S&P downgrades Hungary again

Ratings agency Standard & Poor's (S&P) has downgraded Hungary from BB+ to BB, while keeping stable outlook for the country's debt. The Hungarian currency started to weaken but the Hungary dismissed the downgrading as a “hollow measure”.

According to the rating agency, "the downgrade reflects our opinion that the government's unorthodox policies, including exceptional measures applied to the financial sector, could erode the country's medium-term growth potential. This could eventually undermine the government's efforts to sustainably reduce general government debt."

“A further downgrade is possible if Hungary's economic recovery weakens significantly more than expected, if banks accelerate their withdrawal of credit, or if external or public finances weaken,” the Standard & Poor's statement added.

The Hungarian Ministry of National Economy dismissed the downgrading as a “hollow measure”. In a statement, it was of the view that the ridiculousness of the decision was shown by the fact that S&P downgraded Hungary while recognizing its economic performance. “Based on all this, it is time for one of the lobby institutions of the speculators, Standard & Poor's, to downgrade itself,” the Ministry pointed out.

Hungarian analysts believe the reason for Standard & Poor's decision was that it sees a growth problem in the Hungarian economy and sees a little chance of a better economic performance for want of a deal between Hungary and the IMF/EU.