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Hungary upgraded to investment grade

November 8th, 2016

A conservative analyst calls the upgrading of Hungary’s sovereign debt belated but welcome, as it will produce positive feedback for the national economy.

Magyar Hírlap’s Csaba Szajlai, a former critic of the ’unorthodox’ economic policy path chosen by the government after 2010 (See e.g. BudaPost, September 26, 2011) defines the consecutive decisions by the three major rating agencies to upgrade Hungary’s debt back to investment grade as ‘a triumph for (the government’s) fiscal and monetary policies’. Hungary was downgraded to ‘junk’ status five years ago, Szajlai recalls, although it had been in deep trouble since 2004. The markets took notice at the time, and the treasury had to pay exorbitant rates on the government bonds. Even in 2009, when Hungary had to be bailed out by the IMF, the rating agencies still did not strip Hungary’s debt of its investment grade status. They did so precisely when improvement was underway. Szajlai doesn’t attribute that to enmity towards the new conservative government. He thinks it is quite customary for the rating agencies to be late in their reactions. This goes for positive ones as well, since Hungary would have deserved to be upgraded a long time ago, as the debt ratio has been steadily decreasing year by year; this year’s deficit may be below 2 per cent and for the last four years growth has been higher than the European average. Never mind, Szajlai concludes, now Hungary is back to investment grade and may attract new institutional investors (mainly overseas pension funds which are barred from buying ‘junk’).