According to leading credit agencies, Hungary’s disciplined fiscal policy has paid off

Standard & Poorʼs Global Ratings has affirmed Hungaryʼs "BBB-/A-3" long and short-term foreign and local currency sovereign credit ratings citing the government’s fiscal discipline.

“Hungary’s strong external profile and track record of fiscal restraint support the sovereign ratings,” according to the Standard & Poor’s statement published February 16, underlining one of the main reasons behind reaffirming Hungary’s credit rating. The credit agency revised its outlook from 'stable' to ‘positive’ in August 2017 and Friday’s report reaffirmed that upgrade.

When S&P revised its outlook in August 2017, it predicted Hungary’s real GDP growth for 2017 “will approach 3.5 percent”. In fact, an increase in consumption triggered in part by an increase in real wages, a gradual reduction in the bank levy, substantial recovery in EU fund absorption, employment gains, rising expenditure on housing subsidies, and stronger private sector balance sheets boosted growth to 4.0 percent in 2017.

Only a few years ago, Hungary’s credit rating remained in the junk category, and the country’s return to investment grade in just over four years marks a sharp turnaround (most countries require six years on average to return to investment grade).

Along with greater fiscal discipline, the government has also reduced state debt. Hungary’s CDS premium fell below the 100 point-mark last September, after years of crossing the 300-point mark, a sign of the unstable fundamentals created by the mismanagement of the Socialist-led government in the period leading up to the financial crisis.

In addition to the three majors, the Japan Credit Rating Agency (JCRA) also upgraded Hungary's credit rating (of foreign currency denominated debt from “BBB” to “BBB+”, while forint denominated debt has been increased from “BBB+” to “A”) last year. Fitch was the first credit rating agency to upgrade Hungary to investment grade in May 2016, followed by S&P in September then Moody's in November.