BUDAPEST: Hungary regained its investment grade at S&P Global Ratings after almost five years as economic growth rebounded and the government’s budget discipline bolstered public finances. The forint jumped to the highest against the euro in more than six months.
S&P lifted Hungary’s sovereign credit to BBB-, the lowest investment grade, from BB+, according to a statement on Friday. The outlook is stable. Fitch Ratings returned Hungary’s investment grade in May, while Moody’s Investors Service assigns the sovereign its highest junk grade with a positive outlook.
“The upgrade reflects stronger economic performance” as well as “the marked improvement in Hungary’s external financial profile” and the “immunization of the sovereign debt profile from foreign-currency volatility,” S&P primary credit analyst Aarti Sakhuja in Madrid said in the statement.
Hungary, which needed an an International Monetary Fund-led bailout in 2008 to avoid default, has turned the corner in public finances by keeping the budget deficit below the European Union limit of 3 percent of gross domestic product. Prime Minister Viktor Orban’s government has also moved aggressively to cut the economy’s vulnerability to exchange-rate swings by converting household Swiss franc-based mortgages to forint last year and by mostly relying on local debt sales to finance the deficit.
The forint strengthened as much as 0.7 percent against the euro to 307.71 after the upgrade. It traded at 308.14 per euro at 5:45 p.m. in Budapest. The yield on the 10-year government bond dropped 7 basis points to 2.95 percent. The central bank has cut the benchmark interest rate to a record low 0.9 percent to weaken the forint and has pledged to use unconventional policy from September to continue easing monetary conditions.
