Hungary can realistically expect an upgrade of its sovereign rating this year in view of the predictable and stable path it has taken after a stabilisation and monetary policy turnaround as a part of post-2010 policy, according to central bank governor György Matolcsy. He noted Hungary’s good economic fundamentals but said the country remains in a vulnerable position, although its vulnerability has declined significantly in the past years. Hungary’s public finance deficit is firmly under the 3%-of-GDP European Union threshold, public debt is on a declining path, employment is growing and the current account has run a surplus for some time, Matolcsy believes. Hungary’s vulnerability lies in part with its high level of public debt but also with the EU’s vulnerability, he said. The EU’s crisis management after 2008 was unsuccessful, unlike that of the United States, he added. Hungary’s risk had been increased by the Russian-Ukrainian conflict because of its geographic proximity, as well as the effects of the conflict between Russia and the West on the EU economy and growth prospects. Annual average inflation this year could be between 0% and 1% because of low oil prices. Even excluding fuel and food prices as well as the effect of tax changes, inflationary pressure in Hungary was still low.
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