Hungary returned to the right economic policy track this year, while it remains the most vulnerable nation in central and Eastern Europe to any adverse euro-zone development, Ed Parker, head of Fitch’s EMEA sovereign ratings team told Dow Jones Newswires on Wednesday. He ruled out, however, a credit upgrade on the short term, citing still high public and external debt.
“Next year’s budget deficit target of below 3% [of gross domestic product] is credible,” Mr Parker said, speaking on the sidelines of a conference in Frankfurt.
The Hungarian government announced some tax increases, halting public procurements in the remainder of the year and step up VAT collection in an effort to offset an around HUF 100 billion hole caused by slowing growth in this year’s budget.
“It’s encouraging that with growth coming in weaker than expected they announce some new measures,” Dow Jones cited Parker as saying.
The government has embarked on some “pretty strong fiscal adjustment this year,” Parker said.
A credit rating upgrade, however, cannot be expected for Hungary in the near term, Parker said.
“The new government is now serious about fiscal consolidation but public and external debt is still high,” Parker added.
Fitch Ratings revised the outlook on Hungary’s Long-term foreign and local currency Issuer Default Ratings to stable from negative early June this year, when it also affirmed the ratings at ‘BBB-‘ and ‘BBB’, respectively. The agency also affirmed Hungary’s Short-term IDR at ‘F3’ and Country Ceiling at ‘A-‘.
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