Hungary ratings expected to return to investment grade next year

Hungary’s sovereign credit ratings are expected to return to investment grade early next year on the back of improving macroeconomic fundamentals, London-based emerging markets economists say. Analysts at BofA Merrill Lynch Global Research – the London-based research unit of Bank of America-Merrill Lynch – said the current account and financial balance sheets of Hungary’s private sector have improved notably, “making us more positive on the growth outlook”. In the update released to investors in London they said the prospects for domestic spending improved in the fourth quarter of last year due to a faster turnaround in the financial balance sheets of non-financial corporations and households. Based on this, “we double our 2015 GDP growth projection to 3%, keeping our above-consensus forecast of 2.6% for 2014”. This change also reflects the 2013 GDP breakdown release already showing “a faster turnaround in domestic spending than what we anticipated”, the report said. The bank kept its projection that the central bank’s easing cycle would continue until a rate of 2.25% this summer. All told, “we continue to expect the sovereign credit rating will return to investment grade by early 2015”, they said.