Germanyʼs Scope Ratings has announced that is is upgrading Hungaryʼs long-term issuer and senior unsecured local- and foreign-currency ratings to BBB+ from BBB with a stable outlook, according to a press release sent to the Budapest Business Journal.
The short-term issuer rating has been affirmed at S-2 for both local and foreign currency, with a stable outlook.
The agency says that the drivers behind the upgrade are sustained public debt reduction, increasing resilience against external shocks, and strong investment. On the other hand, Scope says that high public debt, competitiveness issues, and uncertainties in the regulatory environment remain constraints.
Expanding on the reasons behind the decision, the press release says that the rating action reflect Hungary’s sustained public debt reduction resulting from high growth and low-interest payments, increasing resilience to external shocks, and strong investment – driven by inflows of foreign direct investment, and projects co-financed with EU funds – creating high value-added jobs and supporting growth potential.
The stable outlook reflects Scope’s assessment that the risks from credit strengths and weaknesses are now broadly balanced. The factors driving the rating upgrade relate to changes to the agencyʼs assessment of "public finance risk" but also changes under the "domestic economic risk" and "external economic risk" methodological dimensions.
The outlook also reflects Scope’s view that the risks at the current ratings are now balanced between increased fiscal and external resilience on the upside and recurrent structural challenges, such as the wide productivity gap and regulatory barriers in the corporate sector, on the downside.