The Hungarian economy seems to be stabilizing, the government has shown a commitment to maintain the budget deficit below 3% of GDP and there is improved flexibility towards external shocks, according to Moody’s.
Moody’s analysts said they expect the country’s real GDP growth to be around 3% in 2014 before slowing down to 2.4% in 2015. For the following years, the agency expects growth to be fixed around 2.2%, which is still low as compared to the peers in the region.
The agency expects overall debt-to-GDP ratio to remain around 77% of GDP for both 2014 and 2015. Moody’s analysts said the debt ratio will probably stay vulnerable to exchange fluctuations, but they expect gradual diminishing of the debt ratio’s exposure to adverse foreign-currency movements as a result of the government’s efforts of redirecting borrowing to the domestic market as part of the earlier announced self-financing plan.
According to Moody’s, the external debt as a proportion of GDP fell, chiefly due to the de-leveraging of corporate, banking and household sector. In line with the estimates of the Moody’s, the external debt ratio of GDP would stand at 128% by the end of 2014, which would be less by 58 percentage points as compared to the peak in 2009.
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