Moody’s Investors Service has downgraded Hungary’s credit rating to junk status, just days after the country sought further support from the international community.
The ratings agency cut Hungary’s government bond rating by one notch from Baa3 to Ba1 and maintained the country’s negative outlook, suggesting further downgrades are possible.
A growing uncertainty that Hungary will be able to meet its medium-term targets for fiscal consolidation and public sector debt reduction, coupled with the increased susceptibility to event risk stemming from the government’s high debt burden, heavy reliance on external investors and large financing needs, are cited as reasons for the downgrade.
“Moody’s believes that the combined impact of these factors will adversely impact the government’s financial strength and erode its shock-absorption capacity,” it said in a statement.
“The rating agency’s decision to maintain a negative outlook on Hungary’s ratings is driven by the uncertainty surrounding the country’s ability to withstand potential event risks emanating from the European sovereign debt crisis.”
On November 21, Hungary approached the International Monetary Fund (IMF) and the European Union for “possible financial assistance”.
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