Moody’s leaves Hungary’s debt in ‘junk’ range

Ratings

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Moody’s Investors Service announced late yesterday that it would not upgrade Hungary’s sovereign debt rating from “junk” to investment grade. The decision was a disappointment but not a complete surprise, especially in the background of the recent Brexit vote, analysts told MTI today.

The Hungarian Ministry of the Economy reportedly said that the uncertainty cast on Hungary and the entire European Union by the June 23 Brexit vote was what caused Moody’s to put off the much anticipated upgrade. Analysts interviewed by Hungarian news agency MTI agreed, and said they had hopes that, if Hungary can maintain a GDP growth level of around 2% this year, Moody’s would probably upgrade Hungary’s debt rating in their next assessment of Hungarian debt, scheduled for November 4. 

Fitch Ratings on May 20 became the first major agency to raise Hungary’s debt rating out of “junk territory” after a series of downgrades that began five years ago. Fitch improved Hungary’s sovereign debt rating to “BBB-” from “BB+”, moving it back to investment grade, and said the outlook for the rating is "stable".

One ratings upgrade is helpful, but the government and analysts have said that two upgrades are needed to really reduce the cost of state borrowing. Analysts said it is expected that Standard and Poor’s will leave Hungary’s rating at “BB+”, just under investment grade, with a “stable” outlook this year.

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