Hungary’s sovereign debt has been downgraded by two analysts because of two political moves that has affected the economic condition of the country. The first move is its refusal to come to terms with the International Monetary Fund or IMF. The second move is the rejection of the country to use strong measures to implement policies that are for economic growth.
One of the two analysis agencies is Moody. Moody put Hungary at a position where it predicted it will have lots of fiscal risks. The agency did this due to the fact that the International Monetary Fund, in cooperation with the entire European Union, halted its talks with officials at Budapest for a 25 billion dollar or 20 billion euro financial deal.
Another agency that reduced its outlook for Hungary is S&P. It’s rating for Hungary is already lower than that for Moody, but still it was lowered even more to a level of negative from being stable.
The Prime Minister, Viktor Orban, already predicted that this might happen. He stated that Hungary will experience pressure from the market, aside from weaknesses in currency which will not get any significant form of support from international lenders. Still, the agencies are hopeful that Hungary will continue its talks with IMF.
According to Hungary’s secretary of state Mihaly Varga, the real status of Hungary’s public finances is hidden. This implies that the country needs stronger and more effective measures to reach their target of a 3.8 percent of GDP. Last Friday, the euro reached its lowest mark in four years because many were afraid of a Hungarian debt crisis, which was even supported by the spokesman of the prime minister. Furthermore, officials were afraid and were quite certain that they will not be able to avoid the same fate that was met by Greece.