• Fitch likely to upgrade czech’s credit rating, Hungary to see one rating upgrade in 2018

    Source: FxWire Pro - Commentary / 20 Nov 2017 08:46:29   Eastern Standard Time

    The Czech economy’s favorable development might positively impact its credit rating, according to an Erste Group Research report. Productivity-enhancing investments are underpinning strong growth, while excessively expansionary fiscal measures are not driving the economic growth now. At present, S&P’s credit rating stands at AA- with a stable outlook, while Moody’s and Fitch’s ratings stand at A1 with stable outlook and A+ with positive outlook, respectively. Fitch might raise the country’s rating to a higher grade. The other ratings might probably stay the same; however, the outlook might be changed to a positive stance, stated Erste Group Research.

    Meanwhile, two out of three big rating agencies improved Hungary’s outlook from stable to positive in 2017, while the credit rating stayed at BBB-/ Baa3, which is the lowest investment grade category. The two agencies that improved the outlook are likely to have considered the cyclical economic improvement more significant than structural improvements.

    “Taking this into account, we think there is a relatively high chance for at least one rating upgrade next year, as the Hungarian economy’s cyclical improvement should continue, while the budget deficit remains constrained, at below 3% of GDP”, stated Ertse Group Research.

    The structural shortcomings are not expected to be addressed in a significant manner, which might restrict the scope for upgrades.

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