S&P may increase Hungary’s rating

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S&P analyst Karen Vartapetov has said that the credit rating agency may improve Hungary’s rating in the next twelve months.

Currently Hungary’s sovereign debt rating is BBB- with a positive outlook both at Fitch and S&P, and Baa3 with a stable outlook at Moody’s. Of the three big rating agencies, S&P last upgraded Hungary’s rating in August 2017.

S&P finished its second annual review of Hungary on August 17th and it was somewhat disappointing that it left the country’s rating unchanged at one notch above junk. Those in charge of Hungary’s economic policy and Hungarian economist both believe this rating to be unfair in view of good macroeconomic indicators.

Vartapetov said the major credit rating agencies normally take a longer view and change a country’s rating every two years or so and Hungary is still within that timeframe. She said the longer view is needed to assess the effect of changes such as the lending program of the Hungarian National Bank or the effects the changes in U.S. and eurozone monetary policy had on Hungary.

She also said that while employees may be happy with a double-digit growth in real wages, S&P regards it as a sign of an overheating economy and a threat to the country’s competitiveness. Another uncertainty is the amount of EU subsidies Hungary will receive in the 2021-2027 budgetary cycle.

Fitch Ratings is scheduled to update Hungary’s rating on August 31st and Moody’s in November.


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