Fitch Ratings today became the first ratings agency to improve Hungary’s sovereign debt rating from “junk” status to “investment grade” since Hungary was downgraded a number of times five years ago. Analysts asked by Reuters had not predicted the upgrade.
Fitch gave Hungary a BBB- rating, up from BB+ with the justification that “tighter fiscal policy has been consistent with a gradual decline in government debt from a high level”, while also attributing the upgrade to high account surpluses and EU fund inflows. Fitch said that it anticipates Hungaryʼs debt to decline slowly in the medium term.
Analysts had expected the decision to keep Hungary in “junk” territory after the government announced a planned increase in the deficit in early May, Reuters said earlier today.
The last time Fitch released a rating on Hungary’s long-term foreign currency debt, on November 20, the ratings agency said that the desired upgrade from junk status to investment grade requires three elements: Greater political stability and an improved business environment; continued reductions in external indebtedness, supported by current account surpluses; and a reduction in the government debt ratio.
The next major ratings agency to weigh in on Hungary’s sovereign debt will be Moody’s, which has an announcement scheduled for July 8.