Implausible but most welcome: Moody's improved its Baa3 outlook from Stable to Positive yesterday

HUNGARY - In Brief 26 Sep 2020 by Istvan Racz

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What is so surprising about this announcement is not so much the fact that Moody's has finally decided to move Hungary upward on its scale, towards the BBB/Stable ratings maintained both by Fitch Ratings and S&P. It is much more the timing of the decision, the fact that Moody's made this step exactly now, at a time of a deep crisis when the situation is quite unstable and forecasts necessarily have limited real predicting power.But Moody's, after almost two years of not reviewing Hungary at all, now says that although Hungary is being hit hard by the Covid crisis, it is doing quite well in comparison, and is likely to bounce back already in 2021. Moody's expects GDP growth at -5.5% this year and +4% in 2021, and it sees the 2020 fiscal deficit at 7.3% of GDP and the end-year government debt ratio at 76% of GDP. The agency expects Hungary to return to its former trend of reducing the debt ratio over the forthcoming years.Moody's main forecast figures appear to be quite close to the government's, but neither of the two seem to us unrealistic. And generally, we do not have any problem with a move to Baa3/Positive in the case of Hungary - on the contrary, we welcome it, of course. We just find the timing slightly odd, especially from the agency which consequently shrugged off the idea of improving Hungary's ratings in recent years.Maybe Moody's has got impressed with Hungary's efforts to contain the fiscal deficit despite the current really hard times, we do not know.