Moody’s downgrades Budapest again

Moody’s Ratings has downgraded the credit rating of Budapest, citing the deteriorating relationship between the Hungarian government and the capital as a key factor behind the decision.

The agency lowered the city’s long-term issuer rating for both domestic and foreign obligations from Ba1 to Ba2, placing Budapest further below investment grade. According to MTI, in Moody’s methodology, the Ba2 rating stands two notches below the lowest investment-grade level, which begins at Baa3. At the same time, the agency also reduced the city’s Baseline Credit Assessment (BCA) from ba1 to ba2. Moody’s assigned a negative outlook to the new rating, signalling that further downgrades remain possible.

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Tensions with government increase financial pressure

According to Moody’s, tensions between the Hungarian government and the capital have intensified the liquidity pressures already affecting Budapest. The downgrade follows another cut issued in December, when the city’s rating was first pushed below investment grade. The rating agency noted that in January the government withdrew funds from the capital after the city failed to make the first instalment of its 2026 “solidarity contribution” payment, a fiscal transfer required from wealthier municipalities.