S&P speaks out on Hungary's credit rating and EU funding
"The chance of a huge and comprehensive cut in EU funds is very remote," S&P's lead analyst on Hungary Niklas Steinert said.
"What is more likely for us are more targeted cuts," which he likened to "a slap on the wrist" and "could be absorbed in the current rating".
Back in August, S&P had a negative outlook on the future of Hungary's investment-grade BBB rating. The rating agency cited the risk of a reduction in EU funding, as well as mounting economic pressures and costs of borrowing making it difficult to reduce the country's debt level.
Steinert said they did not expect a huge downward spiral in the debt rating at the moment. Although a recession is now imminent, Steinert pointed out that one of S&P's other main concerns, energy costs, was alleviated by the agreement reached in late August on additional Russian gas supplies.
He also pointed out the fact that the forint’s drop to record lows has not led to a significant depletion of foreign exchange reserves, which he considers a further relief. Hungary's central bank still has a €4 billion repo line with the European Central Bank that it can call on, and signs show that it is continuing to work to reduce its debt, he said.
Fiscal consolidation has already started, but the question is whether they can keep it up over the next year,
Steinert said.
On the issue of EU funding, he added:
things have pretty much developed according to our expectations, although we thought we would have had more clarity by now.
Cover photo: Getty Images
