The international credit rating agency Standard and Poors Global Ratings has changed Hungary’s debt rating from stable to negative, but still recommends the country for investment. S&P Global Ratings believes the rating adjustment was justified by several external risks – the potential risk from the volume of incoming natural gas or a possible reduction in EU payments. There is a possibility that the prospects for the growth of the Hungarian economy and the integration caused by the coronavirus pandemic will be overburdened.
They highlight: There is at least a one-third chance of a Hungarian sovereign rating downgrade in the next two years, should the country’s economic and budget situation deteriorate well beyond the base forecasts of the S&P global ratings.
The 24 h He writes, according to the analysis, that Hungary’s tax rating could deteriorate if EU payments are significantly delayed or significantly reduced, or if Hungary’s energy supply is significantly reduced. For this reason, the evaluator believes that the government may deviate from the current budget consolidation strategy.
There is a way back
The country can improve its rating to stable if external pressures are kept under control and economic growth is allowed to recover and budget outcomes improve in the credit rating agency’s forecast period to 2025.
However, depending on their alternative scenario, the value of Hungarian GDP could fall by 2023 if natural gas imports stop unexpectedly and/or EU funding decreases. According to the credit rating agency, if the energy supply risks do not materialize, the growth rate of the Hungarian economy may return to levels close to 3 percent after 2023.
At the same time, they believe that Hungarian consolidation efforts will prove sufficient to moderately reduce net public debt over the outlook horizon.
(Cover Image: Editing/Index by Jorunde Novak)
