Ratings agency Fitch has downgraded Hungarian debt one notch to BB+ from BBB-, while keeping the country’s outlook negative. The ratings action follows similar adjustments by both Moody’s and Standard and Poors.”The downgrade of Hungary’s ratings reflects further deterioration in the country’s fiscal and external financing environment and growth outlook, caused in part by further unorthodox economic policies which are undermining investor confidence and complicating the agreement of a new IMF/EU deal,” says Matteo Napolitano, a director in Fitch’s Sovereign Group.
Fitch had placed the country’s debt on review in November, citing a slowing economy and increased funding costs. This year, debt repayments will total more than €4.6 billion, with that number to increase over the coming two years.
Fitch revised expected GDP growth lower for the nation, to a contraction of 0.5%, from a gain of 0.5% previously.
Hungary has faced continued speculation after a number of bond auctions failed earlier this week and late in December, sending bond yields ever higher and the country’s currency to record lows.
An agreement with the International Monetary Fund could abate many of the pressures currently plaguing the country, but the recent passage of new laws impacting Hungary’s central bank have distanced IMF and EU leaders.
“Additional unorthodox policy measures have further undermined confidence in policy making,” Fitch wrote in its statement. “In mid-December, preliminary official talks with a view to securing a new deal with the IMF and EU broke down after the government failed to provide assurances that it would alter legislation (including a new Central Bank Act) viewed as contravening EU law.”