– The latest report from Standard and Poor's reaffirms Hungary's investment-grade rating, underscoring the continued high level of trust the three largest credit rating agencies hold for Hungary. This confidence is based on the stability and resilience of Hungary's economy. Hungary’s economic growth is above the EU average, outperforming the economies of Belgium, France, Italy, the Netherlands, Romania, Latvia, and Germany, according to the Ministry of National Economy (NGM).
The ministry recalled that, although the country has weathered difficult times, there are increasingly positive indicators that signal a turning point for the Hungarian economy. In August, retail sales grew over 4% year-on-year, a rate that surpasses the expected 1.5% GDP growth for this year.
In short: increased consumer spending is driving Hungary's overall economic performance upwards. At the same time, tourism is booming, with overnight stays rising 5.5% in the first eight months of the year compared to the same period last year. This growth reflects the fact that more families can afford to take time off, even if just for a weekend. Altogether, these indicators reflect rising domestic consumption and a recovery in the internal economy.
The ministry highlights three main factors driving domestic economic recovery:
(1) High employment rate: With roughly 4.7 million people employed, the government has not only preserved jobs in the face of the ongoing crises, but has increased the number of people working, achieving near-full employment.
(2) Rapidly rising real wages: Wages are growing at a 14% rate, with average earnings now at 634,000 forints. This means that workers are earning an additional 77,000 forints compared to last year. Real wages have been rising consistently for over a year, with an August increase of 9.4% year-on-year.
(3) Inflation reduced to low levels: The government has managed to reduce inflation to 3% as of September, and has committed to preventing any renewed increases.
The ministry emphasized, however, that the government’s goals "go beyond" these achievements; they aim to reach an economic growth between 3% and 6%. This growth target rests on a foundation of economic neutrality, and to reach this goal, the government has created a new 21-point economic action plan. This plan is designed to further increase the purchasing power of wages, ensure affordable housing and double the size of small and medium-sized businesses (SMEs) via the Sandor Demjan Program.
With the action plan in place, the ministry projects that an economic growth of 3% to 6% is achievable next year, potentially surpassing 3% as early as the first quarter. The ministry does not rule out certain surprises, as the plan will channel substantial funds into the Hungarian economy.
Beyond growth, the action plan also aims to promote inclusivity, reaching a broad segment of society by focusing on families, rural areas, and small to medium-sized businesses.
Investment-Grade Affirmation
S&P Global Ratings affirmed its BBB-/A-3 investment-grade rating for Hungary’s long- and short-term sovereign credit in both foreign and local currencies on Friday. Alongside this reaffirmation, S&P maintained a stable outlook for the rating in an announcement made late Friday in London. Hungary’s sovereign rating is also held in investment-grade status by the other two major global credit agencies, Fitch Ratings and Moody’s, both of which currently rate Hungary’s credit one notch higher than S&P, according to a press release issued by Hungary's state news agency (MTI).
