S&P’s announcement on Friday evening is the first in a series of credit rating reviews this year.
In a decision issued by S&P Global Ratings on April 26, 2024
confirmed Hungary’s long-term and short-term sovereign credit rating of “BBB-/A-3” issued in foreign and local currency. The outlook is stable
– read the statement.
Preliminary analysts’ expectations were also that S&P would not touch on the classification of Hungarian debt this time.
That is why he did not touch anything in relation to S&P Hungary
According to the analysts of the credit rating agency, high interest costs, slow VAT revenue growth and extra-budgetary activities will put pressure on Hungary’s budget situation in 2024.
At the same time, S&P experts are optimistic about the prospects of Hungarian fiscal policy in their base scenarioas they wrote that starting in 2025, they forecast consolidation efforts – aided by economic recovery, lower interest costs and energy bills – the budget deficit will be kept at or below 4% of GDP, which allows the government to roughly stabilize the public debt in the medium term.
In their justification, they also point out that inflation in Hungary has decreased significantly in recent months, and the current account showed a surplus in 2023, which enabled the Magyar Nemzeti Bank (MNB) to continue cutting interest rates and normalize monetary policy.
Overall, with the above reasons, the credit rating agency confirmed that it did not touch anything regarding Hungary.
The stable outlook reflects the credit rating agency’s expectation that “Hungary’s economic recovery, continuous disinflation and falling interest rates will support the government’s budget consolidation efforts in the medium term, enabling the stabilization of the public debt burden as a proportion of GDP”.
Risks and side effects
As usual, Standard and Poor’s Global Ratings divides the positive and negative scenarios, that is, when a downgrade or upgrade may occur.
The credit rating you can cut back the debtor classification, if Hungary’s budgetary performance turns out to be much weaker than currently expected, which would be a consequence of inadequate political efforts, a weaker economic recovery or external pressure – for example due to a significant reduction of EU funds or energy supply shocks.
THE classification can then be improvedif Hungary’s budgetary situation were to improve significantly, and the external vulnerability would decrease in parallel – they wrote.
S&P forecast in numbers
From the detailed table of the credit rating agency, you can read what to expect for the main Hungarian macroeconomic indicators in the period up to 2027. According to them, GDP growth could be 2.2% this year (the government forecast is about 2.5%), while next year it could be 3.1%, then 2.9%, and 2.5% in 2027.
S&P last acted in January 2023, and has been closely monitoring Hungarian affairs ever since
One year ago in January, Standard and Poor’s decided to downgrade Hungary’s debt rating. At that time, the credit rating agency downgraded Hungary from BBB to BBB minus, so the rating reached the limit of recommended for investment and Bovli. We are one higher than the other two credit rating agencies, Fitch and Moody’s, that is, we are two grades above the limit of the category recommended for investment.
After the downgrade in January of last year, S&P issued a statement on Hungary’s debt rating twice in 2023, confirming the rating and its stable outlook in both July and December.
In recent months, however, S&P has actively followed the developments of the Hungarian economy and economic policy, and has not remained silent on the most important matters. Most recently, analysts warned that the Hungarian public debt could rise this year.
Cover image credit: Scott Eells/Bloomberg via Getty Images
