Hungary’s debt rating was confirmed by Fitch Ratings
Fitch Ratings downgraded Hungary’s public debt rating from stable to negative, therefore leaving Hungary in the investment-recommended category. – was revealed in a statement issued by the London-based credit rating agency after the stock market closed on Friday evening.
as we wrote before, it was in the air, that Fitch is following Standard & Poor’s in its current decision, confirmed the rating of our country in August last year, but lowered the outlook from stable to negative. In their latest review, published on July 22, the Londoners drew attention to the risks surrounding new sources and the extremely high current account deficit, and they saw the high public debt to GDP ratio as a weak point, since the median value of the public debt of BBB-rated countries is only 55 percent.
Although the current account deficit has improved and the national debt as a percentage of GDP is also decreasing, a final agreement with the European Union has not been reached, so the stable outlook may deteriorate to negative
– Zoltán Varga, senior analyst at Equilor Befektetési Zrt., told our newspaper two weeks ago about Fitch’s expected decision.
The Londoners highlight in their decision, the ongoing uncertainty regarding the EU funds: therefore, Fitch sees that it is most likely to be delayed due to the new funds, despite the adoption of Hungary’s Recovery and Resilience Plan, which approved the 5.8 . premature loss of EUR, the condition of the first disbursement is that Hungary fulfills 27 super-milestones.
According to the company’s forecast, inflationary pressure in the economy will increase, as consumer price increases will remain high. We expect HICP inflation to peak around 25 percent in the first quarter of 2023 and remain above 20 percent in the first half of the year. The economy shrank by 0.4 in the third quarter of 2022, and this weak growth is expected in the fourth quarter as well. They see that in 2023, falling real wages due to higher inflation and low consumer sentiment will hold back household consumption, and investment growth will continue to slow down.
According to growth, it will slow down to 0.4 percent in 2023 from 4.7 percent in 2022.
In the end, it is not the evaluation of the credit rating agencies, but the investor’s behavior – given or influenced or not by the credit rating – that is decisive in relation to the Hungarian public debt. And the investors already cast their votes at the beginning of the year, when ÁKK was able to issue foreign currency bonds worth 4.25 billion dollars in the face of almost three-fold excess demand – Dániel Molnár, analyst of the Makronóm Institute, wrote in his quick assessment, according to which the declining long-term yields of recent years show that the sustainability of the Hungarian public debt among investors was not questioned even during the energy crisis.
Finance Minister Mihály Varga also reacted to the decision. According to the head of the ministry, the current outlook change shows that the uncertainties caused by the political debates created by the European Commission, the war and the sanctioned energy crisis are also reflected in the credit rating evaluations, especially in the countries of the region.
Fitch Ratings also downgraded the outlook for the Czech Republic and Slovakia from stable to negative, largely due to regional energy market uncertainties and access to alternative gas sources.
The next verdict will follow in a week, on January 27, when Standard & Poor’s evaluates our country’s rating, so according to Equilor’s analyst, it promises to be uneventful, the institute is expected to wait due to the tug of war surrounding the previous sources. Thus, the downgrading can only materially arise at the next review due on July 7, which would keep our country in the category recommended for investment.