Benefits of any US support hard to gauge for Hungary’s rating, Fitch says

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By Marc Jones and Gergely Szakacs

LONDON/BUDAPEST (Reuters) -The benefit to Hungary’s credit rating of any potential U.S. financial backstop package remains difficult to factor in, Fitch has said, and should be unnecessary given the country’s uninterrupted access to borrowing markets.

Erich Arispe, Head of Emerging Europe Sovereign Ratings at Fitch, also said last week’s increase in Budapest’s deficit forecast had been bigger than expected, but that it hadn’t been large enough to alarm markets so far.

Hungary’s Prime Minister Viktor Orban, who faces a tight election next year, held a meeting with U.S. President Donald Trump earlier this month. 

The 62-year-old secured a year-long exemption from sanctions related to Russian oil and gas purchases, but also said he had shaken hands on a plan that could provide $10-$20 billion of U.S. support if needed. The White House is yet to comment. 

Arispe said such support could be positive, but that more details were needed.

“What you have to think about is the contingent external liquidity support, and that could add to existing (fiscal) buffers when there is more transparent, predictable information,” he said in an interview conducted late on Friday.

But “it’s difficult to factor in something that you don’t know how and when it can be deployed,” he added, including whether the U.S. will attach “policy requirements” to it.    

For the time being, it is unlikely to be anything more than a backstop, Arispe added.

“If we’re thinking about the current situation and current policy settings, and the access to external financing and other (funding) sources Hungary has, it’s not apparent why this will be critical,” he said. 

On last week’s deficit target hike to 5% for both this and next year, he said some slippage had been expected ahead of next year’s election given that Orban has already launched a package of tax cuts and wage hikes in a bid to bolster his support.

“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%.” 

The broader picture for Hungary’s BBB rating and its ‘stable’ outlook, is a 72% debt-to-GDP ratio that is well above the 58% BBB ‘median’, but also a primary deficit – the deficit minus interest payments on past debt – of less than 1% of GDP. 

“It’s not about hitting a specific (debt-to-GDP) level. For us, it’s about the build-up of risk to public finances and the trajectory of the debt level,” Arispe said.

(Reporting by Marc Jones and Gergely Szakacs; Editing by Toby Chopra)