In the regular annual concluding statement of Article IV consultation, the International Monetary Fund reports that Hungary’s financial vulnerability has declined substantially. The analysts of Morgan Stanley have come to the same conclusion: according to a study published yesterday, since 2008 Hungary has improved the most in terms of the bank’s Vulnerability Scoring Indicator.

The IMF delegation held talks in Budapest on 3-15 February 2016, to conduct the usual annual revision in line with IMF’s Article IV procedure.

In the latest report, the IMF acknowledges the achievements of Government measures in recent years with regard to crisis management. The institution applauds robust growth and the positive change in the government budget deficit and general government debt-to-GDP ratios. Among positive outcomes the report highlights the change in state debt composition, low inflation, improved efficiency of tax collection and improved economic transparency.

The IMF also states that thanks to the economic policy decisions of recent years, the country’s vulnerability and external exposure have declined significantly. Steadily improving economic indicators, which are noteworthy also from an international perspective, have not been the consequence of one-off factors, but of favourable economic and fiscal processes.

In the opinion of the IMF, in order to maintain existing positive trends, along with ongoing successful economic policy measures it must be ascertained that the private sector becomes the main growth engine of the economy. This requires an enterprise-friendly business environment, improving competitiveness and a well-functioning, flexible labour market. These statements are mainly in line with Government goals: the top priorities of Hungary’s economic policy in the near future include the further increase of employment, prudent fiscal policy, pro-growth measures and efforts to mitigate repercussions of upcoming negative risks.

In their study, the analysts of Morgan Stanley emphasised Hungary’s significantly lower vulnerability. As they noted, Hungary’s financial position has been improving thanks to the phasing-out of forex loans, low budget deficit and declining state debt levels. The bank’s Vulnerability Scoring Indicator, based on an in-house assessment model, showed the largest improvement with regard to Hungary since 2008, among emerging countries (CEEMEA). Among the variables making up this indicator were factors such as external position, financial and growth performance. Several analyses on Hungarian economic performance as well as international expert opinion justify the expectation of a favourable revision of Hungary’s debt rating this year.

The concluding statement of Article IV consultation on Hungary is avaialable through the below link:

http://www.imf.org/external/np/ms/2016/021616.htm

(Ministry for National Economy)