The sure scenario, however, is that these tensions will eventually ease, according to a resolution by Fitch Ratings in London on Thursday night. The international credit rating agency said that the current growth forecast of the Hungarian economy can still be expected to have HUF 7.2 billion available from the recovery fund announced as the next generation EU (NGEU) to mitigate the economic effects of the European Union’s coronavirus epidemic. to the euro.
Fitch says that the amount is equal to 5 percent of Hungary’s gross domestic product (GDP) produced last year. The credit rating agency recalls in its study on Thursday that this commitment was also confirmed in January this year, when it confirmed the “BBB” investment grade rating of Hungary’s foreign currency-denominated long-term government debt with an unchanged outlook.
Fitch Ratings said in an explanation of the decision to confirm the rating, announced in London on January 28, that it expects NGEU disbursements to have a significant stimulating effect on the Hungarian economy from the second half of this year.
The credit rating agency also analyzed that these disbursements depended on the resolution of legal disputes, but said that it expected Hungary to negotiate with the European Commission on disagreements over the rule of law after the April parliamentary elections.
Another resolution, released on Thursday night, Fitch said, said Sunday’s election result could encourage Prime Minister Viktor Orbán to maintain a confrontational stance in discussions with the EU.
According to the credit rating agency, the fact that the European Commission announced the formal launch of the procedure after the elections under the conditionality mechanism, which links the disbursement of EU funds to the rule of law, may further strengthen the position of both parties.
Fitch Ratings said this scenario poses risks to the expectation that separate NGEU funding will be disbursed to Hungary from the second half of this year.
Hungarian economic growth may be in trouble
Due to the effect of the credit rating: the basic assumption remains that the tensions between the Hungarian government and the EU are easing, as there is an example that Hungary has succumbed to disputes with the European Union.
According to the company’s forecast, if the disbursement of NGEU financing is not achieved, it could slow down the growth rate of the Hungarian economy by as much as 1.5 percentage points next year, given that these financing is important and provides low-cost investment resources.
According to Fitchatings’ forecast, the overall growth rate of the Hungarian domestic market will slow down overall, as high inflation has had a significant negative effect on domestic consumption and on the external demand of the war in Ukraine.
The credit rating agency expects 2.8 percent Hungarian GDP growth by 2022 after last year’s 7.1 percent growth rate, and a 3.8 percent growth in the Hungarian economy next year.