Fitch revises Hungary trend to negative

Fitch Ratings said it revised the outlook on Hungary's long-term foreign-currency issuer default rating to negative from stable and affirmed the IDR at BBB.

“In Fitch's view, a tougher international environment, including higher global interest rates, volatile energy prices, and weakening demand from key trading partners is exposing vulnerabilities stemming from a policy mix that is influenced by political considerations. Inflation is among the highest of all Fitch-rated sovereigns as price caps have proved ineffective and added to fiscal costs, while monetary policy transmission is being hampered by targeted mortgage interest rate caps,” the agency said in a press release.

Fitch also said it considers delays in the disbursement of European Union funds to be highly likely.

“Despite the approval of Hungary's national recovery and resilience plan, which prevented the premature loss of 70% of €5.8 billion (3.2% of GDP) in grants, the first disbursement is conditional on Hungary fulfilling 27 ‘super-milestones,’ many of which are on rule of law,” Fitch said.

The agency noted it sees a high possibility that differing interpretations about super-milestone implementation and political considerations will delay disbursements.

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