Manufacturing will start gradually, with a full ramp-up expected in three to four years.Continue reading
The international credit rating agency Standard & Poor’s Global Ratings affirmed its investment-grade rating of ‘BBB-/A-3’ on Hungarian government debt obligations in foreign and local currency in the short and long term on Friday.
S&P Global Ratings also maintained its stable outlook on the rating along with the rating affirmation announced in London on Friday night. The rating’s stable outlook reflects S&P’s expectation that the recovery of the Hungarian economy, continued disinflation, and declining interest rates will support the government’s fiscal consolidation efforts over the medium term, helping to stabilize the government debt-to-GDP ratio, the agency revealed in a statement.
The affirmation of the investment-grade rating reflects the agency’s assessment that the Hungarian “fiscal slippage” this year is only temporary, and that the public finance situation will start to improve from 2025, without jeopardizing economic stability. The rating agency expects the Hungarian government to announce a credible consolidation program in the second half of 2024, outlining the steps to stabilize the fiscal path.
It projects Hungary’s GDP to expand by 2.2% in real terms this year.
This will be driven mainly by domestic demand, which is expected to pick up steadily in the second half of 2024, in an environment of steeply declining interest rates and increasingly buoyant real wage growth, the rating agency says in its analysis. However, it notes that external demand weakness, especially in Germany, could have a pullback effect on the Hungarian economy’s recovery.
In the medium term, for the period 2025-2027, S&P Global Ratings expects the Hungarian economy to achieve real growth of 2.8 percent on average per year. According to the firm,
significant investments in the Hungarian electric vehicle industry and the related battery manufacturing sector have created the conditions for a pick-up in growth dynamics between 2025-2027.
The rating agency expects the sector to continue to attract significant FDI (foreign direct investment), with leading companies in the electric vehicle sector, including BYD, the world’s largest manufacturer.
EU disbursements also support the agency’s growth forecasts for the Hungarian economy for 2024-2025. In a positive development, the firm notes that the European Union released EUR 10.2 billion in cohesion funding in December, equivalent to 5.3 percent of Hungary’s GDP last year.
S&P’s decision was also welcomed by the Ministry for National Economy, which says that the Hungarian economy is on sound footing, as reflected in S&P’s report, continuing to recommend Hungary for investment with a stable outlook. According to the ministry, the country’s financing situation is stable and secure: the government is committed to reducing the budget deficit and public debt, the twin deficits have been eliminated, and Hungary’s external trade balance is improving steadily, Világgazdaság reported. According to the statement,
the government is working to ensure that Hungary’s development reaches 90 percent of the European Union average by 2030,
and the Ministry for National Economy has developed the government’s new competitiveness strategy to achieve this.”
Via MTI, Világgazdaság; Featured image: Facebook/Audi Hungaria Győr
