Downgrade by Moody's was "no surprise", says Hungarian economy minister

08:49, December 07, 2010      

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Hungary's National Economy Minister Gyorgy Matolcsy said on Monday that Moody's downgrade of the country's bond ratings was "no surprise" for the government, but it did "accept it with regret."

According to Matolcsy, Moody's did not take everything into account when deciding on the ratings change. "Hungary's budget deficit in 2010 is the fifth smallest in the EU, while next year's deficit of under 3 percent will also be the EU's fifth smallest," Matolcsy said.

Hungary's current account surplus and structural reform package scheduled for next spring should also be factored into the credit rating, he added.

Peter Szijjarto, Prime Minister Viktor Orban's spokesman, said that the success of the government's economic stabilization and growth policies will be proven over time. "Short-term downgradings will turn into upgradings in the long-term," he said.

Ratings agency Moody's downgraded Hungary's bond ratings on Monday citing "uncertainties" regarding the government's financial strength, and "external vulnerabilities." The agency dropped Hungary's foreign- and local-currency government bond ratings by two notches to Baa3 from Baa1, one notch above junk status. The outlook on Hungary's ratings was left at negative.

Moody's said the downgrades were mainly due to "increased concerns about the country's medium- to long-term fiscal sustainability and higher external vulnerabilities than most of Hungary's rated peers."

Hungarian News Agency MTI quoted Moody's Vice President Dietmar Hornung as saying that the downgrade was primarily driven by the Hungarian government's "gradual but significant loss of financial strength."

"The government's strategy largely relies on temporary measures rather than sustainable fiscal consolidation policies. As a consequence, the country's structural budget deficit is set to deteriorate," Hornung added.

Earlier in 2010, when announcing a package of growth measures, Hungarian Prime Minister Viktor Orban said that he expected one or two downgradings in the short-term.

"These are undoubtedly unpleasant things, but they cause temporary problems only," Orban said in July.

Source: Xinhua


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