Hungary Kept Rated Junk With Negative Outlook by S&P on Growth

Hungary’s credit rating was affirmed at non-investment grade with a negative outlook by Standard & Poor’s, which cited “weak” growth prospects and high debt.

S&P kept its BB/B long- and short-term sovereign credit ratings stable on Hungary, where “weakened” institutional checks and balances and policies that may increase the probability of exchange rate depreciation could weigh on growth and raise debt burdens, S&P said in a statement today.

“Hungary’s creditworthiness continues to be constrained by the economy’s weak growth prospects, limited monetary flexibility, and high stocks of public and private external debt,” S&P said in the statement.

Hungarian Prime Minister Viktor Orban, who is trying to win re-election next year, is seeking to fortify the economy’s recovery from last year’s recession while keeping the budget deficit below the European Union ceiling of 3 percent of economic output.

“The outlook remains negative, reflecting at least a one-in-three chance of a downgrade if the policy framework lessens confidence and medium-term economic growth prospects, or significantly raises financing costs and leaves the country exposed to sharply diminished capital inflow,” S&P said.

The forint was little changed at 292.27 against the euro at 8:12 a.m. in Budapest. The currency has firmed 1.9 percent in the past three months, the best performance among 24 emerging-market currencies tracked by Bloomberg.

Hungary is rated Ba1 at Moody’s and BB+ at Fitch Ratings, both non-investment grades.

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