S&P says it will not upgrade Hungary to investment risk this year

HUNGARY - In Brief 12 Jun 2016 by Istvan Racz

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S&P's Moritz Kraemer said to Reuters in recent days the agency is unlikely to raise Hungary to investment risk from its current BB+/Stable sovereign LT FX rating on September 18, which will be its next revision date for the country and also the last one this year. The main factors behind this are the government's unpredictable economic policy, the country's weakening institutional framework and its high dependence on EU transfers, access to which is subject to serious risks currently. On this latter point, Mr. Kraemer noted that the conflict between Hungary and the EU on migration policy will raise the question for big European donor countries if Hungary should be provided with so much of development transfers as it has been so far.In our view, this is clear talk, but it is pretty much in line with expectation. Only very few analysts and investors have been expecting an upgrade from S&P any time soon. However, this leaves the question open if Hungary can get an upgrade from Moody's on its next revision date of July 8, from the current level of Ba1/Positive. Moody's has been historically much more positive on Hungarian prospects than S&P, and particularly after a similar measure from Fitch Ratings last month, there seems to be at least an even chance that Moody's will also upgrade Hungary in early July.