No change in the sovereign credit rating from Fitch and S&P on August 16

HUNGARY - In Brief 18 Aug 2019 by Istvan Racz

Both Fitch Ratings and S&P had a revision date for their BBB/Stable sovereign credit ratings for Hungary on August 16. However, both agencies refrained from changing the ratings on this occasion. S&P did not even pick up the issue, whereas Fitch confirmed its BBB/Stable, saying that Hungary deserves no upgrade from this level at this moment, despite its recent good performance on growth, fiscal policy and external debt. Fitch concluded that Hungary's gross government debt ratio (70% at end-2018) was still too high compared to the average level of their BBB-rated governments (39%). The agency also added that Hungary's economic policy remains too unpredictable for an early upgrade to take place.The big majority of analysts expected exactly this outcome, given that Hungary was upgraded by both agencies to the current level only a few months ago (in February 2019). We agree with this latter judgement. On the one hand, we feel that Hungary's economic policy has improved quite a lot on predictability in recent times. But on the other hand, answers are missing to the questions of what policies could be usefully adopted to counter the negative impact of the drying-up of EU development grants and the handle the existing structural labor market problem.

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