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Hungary’s credit rating outlook upgraded

November 14th, 2015

As two out of the ‘big four’ upgrade Hungary’s credit rating outlook to positive, commentators ponder the prospects of a future upgrade of Hungarian sovereign debt to investment grade.

Last week, both Fitch Ratings and Moody’s upgraded Hungary’s one notch below investment grade sovereign credit rating outlook to positive from stable. Moody’s has also raised the debt ratings of six Hungarian banks.

The upgrade of Hungary’s credit outlook is an acknowledgment of the government’s success in stabilizing the economy and balancing the budget, Csaba Szajlai comments in Magyar Hírlap. The conservative columnist suspects that Hungary’s credit rating will soon be improved to investment grade as the Hungarian budget and economy are becoming less vulnerable. Szajlai points out that the Hungarian government’s achievements in balancing the budget and decreasing debt while also maintaining fast economic growth has already been acknowledged by the EBRD and the OECD, but the positive message of credit rating companies is also very important for investors. Thus the upgrades will help Hungarian efforts to refinance public debt and sell T-bonds at lower interest rates, which will further strengthen the stability of the budget, Szajlai writes.

In Népszava, Miklós Bonta suspects that the upgrades may slow down capital outflows from Hungary. The left-wing columnist, however, suggests that the improvements may not have a big impact as the country’s credit rating is still a notch below investment category with all major credit rating firms. In an aside, Bonta remarks that the official statistics on Hungary’s public debt may not reflect realities, as both the National Bank and major public companies purchase T-bonds to reduce the level of external public debt. Bonta contends that despite the improvements in Hungary’s rating outlook, the actual upgrade of Hungarian sovereign debt to investment grade may not follow any time soon.

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