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The Hungarian Economy Is Soaring: Moody’s Developed Hungary

Moody’s Investors Service, an international credit rating agency, upgraded Hungary on Friday, improving Hungary’s sovereign debt rating by one notch from “Baa3” to “Baa2”.

Meanwhile, Moody’s changed the outlook for Hungary’s sovereign rating from positive to stable since September last year.

In justifying the decision, the company emphasized that among the main factors for the upgrade is that Growth rebounded strongly in the first half of this year, which also boosted the resilience of the Hungarian economy.

All this was also helped by effective fiscal and monetary policy.

The credit rating agency said it considers the medium-term outlook to be strong, mainly due to strong investment momentum.

The company expects the potential growth of Hungary’s GDP to be around 3-4 percent annually over the next five years.

According to Moody’s, it is Strongly slowing growth and a strong medium-term outlook also lead to fiscal consolidation and a reduction in the government debt burden, which supports Hungary’s strong fiscal position.

In addition to improving the sovereign debt rating, the credit rating agency raised the upper limit of the ratings that can be assigned to forint and foreign currency debt to trade debtors from “A2” to “A1”.

According to Moody’s analysis, the four-point difference between the country’s cap on the Hungarian forint debt rating and the rating on sovereign debt is moderate government presence within the Hungarian economy, strong predictability of government actions, reliability of key institutions, and moderate and strong political risk. external weakness.

Moody’s confirms that the rating ceiling for foreign currency debt is the same as the upper limit for the rating of forint liabilities.

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Hungary’s fiscal and macroeconomic policies are regularly evaluated by the European Commission, and Moody’s believes that strong trade and investment relations with the EU reduce the risks of transfer restrictions and transferability, according to the upgrade rating.

Moody’s notes that a Due to the coronavirus pandemic, Hungary’s GDP fell by 5 percent last year, less than the European Union as a whole, whose economic performance declined by an average of 5.9 percent in 2020.

According to Moody’s, the medium-term outlook for the Hungarian economy in the forecast period to 2025 is supported by high investment rates, which on the one hand reflect the fact that Hungary is attractive to foreign investors, and the Hungarian government is pursuing a growth-friendly economic policy, including low corporate taxes and a steady reduction in employers’ social security contributions.

Last year, the investment rate in the Hungarian economy was 27.6 percent of GDP, higher than the European Union average of 22 percent, the credit rating agency confirms in its analysis.

Moody’s also highlights this In the past year, no major investment programs in Hungary, including automobile capacity expansion investments and founding programs, have been cancelled.

The company announced that it expects a net positive inflow of foreign direct investment into the Hungarian economy, equal to 0.3% of GDP, likely between 2021 and 2025.

The credit rating agency said, as expected Hungary will be among the few sovereign debtors in the “Baa” rating category that will be able to reduce the government debt-to-GDP ratio in 2020-2023.

Moody’s predicts that the Hungarian government’s debt ratio will fall by about 4 percentage points to 76.7 percent of GDP, and the gap between the Hungarian debt ratio and the stable average debt ratio will largely narrow for other “Baa2” sovereign debtors.

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At the same time, based on a strong income base, Hungary’s debt ratio of 184.9 percent is favorable compared to the average of other sovereign debtors rated “Baa2”, which is 285.3 percent, Moody’s assures investors in its analysis.

After the upgrade announced by Moody’s on Friday, for the first time in several years, the three leading global credit rating agencies have scored Hungary with the same sovereign debt rating and rating outlook.

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