Fitch kept Hungary’s long-term rating at BB+, its highest junk grade and on par with Macedonia, according to a statement today from London. Standard & Poor’s lowered Hungary’s rating to two steps below investment grade on Nov. 23, citing government policies that are eroding economic-growth prospects. Moody’s Investors Service rates it one level higher.
Prime Minister Viktor Orban introduced a slew of new taxes, including special levies on the banking and telecommunication industries, to keep the budget shortfall below 3 percent of economic output and avoid losing European Union development funds. The government forecasts a 2.7 percent fiscal deficit for the next two years, while the EU sees it at 2.9 percent in 2013 and 3.5 percent in 2014.
The revision “is underpinned by progress in reducing the budget deficit and stabilizing government debt along with improved fiscal and external financing conditions,” Matteo Napolitano, a London-based director at Fitch, wrote in the statement.
The forint gained as much as 0.4 percent after the announcement and traded 0.2 percent stronger at 285.71 per euro as of 5:15 p.m. in Budapest. Yields on the government’s benchmark 10-year forint-denominated bonds fell 13 basis points, or 0.13 percentage point, to 6.196 percent, the lowest in seven years.
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