think about is the contingent external liquidity support, and that could add to existing buffers when there is more transparent, predictable information," Arispe said in an interview conducted Friday. However, he noted it’s challenging to evaluate "something that you don’t know how and when it can be deployed," including whether the U.S. will attach "policy requirements" to any support.

Arispe suggested the support would likely remain just a backstop, adding: "If we’re thinking about the current situation and current policy settings, and the access to external financing and other sources Hungary has, it’s not apparent why this will be critical."

Regarding Hungary’s recent deficit target increase to 5% for both this year and next, Arispe acknowledged some fiscal slippage had been anticipated ahead of elections, especially given Orban’s tax cuts and wage hikes aimed at boosting his popularity.

"It is somewhat above what we were anticipating," Arispe said. "We were thinking about 4.6% of GDP deficit for this year. But for 2026 we’re expecting a faster consolidation towards 4%."

For Hungary’s BBB rating with a ’stable’ outlook, Fitch notes the country’s 72% debt-to-GDP ratio exceeds the 58% BBB median, while its primary deficit remains below 1% of GDP.

"It’s not about hitting a specific level. For us, it’s about the build-up of risk to public finances and the trajectory of the debt level," Arispe explained.

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