Hungarian economy has good prospects, forint exchange rate may stabilise

The Hungarian economy will stagnate this year. The yearly inflation will be around 17.7 percent, Fitch Ratings’ new analysis said. However, they calculate a EUR 10 billion allowance opened by Brussels. Moreover, the Hungarian National Bank may decrease the base interest rate to 5-6 percent by the end of 2023. That may result in the free fall of the forint since the exchange rate is only protected by the very high base interest rate. Of course, if the EU funds opened for Hungary, that would mean a completely new situation.

Hungarian investment grade is like Kazakhstan’s, the Philippines’, Italy’s

According to novekedes.hu, Fitch expects an average of 3 percent economic growth in Hungary for the coming years. Meanwhile, they affirmed Hungary’s investment grade ‘BBB’ sovereign rating with a negative outlook on Friday’s scheduled review. BBB means that Hungary is in the same category as Bulgaria, Italy, Cyprus, Kazakhstan, the Philippines, and Indonesia.

“Hungary’s ratings are supported by strong structural indicators relative to ‘BBB’ peers, a record of economic growth fuelled by investments and solid net FDI inflows,” they said. The Hungarian investment grade has been with a negative outlook since January. Meanwhile, the company raised the Hungarian state debt rating from BBB minus to BBB four years ago.

The analysis highlighted that the shrinking energy import costs did good, but they emphasised the country’s dependence on Russian energy. The explanation for the negative outlook was the risks to the Hungarian political leadership’s credibility.