The new Hungarian government will face significant macroeconomic and public finance challenges following the election, driven by weak economic growth, a high budget deficit and a rising public debt burden, Fitch Ratings said in an assessment published in London, financial website Portfolio.hu wrote on April 14.
The decisive victory of the Tisza Party is expected to improve relations between Hungary and the European Union, while reducing the risk that institutional resistance could hinder the implementation of the new government’s policy agenda, it said.
Fitch analysts said they would now focus their sovereign credit assessment on the credibility and feasibility of the incoming government’s fiscal consolidation strategy, as well as its impact on debt dynamics and economic growth.
The agency said pre-election fiscal loosening, rising debt levels and an uncertain consolidation path had been key factors behind its decision in December to revise Hungary’s “BBB” sovereign rating outlook to negative.
Fitch said the Hungarian economy has essentially stagnated since 2023, with average annual GDP growth of just 0.1%, significantly below the 4.2% average recorded between 2015 and 2019.
According to the report, weak growth has been driven by an unfavourable external environment, rising uncertainty, a decline in public investment, and structural economic challenges, including stagnating labour productivity and weakening external price competitiveness.
At the same time, Fitch said it expects Hungary’s economic growth to accelerate to 2% in 2026 and 2.4% in 2027, which is below the government’s 3% target for 2026.
The recovery is expected to be supported by a rebound in private consumption following pre-election fiscal easing, stronger investment activity, and new export capacity from the automotive and battery manufacturing sectors, it added.
However, the agency warned that sustained high energy prices due to geopolitical tensions could pose risks to the outlook, noting that Hungary is a net energy importer and highly dependent on EU economic performance.
Fitch also said that the pro-EU stance of Tisza Party leader Peter Magyar and the party’s strong parliamentary mandate are likely to improve cooperation with Brussels, including the possible unblocking of EU funds and progress on addressing rule-of-law, judicial independence and corruption concerns.
This could pave the way for the release of currently frozen EU financing, although it remains unclear how quickly this would translate into stronger growth, it added.
The budget gap is slated to rise to 5.6% of GDP this year from 4.7% last year, mainly due to pre-election fiscal expansion and energy-related subsidies, and is projected to decline to 5% of GDP by 2027, it added.
Just days before the election, the National Economy Ministry released Q1 fiscal data showing that the cash-flow-based deficit exceeded 80% of the full-year target. In a short comment, the ministry added that the 5% deficit target could be met.
The agency said the new government would need to restore confidence in fiscal policy and strengthen the budgetary framework after developing a medium-term consolidation strategy, pointing to frequent changes in fiscal targets and repeated deviations from budget plans in recent years.
Fitch also noted that Hungary’s commitment to reducing public debt has not been reflected in recent performance, as the debt-to-GDP ratio increased from 73.3% in 2023 to 73.5% in 2024 and 74.6% last year.
The government is in a tight spot as reviews by the top three rating agencies are due within the next two months. Moody’s is due to review Hungary on May 22, followed by Standard & Poor’s on May 29 and Fitch Ratings on June 5.
The economic programme of the incoming government is based on restoring EU funding, tax reform, pension increases and a more competitive growth model, as the Orban government's fiscal policy had lost credibility, Andras Karman, Tisza Party’s expert on budgetary and tax policy, told leftist daily Nepszava. After a revision, the government will submit a new budget within 100 days. The election pledges would be financed through a combination of EU funds, fiscal reforms and economic growth, while also aiming to ensure a sustainable reduction in the budget deficit.
On the broader outlook, he said GDP has stagnated over the last three years, due to deep structural problems rather than cyclical ones. Hungarian wages have fallen behind the EU average, with only Bulgaria and Greece ranking lower, and Romania is now ahead of Hungary. However, wage convergence cannot be sustained without productivity growth. The Orban government’s economic policy in the past 15 years has been characterised by an extensive growth model, driven by low-cost labour and foreign investment in assembly industries, which boosted output until 2020 without improving productivity. This model, he argued, had exhausted its potential and called for a shift towards fair competition, reduced corruption, and greater investment in education, healthcare, and human capital.
The budget expert also urged a more innovation-driven, productivity-focused economy with a stronger role for SMEs, which he said would be key to restoring growth and wage convergence.
On taxation, he said the system was unfair as lower-income households bear a relatively higher burden due to the highest VAT among OECD countries. He flagged that the headline 27% rate will remain in place, but consumers would pay 5% or no taxes on medicines, firewood and healthy food, saying that targeted reductions would be more effective.
Targeted income tax cuts would be launched via a tax credit for incomes below the median wage, affecting around half of taxpayers, while the minimum wage tax burden would fall from 15% to 9%.
The new Tisza government, in line with its election promises, will introduce a new annual wealth tax of 1% on assets above HUF1bn, covering both productive assets, such as company ownership and non-productive assets, such as luxury property.
The pension reforms would address long-standing disparities, including higher minimum pensions, retention of the 13th and 14th month pensions and the introduction of a voucher card for pensioners that can be used for food and medicine.
He said pension indexation could be adjusted in the longer term to better track wage growth, with details to be worked out after consultations.
The reduction of the retail sector taxes would be considered in the longer term, provided they led to lower prices for households. Multinational companies, bearing much of the impact of the windfall tax, have called for a reduction in the levy, which has led to massive losses, as well as unorthodox measures such as a profit margin cap.
In the interview, Karman did not touch on that, nor on plans on the fuel price cap. The measure was introduced without an end-date on March 9, and according to energy analysts the measure has played a part in the steep fall of the strategic reserves. This had fallen to a record low of 44 days from over 90 days, at the onset.
On the government’s broader fiscal policy plans, he said the focus was not on rapidly cutting the deficit but on establishing a credible, medium-term fiscal policy that would put public debt on a declining path. Predictable budget management and sustained economic growth are both needed to achieve lasting deficit reduction, he said, noting that the release of some €22bn of frozen EU funds is the most vital thing.
Additional resources could be generated by reducing corruption and eliminating overpriced public procurements, which he said could yield HUF1 trillion in savings each year and that setting target dates for the euro could cut risk premiums.
Additional savings are expected from reducing unnecessary expenditures, including spending on propaganda, excessive funding for public media, and support for quasi-civil organisations.
He also highlighted the high cost of Hungary’s debt financing, noting that interest payments approach 5% of GDP, significantly above regional levels, leaving room for savings through more credible economic policy.
Strengthening policy credibility and setting a clear path towards euro adoption could lower risk premiums and borrowing costs, he said.
The government aims to meet the criteria for adopting the euro by 2030, which he said would support lower inflation, faster growth and improved investor confidence. A revised budget and a medium-term economic programme outlining the path to euro adoption are expected to be prepared in the coming months, he added.
In his first international press briefing after the election, Magyar also spoke about the government’s plans to adopt the euro, comments that helped drive the forint to a four-year high. The EUR/HUF pair moved from 376 to 363 in the last two days.
In an interview with Portfolio.hu, former central bank governor Akos Peter Bod, said the new government will inherit a significant economic legacy, uncertain public finances, and a challenging external environment.
The election outcome quickly calmed markets, with the forint strengthening due to reduced political uncertainty and the clear two-thirds parliamentary mandate. Restoring confidence could in itself support economic growth, as many companies had delayed investment decisions due to political uncertainty. The coming weeks will be crucial as early decisions are required on the budget, energy policy, pricing and EU relations during the government transition period.
In its latest forecast released on April 14, the IMF lowered its 2026 global GDP outlook from 3.3% in January to 3.1%, below its long-term average. For Hungary, it expects growth to pick up from 0.4% 2025 to 1.7%, and by 2% in 2027. Inflation is expected to slow, falling from 4.4% last year to 3.8% in 2026 and 3.5% in 2027. The IMF’s previous autumn forecast had projected 2.1% growth for Hungary.
Hungary vote driven by domestic anger but opens door to EU reset, analysts say
By Clare Nuttall in Glasgow April 14, 2026
Tisza's April 12 landslide election victory in Hungary reflects deep domestic frustration rather than foreign policy concerns, but could pave the way for a reset in relations with the European Union, analysts told a European Council on Foreign Relations (ECFR) webinar on April 13.
The result was a dramatic shift in Hungarian politics, with opposition leader Péter Magyar securing more than 3mn votes, ending Prime Minister Viktor Orban’s long era in power.
“The election showed overwhelmingly that Hungarian society wanted change,” said Zsuzsanna Végh, programme officer at the German Marshall Fund.
“The result is incredibly impressive from a party that has just been around for less than two years. We have never seen such a high turnout in Hungary … it is a massive landslide victory that went well beyond the capital.” She highlighted the scale of mobilisation, noting that “nearly 6mn voted, we have never seen a party getting this much support.”
Végh said voters were driven primarily by domestic grievances. “There was frustration because of the erosion of democracy, but it was largely economic issues,” she said. Cost-of-living pressures and dissatisfaction with governance dominated voter concerns.
Domestic focus, European implications
That assessment was echoed by Paweł Zerka, senior policy fellow at the ECFR, who said voters were motivated mainly by internal issues rather than foreign policy.
“Few people voted because of foreign policy or European issues,” Zerka said. Among Magyar’s supporters, he noted that one third cited corruption and governance; others prioritised the cost of living and inflation, or decaying public services.”
However, he argued that these concerns overlap with Hungary’s relationship with Europe. Voters may have supported change in order for Hungary “to become — or re-become — a normal European country, with not too much corruption, that benefits from EU funds to support the growth of the national economy.”
The scale of the victory gives the incoming government a strong mandate to repair ties with Brussels, analysts said, although questions remain.
According to Végh, early priorities are likely to include reforms aimed at unlocking frozen EU funds. “Immediate reforms necessary for the release of Hungary’s frozen structural funds and recovery funds… will also necessitate a reset with the EU,” she said.
Piotr Buras, head of ECFR Warsaw and senior policy fellow said the result signals a broader shift in Hungary’s European orientation, pointing to Magyar’s mandate for reorientation of Hungary’s foreign policy, though he cautioned against excessive optimism.
“I would warn against too high expectations,” Buras said, drawing parallels with Donald Tusk’s victory against the rightwing Law and Justice (PiS) party in Poland where, he said, after the initial euphoria after the election, “some of the expectations have been disappointed because of domestic constraints, the expectations of Polish society.”
Ukraine and Russia policy
One key test will be Hungary’s stance on Ukraine. Buras said a minimum expectation from the EU would be that Budapest aligns with core European positions. “Whether Budapest subscribes to the European consensus… I think this is the minimum,” he said.
But deeper support may prove more complicated. Zerka noted divisions among voters; while Magyar’s supporters are generally more sympathetic to Ukraine than Fidesz’, they are split on issues such as financial aid and EU membership. “The government won’t have national numbers to be too pro-Ukrainian,” she said.
On Russia, analysts suggested there is more room for change. Végh argued that previous policies were influenced by external factors rather than domestic demand. “Not the promotion of Hungarian interests, but the protection of Russian interests,” she said. A series of recent scandals exposing apparent links between Moscow and top-level Fidesz officials has sparked a backlash against Orban’s pro-Russian stance, which is likely to give the new leadership space to shift position.
Despite expectations of a reset, analysts stressed that change is likely to be gradual and selective.
Végh said reforms would initially focus on core democratic institutions. “Rule of law, anti corruption, judiciary reforms will be a priority, the institutional core of democracy,” she said, while noting uncertainty over broader issues such as pluralism and minority rights.
Buras also pointed to Hungary’s continued dependence on Russian energy. Plans to end reliance on Russian oil and gas by 2035 make Hungary an outlier in the EU.
The Hungarian election could also reshape dynamics within the EU, particularly within the centre-right European People’s Party (EPP). Buras suggested Magyar’s victory might strengthen more conservative voices in European debates. For example Hungary’s new leadership, alongside figures such as Tusk, could play a greater role in shaping EU policies on issues like migration and climate.
However, initially, the immediate focus will be on domestic reforms and rebuilding trust with European partners.
