S&P affirms Hungary’s rating at BBB, outlook stable

The US-based ratings agency Standard & Poor’s on Friday affirmed Hungary’s sovereign rating (BBB-) and left the outlook stable as expected. The agency said Hungary's substantial external surpluses and its track record of fiscal restraint support the sovereign ratings.

Standard & Poor’s noted that Hungary's stable outlook reflects assessment of the nation's strong external profile. The Agency is satisfied primarily with Hungary's strong external position represented by sizable current and capital account surpluses. Hungarian state’s self-financing program initiated in 2014--has yielded a reduction in country's foreign currency-denominated debt to about one-quarter of total outstanding debt, S&P noted. 

The rating agency predicts that the general government debt, net of liquid assets, will reduce gradually to about 65 percent of GDP in 2020 from 70.7 percent in 2016. However, analysts at KBC market research think that such a fall in indebtedness is not unrealistic.

The Hungarian forint extends gains against the euro. EUR/HUF was trading at 307.94 at 1015 GMT, down 0.21 percent on the day. The Monetary Policy Committee meeting in Hungary due Tuesday will be next major driver for price action in the pair. The MNB is expected to maintain the policy rate at the historical low of +0.90 percent.

 At its last meeting on Jan-24, the MNB kept the base rate and all the parameters of the rate corridor unchanged, and maintained its rhetoric that it stands ready to loosen monetary conditions further through the use of unconventional policy tools if needed.