Moody’s: Hungary could be upgraded with sustained growth
Moodyʼs would consider upgrading Hungaryʼs government bond rating if there were signs of policy-supported, sustained growth prospects and declining government debt, Hungarian news agency MTI reported today.
In its annual update, "Credit Analysis: Hungary", released in London, Moodyʼs Investors Service said that Hungaryʼs Ba1 rating with stable outlook reflects its diversified and relatively resilient economy and its contained fiscal deficit, weighed against the governmentʼs high debt level and the economyʼs substantial refinancing needs.
"Hungaryʼs economy is responding to government policies which are aimed at stimulating domestic demand," said Alpona Banerji, Vice President, Senior Credit Officer and co-author of the report. "We expect growth over the next three years to average around 2.3%. However, government debt levels - although on a declining trend - are still relatively high and represent the countryʼs main credit challenge," Banerji was quoted as saying.
Government debt is estimated to stand at 75% of GDP in 2015 and forecast to be around 73% in 2016. While that ratio exceeds the levels of most of its similarly rated peers, it is declining and the government is committed to keeping the budget deficit below 3% of GDP, Moodyʼs said in the report.
The Hungarian economy is also exposed to potential shocks directly and indirectly from any further slowdown in the European Union and Russia and the ongoing slowdown in China. However, the emergence of more broad-based and balanced growth driven by domestic demand should offset the impact of these potential external threats. The redenomination of foreign currency mortgages has also reduced Hungaryʼs external vulnerabilities.
The governmentʼs recent intervention in the banking and energy sectors has increased its contingent liabilities. However, a government plan to gradually reduce the countryʼs extraordinary bank tax - introduced in 2010 to support public finances - is expected to improve the investment climate, Moody’s noted.
Downward pressure on the rating could stem from any weakening of policymakersʼ commitment to containing the budget deficit to less than 3% of GDP, or the introduction of measures that would affect the growth outlook, the ratings agency added.
SUPPORT THE BUDAPEST BUSINESS JOURNAL
Producing journalism that is worthy of the name is a costly business. For 27 years, the publishers, editors and reporters of the Budapest Business Journal have striven to bring you business news that works, information that you can trust, that is factual, accurate and presented without fear or favor.
Newspaper organizations across the globe have struggled to find a business model that allows them to continue to excel, without compromising their ability to perform. Most recently, some have experimented with the idea of involving their most important stakeholders, their readers.
We would like to offer that same opportunity to our readers. We would like to invite you to help us deliver the quality business journalism you require. Hit our Support the BBJ button and you can choose the how much and how often you send us your contributions.