According to preliminary data compiled by the National Bank of Hungary, at the end of 2015 Hungary’s state debt-to-GDP ratio was 75.5 percent, below prior estimates. Final GDP data at current prices will be published by the Hungarian Central Statistical Office (KSH) in March 2016, and thus a precise debt figure will be revealed by the KSH at the beginning of April 2016, in the EDP report for the Eurostat.

The Government of Hungary is dedicated to steadily reducing state debt. Between 2002 and 2010, the ratio rose from 55 percent of GDP to 80.6 percent. Thanks to the economic policy reform implemented after the change of Government in 2010, the gross, consolidated, nominal debt ratio fell to 75.5 percent of GDP by the end of 2015.

In order to reduce debt, the Government has maintained a general government budget deficit of below 3 percent of GDP, and the stability-oriented financial policy has succeeded in lowering debt financing costs. Robust economic growth has also helped achieve the debt objective.

The composition of state debt had also changed in a positive way and this improved external vulnerability. The share of state debt held by foreign investors has fallen below 50 percent, and now two-thirds of outstanding debt is denominated in forints. Retail investors hold 13 percent of state securities.

Hungarian reforms are working: the level of state debt is on a descending path, the economy has been expanding since 2013, and the government budget deficit-to-GDP ratio is expected around 2 percent in 2015. The phasing-out of forex loans has reduced the country’s vulnerability to external shocks.

Hungary has achieved a stable economic position, acknowledged also by international institutions   and market analysts, thus a favourable revision of Hungary’s debt rating this year is highly justified.

(Ministry for National Economy)