Thanks to Hungary’s balanced and stable growth in recent years, Standard and Poor’s raised Hungary’s credit rating one notch higher, Minister of Finance Mihály Varga said, commenting on the latest announcement by the agency.
The agency acknowledges that Hungary’s vulnerability to external risks has diminished and the government debt-to-GDP ratio has also been declining as a result of prior Government measures, the Minister noted.
It was high time to receive the upgrade, he added, as markets had long priced in the substantial improvement in economic fundamentals. S&P’s has thus lifted the country’s rating from the lowest investment-grade category (BBB-) one notch higher, to BBB. The Minister said, however, that the country would actually deserve an even higher rating.
The fact that Hungary’s expansion stemmed from the country’s economic capacities instead of borrowed money as it did in previous decades must also have contributed to the decision. On the other hand, the forint-based debt financing model has also helped further reduce external debt.
Although the agency’s view is generally favourable, they also mention points of caution. S&P’s, for example, sees the rate of growth more subdued than the Government or other international organizations do, as a result of the country’s demographic trends and certain factors hampering competitiveness. “The Government had already recognized these challenges and implemented a number of measures to tackle them, and we are also working on an economic protection scheme aiming to maintain the current high growth rate in coming years”, Mihály Varga said.
“Last year’s GDP growth rate of 4.8 percent and the outlook of the Hungarian economy make us optimistic with regard to the next rating review and a positive decision may make Hungary even more attractive for foreign investors”, Mihály Varga concluded.
(Ministry of Finance)
