Tue, Dec 07, 2010 - Page 10 News List

Moody’s downgrades Hungarian bonds two notches


Moody’s rating agency said yesterday it had lowered its rating on Hungary’s bonds two notches to Baa3 from Baa1 over concerns about its medium to long-term fiscal stability.

Moody’s said the “key drivers” for the downgrade were “increased concerns about the country’s medium- to long-term fiscal sustainability; and ... higher external vulnerabilities than most of Hungary’s rated peers.”

It said the outlook on the Hungarian government’s ratings remained negative.

“The negative outlook reflects the uncertainties regarding the government’s financial strength, as the country’s structural budget deficit is set to increase and external vulnerabilities make the country susceptible to event risk,” it said.

Hungary’s new center-right government under Prime Minister Viktor Orban has pledged to bring down the country’s public deficit to below 3 percent of GDP next year as required under an international bailout package from the EU and the IMF.

However, Orban has moved to do so by extending a number of special “crisis” taxes that were due to have expired.

Hungarian central bank Governor Andras Simor has criticized government’s planned tax reforms, saying they were short-sighted and would not bring down the country’s deficit in the long term.

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