Connect to share and comment

S&P revises Hungary credit outlook to 'negative'

PlacardEnlarge
(Globalpost/GlobalPost)

Standard & Poor's revised the outlook on Hungary's credit rating to "negative" from "stable" on Thursday, citing concerns over recent constitutional changes and new leadership at the central bank.

The agency maintained the country's credit rating at BB, but warned the negative outlook could lead to a downgrade.

"The outlook revision reflects our view that the predictability and credibility of Hungary's policy framework has continued to weaken," S&P said in a statement.

"There is at least a one-in-three possibility that we could lower the ratings over the next year if Hungary's economic recovery weakens significantly," it warned.

Earlier this month, Prime Minister Viktor Orban named a close ally, former economy minister Gyorgy Matolcsy, as the new head of the central bank in a move that many said would tighten the government's grip on the institution.

Matolcsy not only replaced a man -- Andras Simor -- who had frequently clashed with Orban over state interference in monetary policy, but was also the architect of many of the government's "unorthodox" policies like nationalising private pension funds and imposing "crisis taxes" on certain sectors.

S&P's decision also comes after the parliament in Budapest approved changes to the constitution -- including a curb on the power of the constitutional court -- that have raised concerns from the European Union and United Nations.

Such moves "raise questions about the independence of oversight institutions, and hence their credibility," S&P said.

The government's "interventionist" policies "could undermine Hungary's institutional effectiveness and the quality and predictability of policy making," it added.

By impacting foreign investment and banks' willingness to lend money, it would in turn hurt the government's efforts to reduce debt, S&P warned.

ssw/rl

http://www.globalpost.com/dispatch/news/afp/130321/sp-revises-hungary-credit-outlook-negative