Moody’s decision to postpone a review of Hungary’s sovereign rating scheduled for last Friday may have been a disappointment, but the ratings agency could still put the country back into investment grade at its next review in November, analysts said. Moody’s kept Hungary’s sovereign rating at “Ba1”, one notch below investment grade. The outlook for the rating is “positive”. The next scheduled review of the rating is November 4.
Erste Bank chief analyst Gergely Ürmössy said Moody’s could upgrade Hungary in November. However, if the slowdown in economic growth seen in the first quarter continues, and if the UK’s exit from the EU worsens the situation, Hungary may still have to wait a while for an upgrade, he added. The baseline scenario shows GDP growth stabilising in the coming quarters and reaching 2% for the full year, while the impact of Brexit remains moderate, he said.
ING Bank chief analyst Péter Virovácz said Moody’s decision to postpone the review was not so surprising considering the risks to the European as well as the Hungarian economy, firstly posed by Brexit. If the domestic economy does not experience any negative shocks and the situation is resolved, Moody’s will most probably upgrade Hungary, he added.
CIB Bank senior analyst Mariann Trippon noted that, in practice, Moody’s usually waits a year between the time it changes the outlook for a sovereign rating and an upgrade. Moody’s changed the outlook on Hungary’s sovereign rating to “positive” from “stable” last November, she added.
Péter Duronelly, a portfolio manager for Aegon Hungary, said Hungary’s external debt is still high in international comparison, but the country’s vulnerability indicators have improved more than any of its emerging market peers in the past 5-6 years. The pricing of Hungary’s debt does not reflect its low sovereign rating, he added.