Fitch revises Hungary's outlook to 'stable'

(Reuters) - Credit ratings agency Fitch on Friday revised its outlook on Hungary to "stable" from "negative," citing reduction in macroeconomic imbalances driven by improved coherence between fiscal and monetary policies.

"The National Bank of Hungary (MNB) has maintained a tight monetary policy stance, while the government has taken steps to reduce the primary deficit since 2023," Fitch said in a statement.

Hungary's Economy Minister said in October that the country has overcome its inflation crisis, with price growth slowing toward the central bank's target after being the highest in the EU last year.

Fitch forecasts Hungary's economy to recover gradually, driven by stronger private consumption, investment and exports.

Last month, Finance Minister Mihaly Varga submitted the 2025 budget draft to parliament, dismissing concerns raised by the budget watchdog about insufficient reserves to mitigate risks and potential revenue shortfalls due to weak growth.

The government, led by Prime Minister Viktor Orban, aims to reduce the 2025 shortfall to 3.7% of GDP, down from the 4.5% target for this year.

"The expected decline in interest expenditure will support a further decline in the fiscal deficit to 4.2% in 2025 and 3.7% in 2026," Fitch added.

Ahead of the 2026 parliamentary elections, Orban's government plans to increase tax benefits for families and continues to provide an additional month's worth of pensions, focusing on key demographics.

The government expects a 3.4% economic growth rebound in 2025, a projection the Fiscal Council considers optimistic in light of current forecasts.

The agency also affirmed its rating for Hungary at "BBB."

(Reporting by Anandita Mehrotra in Bengaluru; Editing by Alan Barona)