Moody’s changes the outlook for the Hungarian banking system

Moody’s Investors Service reported on Thursday that it had changed the outlook for the Hungarian banking system from stable to negative. Moody’s took action after the prospects of nine European banking systems were reviewed in light of the coronavirus pandemic. It has also changed the outlook for banking systems in Norway, Finland, and Portugal from stable to negative.

The change in outlook for Hungary, Norway, Finland, and Portugal "reflects our expectation that all four countries will experience a sharp slowdown in economic growth," said Moody’s. "Bank profitability will weaken due to increasing loan loss provisions and slower credit growth," they added.

Moody’s has also changed the outlook for the banking system in Slovakia from positive to negative. The outlook for the Czech, Polish, Austrian and Irish banking systems remained stable.

The International Monetary Fund (IMF) announced this week that the Hungarian economy will shrink by 3.1% this year, according to its latest global economic outlook released on Tuesday. According to the IMF, the Hungarian economy will recover in 2021 and can grow by 4.2% again.