Moody's kept Baa3/Stable rating for Hungary unchanged yesterday

HUNGARY - In Brief 24 Nov 2018 by Istvan Racz

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Moody's failed to improve the government's Baa3/Stable rating on the occasion of this year's last revision date for any major rating agency yesterday. Analysts typically did not expect an upgrade, but a number of them expected an improvement of the rating outlook to positive, just as it happened with S&P's and Fitch Rating's BBB- ratings earlier.Moody's actually gave an assessment this time rather than just skipping the pre-announced revision date. The agency acknowledged a number of positive features and developments, such as robust growth, official commitment to fiscal consolidation, reduced external vulnerabilities and the authorities' awareness of the importance to improve competitiveness. However, they appeared concerned about various short and medium-term challenges, and especially they did not like the government's 'unorthodox' political behaviour, its clashes with the EU and the lack of transparency. Moody's thought that these features might impair business conditions and investor sentiment.We do not believe that Moody's decision is particularly surprising, especially in the light of the key medium-term risk factors such as the labor market and inflation, the prospect of losing much of EU development grants, considerable political rigidities, and the lack of appropriate policies to improve potential growth.