A combination of the spillover effects from the eurozone and local macroeconomic imbalances pushed HUF close to its 2008-crisis low against EUR (316.0). The risk premium on Hungary’s debt surged last week as both S&P and Fitch Ratings indicated—signaled by RGE—that they may cut Hungary's sovereign rating to non-investment grade in the coming weeks. The government has scrapped two Treasury bill auctions since late October as investors got nervous and bids fell short of the amount on offer.
Orbán and the wind from the east
FEW countries in the region arouse more concern than Hungary and few politicians arouse more controversy than its prime minister, Viktor Orbán. Critics see him as the harbinger of authoritarian rule, presiding over the imminent collapse of the economy. It is worth aiming off a little given that the critics are mostly (though not all) Mr Orbán's political rivals. Hungary's economic difficulties are serious (the combination of large foreign-currency debts and a weakening forint is especially alarming). It is more vulnerable to the chaos in the euro zone than any of the nearby countries. But to be fair, Hungary is no longer in the intensive-care ward as it was when the IMF bailed it out in 2008. Mr Orbán inherited a mess and has (thanks to some bruising, and in some cases questionable, measures) brought public finances under control.
Forint Falls as Fears on Hungary Mount
Hungary's currency traded near record lows against the euro Monday as fears mounted that the country's sovereign debt rating could be downgraded to junk-bond status because of slowing growth and unorthodox government economic policies. Investors' wariness was apparent Monday morning in Budapest, where the state debt-management agency scrapped a sale of short-term bonds because of insufficient demand, after twice having to scale back longer-term debt offerings recently. Hungary, which had to be bailed out by the International Monetary Fund and the European Union after the global financial crisis hit in 2008, is again struggling to keep its economy stable. The forint hit a record low against the euro, trading at around 317 forint per euro. The currency also slid more than 2% against the dollar. The government of Prime Minister Viktor Orban isn't facing an immediate crisis. The country has ample foreign-exchange reserves and the government doesn't have major debt repayments due until next year.
Hungary: I don’t like Mondays
Hungary is having a very bad Monday. Its equities are tanking, its bond yields are jumping, its currency is approaching dangerously weak levels and it has been forced to scrap a planned debt sale due to low demand. And all this after a Friday which saw Hungary’s headline Bux index gain 4.4 per cent in what analysts told beyondbrics was a “rally based on nothing”.
What changed? Well, ratings agency Fitch revised Hungary’s rating outlook to negative on Friday night, reminding investors of the very real possibility that the big three ratings agencies will downgrade the country’s debt to junk in the very near future.
Last Updated on Thursday, 17 November 2011 09:53