S&P upgrades Hungary to ’BBB’; outlook ’stable’
Standard & Poor’s Global Ratings, one of the three big ratings agencies, has upgraded Hungary’s sovereign rating to “BBB”, two notches over the investment grade threshold, with a “stable” outlook, news wire MTI reported.
S&P raised its long- and short-term foreign and local currency sovereign credit ratings on Hungary to “BBB/A-2″ from ’”BBB-/A-3”.
“The upgrade reflects Hungary’s sound growth prospects, supported by high private savings and real wage gains sustaining domestic demand, as well as the ongoing expansion of export capacity in the automotive and services sectors,” S&P said in its justification of the decision.
“While we expect growth to slow toward 2% by 2021, we think Hungary’s small open economy will be able to weather a period of weaker external demand, as well as the expected decline in EU funding,” it added.
“The ratings are supported by Hungary’s resilient export-driven economy, strong external profile, low private-sector debt, and the flexible exchange rate regime. Relatively weak checks and balances between government branches, moderate wealth levels, and high public debt are key constraints on the ratings,” S&P said.
Hungary’s net external debt had fallen to under 10% of GDP in 2018 from 55% in 2010. Strong domestic demand, supported by wage growth, will likely thin current account surpluses to about 1% of GDP.
Hungarian banks “appear to be well capitalized and profitable”, S&P said, adding that it considers banks’ renewed appetite to lend and stronger financial performance as a sign that the monetary and credit transmission mechanism to the real economy is largely restored.
The National Bank of Hungary welcomed the upgrade in a statement posted on its website and noted that S&P was the first of the big three ratings agencies to raise the sovereign rating to two notches over the investment grade threshold.