Fitch Affirms Hungary Rating At ‘BBB -’ With Stable Outlook
- 21 Nov 2016 8:00 AM
The ratings are constrained by high state debt, a weak banking sector and a track record of unorthodox economic policy that “has contributed to low private investment and affected growth potential”, it added.
Fitch projected Hungary’s economic growth will remain “subdued” relative to its peers, but forecast GDP growth will accelerate from 2.1% in 2016 to 2.6% in 2017 and 2018 as the new EU funding cycle ramps up and domestic demand benefits from improvements on the labour market as well as accommodative monetary and fiscal policies.
Fitch said a continued reduction in external indebtedness, a sustained decline in state debt as a percentage of GDP and stronger GDP growth potential supported by an improved business environment could trigger a positive rating action. A renewed increase in the state debt-to- GDP ratio and deterioration in the economic policy framework could lead to a negative rating action, it added.
Fitch assumes that the foreign parents of Hungarian banks would support their local units if they come under severe financial stress. It expects Hungary’s relations with the EU to “remain on tract despite occasional tensions”. Fitch bumped Hungary back into investment grade in May.
Standard and Poor’s and Moody’s followed suit in September and November, respectively.
Republished with permission of Hungary Matters, MTI’s daily newsletter.
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