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Moody’s: Hungary’s Outlook Stable


Moody’s Investor Service has changed its outlook on the Ba1 government bond rating of Hungary to stable from negative. The agency has concurrently affirmed Hungary’s Ba1 rating. Moody’s said Hungary’s economy was showing signs of stabilisation after seven years of extremely low growth, averaging -0.4% between 2007 and 2013. It said it expects Hungary’s real GDP growth to be around 3% in 2014 before falling slightly to 2.4% in 2015. Hungary’s economy ministry said in response in a statement on Saturday that Moody’s positive outlook change reflected the government’ achievements in keeping public debt under control and in promoting economic growth.

According to Moody’s report the key drivers of the outlook change are:

 1. The improving medium-term economic outlook. After many years of economy-wide deleveraging, Hungary’s growth is beginning to respond to government policy measures resulting in an improvement in investment and consumption trends, which Moody’s believes will persist. As a result, growth should be more broad based, which will help offset headwinds from slowdowns in the EU and in Russia, Hungary’s important trading partners.

 2. The government’s commitment to maintaining the headline government deficit below 3% of GDP, which has helped stabilize the government debt ratio, albeit at the high level of 77% of GDP. Moody’s expects the debt-to-GDP ratio to fall, very gradually, over the medium term on the back of healthier growth and moderate deficits.

 3. Improved resilience to external shocks, as reflected in persistent current account surpluses, high external liquidity and the performance of the currency relative to other emerging markets during times of market turmoil. Hungary’s external debt has fallen over the past four years, as has its vulnerability to external risks as reflected in the reduction in the external vulnerability indicator.

Moody’s also affirmed the Ba1 bond rating for the National Bank of Hungary (NBH) and changed the outlook to stable from negative, as Hungary’s government is legally responsible for the payments on NBH’s bonds. Hungary’s long-term local-currency bond and deposit as well as its foreign-currency bonds ceilings remain unchanged at Baa2.

via and photo: Emmanuel Dunand – AFP (via