Moody’s Investors Service, an international credit rating agency, upgraded Hungary on Friday, improving the rating of the Hungarian sovereign debt on a scale from “Baa3” to “Baa2”.
At the same time, Moody’s changed the outlook for the Hungarian sovereign rating from positive to stable since September last year.
In justifying the decision, the company stressed that among the main factors of the update is this growth rebounded sharply in the first half of this year, which also strengthened the resilience of the Hungarian economy.
All this was also favored by effective fiscal and monetary policies.
The credit rating agency said it considered the outlook to be solid in the medium term, mainly due to the strong boost in investment.
The company expects the potential growth of the Hungarian gross domestic product to be around 3-4% per year over the next five years.
According to Moody’s, it is A sharp slowdown in growth and a strong medium-term outlook are conducive to fiscal consolidation and a reduction in the public debt burden, which strengthens the strength of the Hungarian fiscal position.
In addition to improving the sovereign debt rating, the credit rating agency raised the upper limit on the ratings that can be assigned to commercial and foreign currency debt of commercial debtors from “A2” to “A1”.
According to Moody’s analysis, the four-point difference between the country’s ceiling on the rating of the Hungarian forint and the rating of the sovereign debt is a moderate government presence in the Hungarian economy, a strong predictability of government action. , reliability of key institutions and a moderate political risk and robust external vulnerability.
Moody’s points out that the foreign currency debt rating limit is the same as the upper rating limit for forint liabilities.
The European Commission regularly assesses Hungary’s fiscal and macroeconomic policies and the strong trade-investment relationship with the EU, according to Moody’s, minimizes the risk of remittance and convertibility restrictions, according to the update’s analysis.
Moody’s points out that a Due to the coronavirus epidemic, the Hungarian gross domestic product decreased by 5% last year, ie to a lesser extent than the European Union as a whole, whose economic performance fell by an average of 5%. , 9% in 2020.
According to Moody’s, the medium-term outlook for the Hungarian economy over the period to 2025 is supported by high investment rates, which in turn reflect the fact that Hungary is attractive to foreign investors and the Hungarian government pursues a growth-friendly economic policy, including low corporate taxes and a steady reduction in social security contributions for employers.
Last year, the investment rate in the Hungarian economy was 27.6% of GDP, which was higher than the EU average of 22%, the credit rating agency points out in the analysis .
Moody’s also highlights this Last year, large investment programs in Hungary were not canceled, including automotive capacity expansion investments and greenfield programs.
The company announced that it expects that between 2021 and 2025 there will be a positive net inflow of foreign direct investment into the Hungarian economy, corresponding to 0.3 per cent of GDP.
The credit rating agency said: as expected Hungary will be one of the few sovereign debtors in the “Baa” rating category that will manage to reduce its public debt-to-GDP ratio in the period 2020-2023.
Moody’s predicts that the Hungarian public debt ratio will fall by almost 4 percentage points, to 76.7% of GDP, and the difference between the Hungarian debt ratio and the largely stable average debt ratio of other sovereign debtors “Baa2 “will be reduced.
At the same time, based on a solid income base, the Hungarian debt ratio of 184.9% is favorable compared to the median of other sovereign debtors classified as “Baa2”, which is 285.3 %, underlines Moody’s Investors Service in his analysis.
Following the update announced by Moody’s on Friday, for the first time in several years, the three leading credit rating agencies in the global market register Hungary with the same rating and sovereign debt outlook.