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Standard & Poor’s downgrades Hungary but still above investment grade threshold

January 31st, 2023

A government critical conservative economist believes that the government needs to maintain a strict economic policy path and secure access to suspended EU funds to improve Hungary’s economic outlook.

On Friday last week, Standard & Poor’s credit rating company downgraded Hungary’s sovereign rating by one notch to BBB- with ‘stable’ outlook. The Hungarian government commented on the decision by underlining that Hungary is still considered investment grade by all three major credit rating firms. Minister of Economic Development Márton Nagy said that the Hungarian economy will return to fast growth in 2024 and its sovereign debt status will be upgraded again soon.

On Portfolio, Péter Ákos Bod interprets S&P’s decision as an indication that the Hungarian economy is vulnerable. The government-critical conservative economist writes that the government and the National Bank need to maintain a disciplined fiscal and monetary policy path to balance Hungary’s budget and slow down inflation. Hungary’s outlook would significantly improve, he adds, by getting access to the suspended EU funding. Bod predicts that this will not be simple, bearing in mind that the Hungarian economy is slowing down and fears of a recession are on the rise.

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