Moody's affirms Hungary rating but says growth, vulnerability remain concerns

Moody's said the ratings action reflected a reduction in the general government debt ratio last year and the expectation that the ratio will stabilise in 2013 "to levels somewhat closer although still higher to similar rated peers". But it added that policy measures continue to have a negative impact on the economy's medium-term growth outlook, and the projected weak growth raises concerns about the ability of the government to reduce government debt in a sustainable way.
Moody's also noted ongoing uncertainty associated with the economy's ability to withstand external shocks or adverse developments while facing substantial financing needs and potential volatility on financial markets.
Moody's said a reduction in policymakers' commitment to keep the general government deficit under the 3% of GDP threshold as well as further government measures that "undermine the economic growth path more severely than what is anticipated" could put downward pressure on the sovereign rating.
Moody's said it would consider stabilising the outlook on the Ba1 rating if Hungary "were to exhibit more predictability in its policy framework that would support robust economic growth over the medium term".
In a statement published on the government's website, the National Economy Ministry called Moody's ratings action "biased and unsubstantiated".
"The Hungarian government cannot comprehend why Moody's Investors Services does not take into account what Hungary has achieved lately," it said, citing a fiscal deficit under the 3% threshold, falling general government debt, a high external financing capacity, a big current account surplus and improving employment data.
"Investors tend to increasingly rely on their own analyses and forecasts and they do trust and believe in Hungary. This is aptly reflected by successful government securities auctions and decreasing country risk," the ministry added.