Report: S&P upgrade of Hungary ‘unlikely’
Standard & Poorʼs ratings agency is likely to leave Hungaryʼs debt in “junk” territory, due to unpredictable economy policies and heavy dependence on EU funding, Reuters reported yesterday.
While S&P usually does not announce their schedule of publishing sovereign debt ratings for countries, it would seem that Hungary is due for an announcement soon.
Fitch Ratings on May 20 became the first ratings agency in about five years to upgrade Hungaryʼs debt one notch, to “investment grade”, but S&Pʼs EMEA sovereign chief Moritz Kraemer told Reuters that his agency would not follow their lead. “Unpredictable policymaking remained a hurdle to S&P following Fitch in lifting Hungary to investment grade,” Kraemer was quoted as saying.
“The key factors holding back the rating now is the difficult predictability of policymaking, weakened institutional framework and maybe also the dependence on the transfers from the EU budget, which is very large,” Kraemer said. “We are in an environment where there might be risks going forward about the continuation of those transfers, particularly in the next multi-year budget.”
Kraemer noted that “big European countries are questioning whether Hungary, which has effectively closed its borders to avoid a flood of Syrian refugees, should get such large amounts of EU funding, given its lack of solidarity on the migrant issue”, Reuters reported.
The ratings from S&P, as well as Fitch and Moodyʼs, determine how much interest Hungary has to pay on its bonds and other loans. Analysts have said that, if another agency follows Fitchʼs lead, Hungary could borrow much more cheaply than it does now.
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