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Moody's Cuts Hungary Credit Rating to Junk |
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Friday, 25 November 2011Moody's Investors Service has downgraded Hungary's government bond rating by one notch to 'Ba1', below investment grade.
It retained a negative outlook on the bonds.
Moody's said that key elements of the decision to downgrade included "rising uncertainty surrounding the country's ability to meet its medium-term targets for fiscal consolidation and public sector debt reduction" as well as "increased susceptibility to event risk" given external market volatility.
"Moody's believes that the combined impact of these factors will adversely impact the government's financial strength and erode its shock-absorption capacity," it said in a statement.
"The rating agency's decision to maintain a negative outlook on Hungary's ratings is driven by the uncertainty surrounding the country's ability to withstand potential event risks emanating from the European sovereign debt crisis."
The Economy Ministry has vehemently slammed the downgrade as professionally unfounded and described it as "financial attacks against Hungary."
The government cited its commitment to keep the budget deficit below 3% of economic output next year, 1% of GDP worth of reserves in the 2012 budget and an expected decline in debt levels as arguments against the cut.
"Obviously, the forint's weakening is not justified by either the performance of the Hungarian economy, or the shape of the budget," the ministry said in a statement.
"Therefore, it can be driven only by a speculative attack against Hungary, which can be fueled by exactly these kinds of professionally unfounded assessments by rating agencies."
The downgrade comes just days after Hungary made an official request for precautionary financial help from the International Monetary Fund and the European Union, blaming the step on the euro zone debt crisis.
"The government's economic policy is undoubtedly a success, thanks to the unconventional, bold and unusual steps, which restored the country's economy," Economy Minister Gyorgy Matolcsy said in the parliament.
The nation received an IMF-led bailout in 2008, but Prime Minister Viktor Orban ended the 2008 IMF deal, which had been agreed under the previous government, last year.
As the eurozone debt crisis has unfolded, official figures showed that the Hungarian governmment's total debt had risen to 82% of its output, as its currency, the forint, has weakened.
Hungary has said it wants "a new type of co-operation" with the IMF. |
Friday, 25 November 2011
Novinite
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