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

By bne IntelliNews March 31, 2014

Standard & Poor’s has affirmed Hungary’s BB/B long- and short-term sovereign credit ratings and revised the outlook to stable from negative, the ratings agency said in a statement. The revision of the outlook reflects S&P’s view that the risks to Hungary's creditworthiness are balanced as well as expectations for steadying economic performance.

Hungary's ratings are supported by the country's comparatively advanced economy, highly-skilled labour force, and relatively well-diversified economic and export structures. In addition, the government's success in maintaining general government borrowing needs within EU limits also supports the rating. On the other hand, the ratings remain constrained by declining but still-high stocks of external debt, as well as substantial general government liabilities.

The agency revised upwards its projection for Hungary’s economic growth to 1.8% on average between 2014 and 2016, from 1.3% projected in October 2013. Under its forecast, S&P assumes recovery in private-sector demand and increase in participation on the labour market.

After successful fiscal consolidation in 2013, the government is expected to meet its objective of keeping fiscal deficit, calculated under accruals-based European (ESA 95) methodology, below 3% of GDP in 2014 as well. The net general government debt levels should remain close to 74% of GDP in 2014-2017.

The agency said that it would consider upgrading the country's ratings in case of a sustained reduction in external debt net of liquid assets, even as economic growth strengthens.

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