S&P Reaffirms Ratings in Hungary’s Economic Resilience and Growth Potential

Standard and Poor’s has confirmed that it continues to recommend Hungary for investment, with the three major rating agencies all showing a high level of confidence in the country. This is based on the stability and crisis resilience of the economy, writes Magyar Nemzet. The Hungarian economy is growing above the EU average, outperforming the Belgian, French, Italian, Dutch, Romanian, Latvian, and German economies, among others, the Ministry for National Economy emphasized.

S&P Global Ratings affirmed its BBB minus/A-3 investment-grade rating on Hungarian government debt obligations in foreign and local currency with long and short maturities. The international rating agency has maintained its stable outlook while affirming the rating. Hungary’s rating is also maintained in the investment grade category by the other two global credit rating agencies, Fitch Ratings and Moody’s, but at one notch above S&P’s rating.

The ministry pointed out that although we are going through a difficult period, there are an increasing number of positive signs that the Hungarian economy is turning the corner. In August, retail sales rose by more than four percent on an annual basis, and this dynamic is already higher than the 1.5 percent GDP growth expected for this year.

In other words, goods consumption is clearly pulling up overall economic output.

At the same time, tourism is booming, with the number of overnight stays up 5.5 percent in the first eight months of the year compared to the same period last year. This is also a sign that more and more people and families are able to go away for a holiday, even for a weekend. Overall, this clearly points to an increase in consumption and a recovery in the internal economy.

According to the Ministry for National Economy, three main factors are contributing to the recovery of the domestic economy:

1. High employment: around 4.7 million people are employed, meaning that despite the ongoing crises, the government has not only protected jobs, but more and more people are working, with near full employment.
2. Dynamically rising real wages: wages are growing at a rate of 14 percent, so that the average wage is now HUF 634,000 (EUR 1,566.8). This means that workers now earn HUF 77,000 (EUR 190) more than a year ago. Real wages have been rising steadily for a year now, with August salaries 9.4 percent higher than last year.
3. Inflation brought down to low levels: inflation has been brought down and kept low by the government – in September inflation was three percent.

The ministry stressed that “the government is not satisfied with this” and that its goal is for the Hungarian economy to achieve economic growth of three to six percent. The basis for all this is economic neutrality.

In order to pull the economy into this growth band, the government has drawn up a new economic policy action plan consisting of 21 measures.

It aims to further increase the purchasing power of wages, ensure affordable housing, and double the size of domestic SMEs through the Sándor Demján program.

The action plan will enable economic growth of three to six percent next year, which could jump above three percent from the first quarter. However, it is also possible that there will be big surprises, as the 21 measures will allocate significant amounts of money into the Hungarian economy.

At the same time, the action plan not only supports growth, but also strengthens its inclusiveness by bringing measures to a wide section of society to improve the economy, with a focus on families, rural areas, and small and medium-sized enterprises.

Via Magyar Nemzet; Featured image via Facebook/Mercedes-Benz Gyár Kecskemét