S&P affirms Hungary’s BB/B ratings, outlook stable

By bne IntelliNews September 22, 2014

Standard & Poor’s has affirmed Hungary’s BB/B long- and short-term sovereign credit ratings with a stable outlook but warned that medium-term prospects remain clouded by the government's policy mix and a shrinking population.

Hungary's ratings are supported by the country's comparatively advanced economy, highly-skilled labour force and relatively well-diversified economic and export structures, the ratings agency said in a statement. In addition, the government's success in maintaining general government borrowing needs within EU limits as well as its commitment to financing itself solely in local currency also supports the rating, S&P said.

On the other hand, the ratings remain constrained by the country's external position and the government's foreign exchange exposure on its own stock of debt. 

S&P revised upwards its projection for Hungary’s economic growth to more than 3% in 2014. The agency expects that the size of the Hungarian economy will return to 2007 levels by end-2015. 

The rating agency expects the government to meet its deficit target of 2.9% of GDP. However, the cabinet is not expected to make significant progress on debt reduction and the level of gross general government debt to GDP would remain close to 80% of GDP, S&P warned.

The agency said that it would consider upgrading the country's ratings if there is evidence that the government’s policy encourages investment and promotes sustainable growth.

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