Wednesday May 25, 2022

Moody’s knocked down Hungary by two notches

The rating agency Moody’s reduced the number of ratings of Hungary by two points on Baa3, ie close to the speculative category. Hungary has embarked on a controversial fiscal strategy that has raised concerns about the long-term development of public finances. She left a negative insight on the rating, so I can dream of it again.

The Moody’s Investors Service agency is contemplating the Hungarian economy because its budget deficit is deteriorating even after the effects of the economic cycle.

According to the agency, the situation is complicated by the fact that Hungarian finance is easily put under pressure by foreign investors, who are now showing an aversion to the risks. Hungary is in a tense period during the debt crisis in the euro area, because the country is highly dependent on the financial budget of the market. Thus, large households with mortgages in euros or Swiss francs are sensitive to the exchange rate.

Hungary needs sustainable reforms, not clique

Investors have been concerned about the unorthodox economic policy since the advent of Fidesz. Moody’s flawed is that the vicious government of Fidesz does not reduce budget deficits by “sustainable consolidation measures” such as long-term disputes or tax increases.

Although the budget deficits are still full, they rely on temporary measures of the type of special taxes imposed on the banking sector, telecommunications, retail and energy, and the reduction of pensions as well as the de facto elimination of unstable pension funds and the transfer of their pensions to the state system.

After the announcement of Moody’s, the forint fell by one percent to the euro, but analysts warn that the downgrade of the rating to the speculative category would cause a much sharp decline accompanied by the sale of government bonds.

Hungary has benefited from the International Monetary Fund’s and the EU’s financial assistance since 2008. However, representatives of the IMF and the EU in July prematurely ended the inspection of the full conditions of the Hungarian credit program, its completion is necessary for the release of the remaining pensions from the package in the total amount of $ 25 billion (about 470 billion K). Budapest then said that it would do without pensions from the IMF.

Back to Top