JP Morgan said on Friday that it recommends upgrading Hungary to overweight from market weight in its EMBIG model portfolio, citing the country's quickly improving fiscal standing.
The recession in Hungary was the deepest in the central and eastern European region as International Monetary Fund and the European Union provisions compelled authorities to run a pro-cyclical fiscal policy, JP Morgan said.
“We estimate that the improvement in Hungary's cyclically adjusted primary budget balance between 2007 and 2009 amounted to 4.5% of GDP, capping this year's headline deficit at below 4% of GDP,” JP Morgan said.
As a result, Hungary is in the unique position of not being required to tighten its fiscal policy as economic growth recovers, suggesting that medium-term growth prospects are particularly favorable, JP Morgan added.
Although Hungary's debt-to-GDP ratio is high by regional standards, the low deficit and positive outlook for growth suggest that the ratio will fall quickly beginning in 2011, JP Morgan said, maintaining that Hungary was well placed to introduce the euro ahead of the Czech Republic and Poland. (MTI-ECONEWS)