BUDAPEST, May 8 (Reuters) - Meaningful steps taken towards meeting the criteria for joining the euro zone are likely to improve Hungary's sovereign credit quality, although the path to euro adoption could be lengthy, ratings agency S&P said.
Hungary's incoming Prime Minister Peter Magyar, who won with a landslide on April 12, has pledged to adopt the euro with a "foreseeable and achievable" target date, with his Tisza party's supermajority likely allowing it to push through the required constitutional changes.
S&P said in a note on Thursday that Hungary currently does not meet any of the requirements for joining the euro zone, which include maintaining low inflation, sound public finances, a stable exchange rate and low long-term interest rates.
"Meeting the convergence criteria could prove beneficial for Hungary's creditworthiness," they said, noting that euro zone accession has typically led to sovereign rating upgrades of up to two notches for the Baltic countries and Croatia.
"One notch has generally reflected improvements in fiscal positions ahead of the euro adoption, as candidate countries made progress towards consolidating their public finances," they said.
The second, after joining the euro zone, reflected the European Central Bank's policy credibility and effectiveness, better access to the bloc's deep and liquid capital markets, and the reduction in foreign exchange risks.
S&P rates Hungary 'BBB-', its lowest investment-grade rating, with a negative outlook.
The agency told Reuters earlier this week that downgrade warnings for Hungary and Romania ?reflect the fiscal risk facing the two emerging European countries, having already in March pointed to the risk to Hungary's rating should the recent surge in energy prices persist.
(Reporting by Anita Komuves and Gergely Szakacs; Editing by Kirsten Donovan)
