Fitch Ratings raised Hungary’s Long-Term Foreign- and Local-Currency Issuer Default Ratings to ‘BBB’ from ‘BBB-‘ at a scheduled review on Friday.

The outlook for the ratings, two notches over the investment grade threshold, is ‘stable’.

Fitch said a rapid external deleveraging was among the main drivers for the upgrade. It noted that Hungary’s net external debt fell to an estimated 10.2 percent of GDP in 2018 from an average of 34.4 percent in 2013-2017, supported by consistent current account surpluses, stable net FDI inflows, and capital transfers from the European Union.

Finance Minister: Fitch upgrade is more positive feedback

Finance Minister Mihály Varga on Saturday said Fitch Ratings’ upgrade of Hungary can be added to the favourable feedback showing the economy is on the right track.

The latest upgrade comes thanks to the work of Hungarians and businesses as well as the government’s economic policy, Varga said. He noted that the economy had expanded by 4.8 percent last year, three times the European average.

Now nobody can deny that the Hungarian economy is performing ever better and can continue to expand in the coming years.”

Fitch Ratings raised Hungary’s Long-Term Foreign- and Local-Currency Issuer Default Ratings to ‘BBB’ from ‘BBB-‘ at a scheduled review on Friday. The outlook for the ratings, which are two notches over the investment grade threshold, is ‘stable’.

Varga recalled that Prime Minister Viktor Orbán had said in 2011 – after the country’s sovereign rating was bumped down to speculative grade – that downgrades would be followed by upgrades. The economic policy the government has followed in the past years has proved that the Hungarian economy has become stronger, and the economic policy measures taken since that time have won over even the doubtful rating agencies, he said.

Varga acknowledged that Hungary’s sovereign rating had stood at the same level earlier under Socialist governments, but he said economic growth at that time was the product of credit and privatisation revenues.

Now, the level of state debt relative to GDP is on a steady decline, the general government deficits are lower, the government is not privatising state assets, and the current account balance continues to show a surplus, he said. Hungary’s economic growth, the government’s economic policy, a disciplined fiscal policy, low inflation and the country’s balanced position has led to the upgrade by Fitch, a week after another one by Standard and Poor’s, he added.

Varga said Fitch had acknowledged a reduction in vulnerability, strong economic growth, a decline in public debt, low levels of FX debt, and an improvement in competitiveness in its analysis of Hungary. At the same time, the rating agency pointed out risks, notable signs of a slowdown in EU growth and challenges on the labour market, he added.

Hungary’s government has already acknowledged these risks and earlier started working on measures that aim to protect the economy, Varga said. The goal is to reduce the unemployment rate further and to see wages continue to rise, he added.