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Moody's Affirms Budapest's 'Baa3' Rating

Ratings

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Moody's Ratings has affirmed the "Baa3" local and foreign currency long-term issuer ratings of the city of Budapest with a stable outlook, according to its latest report.

The rating action reflects Budapest's "significant role in the national economy, declining and manageable debt levels, and adequate budget management amid a challenging operating environment," Moody's said. 

The rating agency noted that Budapest contributed about 37% of Hungary's GDP; its diversified economy consistently outperformed the national average, with a high value-added service-based economic structure and GDP per capita above 200% of the national average. 

Moody's expects Hungary's GDP to grow by 3% in 2024, contributing to increased business tax revenue, Budapest's primary revenue source, and improving the city's operating performance. 

Moody's said Budapest's rating remained constrained by its "challenging liquidity position," which had deteriorated over the past three years due to the impacts of the pandemic, rising solidarity tax, and pressure from the transportation system. 

The stable outlook reflects Budapest's commitment to continue with fiscal consolidation measures and ability to contain debt levels, as well as Hungary's projected positive economic prospects, the agency added.

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