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Moody’s Upgrades Hungary's “Ba1" Rating From "Stable" To "Positive"

By Tamás Székely // 2015.11.09.

Moody’s Investors Service raised the outlook on Hungary’s “Ba1” sovereign long term issuer rating, one notch under investment grade, to “positive” from “stable” in a scheduled review on Friday evening. After the publication of Moody’s review, the Hungarian forint firmed to 313.36 to the euro from 314.93 previously on the interbank forex market. However, on Monday the Hungarian currency started to ease again, sinking to 315 to the euro and to around 293 against the US dollar.

According to economic news portal, the key driver for the outlook change is that the downward trend in the Hungarian government debt stock will likely be sustained in the coming years. The Hungarian economy’s external vulnerability has been greatly reduced through the resolution of the foreign-currency debt overhang of both households and the banking sector and  this in turn should have a positive impact on domestic demand. Moody’s also believes that greater policy stability, in particular with regards to the banking sector, should help revive bank lending and support economic growth prospects, noted.

The Hungarian government welcomed rating agency Moody’s raising Hungary’s rating outlook to “positive,” viewing it as the “ante-room” to an upgrade. The Economy Ministry said in a statement that Moody’s outlook upgrade testifies to the success of reform measures implemented by Hungary. It noted Moody’s is second among the three major international rating agencies that has given Hungary a “positive” outlook for an upgrade after Fitch. The ministry said that Hungary will keep on gradually reducing its public debt over the next years and it reaffirmed the government’s commitment to keeping the public finance deficit below 3% of GDP.

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