Fitch Ratings: Hungary could meet eurozone entry criteria by 2030

Hungary’s 2030 Euro Goal Depends on Sustained Budget Repair

Usagevpn.com – Hungary’s plan to prepare for euro adoption by 2030 has received qualified backing from Fitch Ratings, which sees the government’s proposed fiscal path as broadly consistent with meeting a central part of the entry requirements. The ratings agency nevertheless warned that turning the targets into reality will require difficult and persistent budget discipline.

The government’s draft 2027 budget, presented by Prime Minister Péter Magyar on Monday, aims to reduce the general government deficit to 4.9% of gross domestic product. That would mark a sharp improvement from the 7.5% deficit expected this year.

Fitch views the programme as an important early test of Budapest’s wider consolidation strategy. Its assessment highlighted both the scale of the planned adjustment and the risks involved in carrying out a package made up of numerous individual measures.

“An important measure of the credibility of the government’s frontloaded fiscal consolidation strategy under its plans to meet euro-adoption criteria by 2030.”

Spending cuts, expiring measures and new taxes

The 2027 budget envisages expenditure reductions worth 1.5% of GDP. A further 1.4% of GDP in savings could come as temporary and one-off measures introduced before the election come to an end.

Lower debt-servicing costs are also expected to help the public finances. Fitch said interest spending could decline by as much as 0.2% of GDP as inflation-linked bonds become less costly and Hungarian sovereign borrowing costs ease amid stronger market sentiment.

“Reflecting declining costs on inflation-linked bonds and lower Hungarian sovereign yields amid improved market sentiment.”

The proposed savings would reach across several areas of state activity. Economic-development subsidies, official communications, public media, state investment and operating spending are among the planned targets. Ministries and state-owned companies are expected to reduce operating expenditure by at least 10%.

Revenue measures form another element of the programme. The government expects tax changes and related steps to deliver roughly 1% of GDP in additional income. Higher corporate and innovation taxes are projected to contribute 0.25% of GDP, while a wealth tax is expected to raise 0.2%. A levy on energy companies would add 0.1%, with further receipts planned through higher mining royalties, company-car tax and advertising tax.

A challenging path to lower deficits

Fitch cautioned that a large collection of relatively small policy measures can be difficult to implement and maintain. Some projected savings remain uncertain, and fresh spending commitments together with tax relief worth about 1.4% of GDP would partly offset the planned gains.

The government’s medium-term framework sets a deficit target of 4% of GDP for 2028. It then envisages a more gradual reduction to 3.4% in 2029 and 2.8% in 2030.

Fitch’s own outlook is slightly less optimistic in the near term. It forecasts a deficit of 5.4% of GDP in 2027, after an estimated 7.3% in 2026, before the shortfall falls below 3% by 2030. Reaching that threshold matters because the European Union’s fiscal rules are among the conditions countries must satisfy before adopting the single currency.

Even so, deficit improvement alone would not guarantee entry into the euro area. Hungary would also need to meet requirements related to inflation, long-term interest rates, exchange-rate stability and the compatibility of national legislation.

Debt and growth remain central questions

Public debt will remain an important constraint. Fitch expects Hungary’s debt burden to peak at 77.7% of GDP in 2027 and 2028. That is substantially above the 57.5% median for sovereigns carrying a BBB rating from the agency.

The subsequent direction of debt will depend not only on fiscal restraint, but also on the strength of economic growth and movements in the forint. A weaker currency can increase the difficulty of stabilising debt, while stronger growth can improve the ratio of debt to GDP.

Hungary’s growth performance has trailed that of similarly rated countries since 2023. Fitch linked that weakness to subdued foreign demand, increased policy uncertainty, delayed inflows of European Union money and the effect of deficit-cutting efforts on investment.

The government expects GDP to expand by 2.4% in 2027 and to move above 3% by 2030. Higher investment financed with EU funds could support that outlook. The EU recently released €4.2 billion for Hungary as part of a broader €16.4 billion arrangement, although access to the remaining funds still requires approval.

Fitch’s growth projections are close to the government’s assumptions. It expects real GDP growth of 2.5% in 2027, rising to around 3% from 2028 as investment and household consumption strengthen, EU money is deployed and external demand recovers.

ERM II would set the timetable

Even if Hungary meets its fiscal ambitions by 2030, euro adoption could come later. Before joining the euro area, a country must participate in ERM II, the exchange-rate mechanism designed to test currency stability.

Members are required to remain in ERM II for at least two years without severe exchange-rate pressures or a devaluation of their currency’s central rate against the euro. If Hungary entered the mechanism in 2030, euro adoption could potentially follow in 2032 or beyond.

Eurasia Group has also identified 2032 as a possible date for Hungary to join the eurozone. The prospect will therefore depend on more than one successful budget cycle: it will require stable inflation, credible public finances, a resilient forint and continued progress on the other legal and economic conditions for membership.