Hungarian outlook lowered by S&P, Slovenia reaffirmed

On the radar

• Hungary’s sovereign credit grade outlook was lowered to negative from stable at S&P Global Ratings.
• Moody’s reaffirmed Slovenia’s credit rating at A3 maintaining a positive outlook.
• In Slovakia, wage growth in February will be released at 9 AM.
• There are no other releases scheduled for today in the region.

Economic developments

The S&P kept the Hungary’s rating at BBB-, that is one step above junk, but the rating agency changed the outlook to negative from stable. Hungary is rated at the same level as Romania is – just at the edge of investment grade. Moody’s Ratings and Fitch Ratings both have Hungary at the second-lowest investment grade. S&P had warned Hungary already in February that Prime Minister Orban’s plan to double down on spending before elections next year can be negative for Hungary’s economy (budget deficit is planned at 3.7% of GDP next year and 3.5% of GDP in 2026 up from 2.9% planned earlier). On the top of that, global developments are growth negative not only for Hungary but for the whole region. S&P underlined in the statement “risks to Hungary’s fiscal and external stability over the next two years come from rising trade protectionism, weakening global demand, narrowing capital inflows, and elevated interest spending amid preelection budgetary loosening.” Romania was supposed to be reviewed by S&P as well, however no statement was issued. Further, Slovenia was scrutinized by Moody’s that reaffirmed Slovenia’s rating and maintained positive outlook. We see Slovenia as strong candidate for rating upgrade later this year. In two weeks, on April 25, Slovakia will be reviewed by S&P and we see high probability of outlook change to negative if not a downgrade. Especially S&P rating of Slovakia is two notches higher than Moody’s or Fitch Ratings.

Market movements

The S&P kept the Hungary’s rating at BBB-, that is one step above junk, but the rating agency changed the outlook to negative from stable. Hungary is rated at the same level as Romania is – just at the edge of investment grade. Moody’s Ratings and Fitch Ratings both have Hungary at the second-lowest investment grade. S&P had warned Hungary already in February that Prime Minister Orban’s plan to double down on spending before elections next year can be negative for Hungary’s economy (budget deficit is planned at 3.7% of GDP next year and 3.5% of GDP in 2026 up from 2.9% planned earlier). On the top of that, global developments are growth negative not only for Hungary but for the whole region. S&P underlined in the statement “risks to Hungary’s fiscal and external stability over the next two years come from rising trade protectionism, weakening global demand, narrowing capital inflows, and elevated interest spending amid preelection budgetary loosening.” Romania was supposed to be reviewed by S&P as well, however no statement was issued. Further, Slovenia was scrutinized by Moody’s that reaffirmed Slovenia’s rating and maintained positive outlook. We see Slovenia as strong candidate for rating upgrade later this year. In two weeks, on April 25, Slovakia will be reviewed by S&P and we see high probability of outlook change to negative if not a downgrade. Especially S&P rating of Slovakia is two notches higher than Moody’s or Fitch Ratings.

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