Fitch cut Hungary to the brink of junk debt status, saying deficit-cutting measures in the 2011 budget passed by parliament on Thursday could send the country down an unsustainable fiscal path towards a further downgrade. To get the budget within EU limits in 2011, the government is relying on unorthodox, one-off revenues, making markets fearful the fiscal gap will bulge again after 2012 unless more durable measures are introduced. Fitch outlined similar concerns, becoming the last of the three main agencies to cut Hungary's debt to within a single notch of non-investment grade status and also placing a negative outlook on the new BBB- long-term foreign currency rating.
The Economy Ministry said the downgrade by Fitch was "regrettable but not surprising," adding that it expected rating upgrades down the line.
"The new Fidesz government ... has set out fiscal plans that go in the wrong direction," Fitch said. "These plans could worsen the underlying medium-term budget outlook by around 4 percentage points of GDP over 2011-2012.
Reuters, December 23, 2010.