Out of junk: another upgrade, from Moody's this time

HUNGARY - In Brief 05 Nov 2016 by Istvan Racz
As the third and last one of the Big Three credit rating agencies, Moody's moved Hungary up to investment grade, specifically to Baa3/Stable from the so far held Ba1/Positive rating, for the country's long term sovereign FX debt. Explaining the move, the agency brought up Hungary's recent good growth performance and favorable growth prospects, its sizable and stable external income surplus, the government's strong commitment to, and results in, reducing its debt ratio, considerable improvements in the profile of government debt, reduced financial vulnerability of the household sector, and improvements in the government's regulatory attitude towards the banking sector.Moody's move was fully in line with market expectation, so the immediate market impact is likely to be very limited. There is only one major pre-announced credit rating revision date left for this year, namely November 18 at Fitch Ratings. However, no move is expected or likely on that occasion, given that Fitch upgraded Hungary to BBB-/Stable only very recently, on May 20, 2016. Our forecast is that Hungary's LT FX rating is likely to stay in the BBB-/Baa3 category for the next two years at least, based on currently available information, of course.

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