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Moody’s downgrade unjustified, Matolcsy says after meeting economists

National Economy Minister Gyorgy Matolcsy said late Friday Hungary’s leading Hungarian economists agreed that a downgrade of Hungary’s sovereign rating under "investor status" by Moody’s late Thursday was unjustified in light of the country’s fundamentals. The minister said Hungary’s GDP could grow 0.5-1% next year.

Speaking after a meeting with Prime Minister Viktor Orban and the country’s top economists, Mr Matolcsy listed Hungary’s fiscal balance, current account balance and employment trends among positive ecomomic fundamentals.

"There were some [at the meeting] who said [the downgrade] was an element of a speculative attack, others were not sure about it", Mr Matolcsy said.

Mr Matolcsy said that there has been speculation against Hungary "on decisive fields of Hungarian finances, such as government securities, the forint, the CDS margins, and in general in the field of financial confidence towards the country".

From the point of view of financial balance, Hungary is among the best countries in Europe, a stand on which the European Commission, a delegation from the International Monetary Fund and the National Bank of Hungary agree, he said.

Mr Matolcsy said the recent cut in the growth outlook for Germany, Hungary’s biggest trading partner, meant Hungary’s projection for GDP growth of 1.5% in 2012 was no longer realistic.

He said Hungary’s economy could grow 0.5%-1% in 2012. The government is not making a concrete projection for the time being, he added.

The government aims to draw up a new growth plan, create a financial safety net and establish a cooperation with the Hungarian Banking Association, Mr Matolcsy said.

The economists at the meeting advised a review of the potential domestic or foreign resources that could be tapped to support investments and produce faster growth, he said.

Hungary is working with the IMF and the EU in the interest of establishing the financial safety net, he said, and said he shared the view of the economists of the importance to cooperate with the Banking Association regarding the early FX mortgage repayment scheme.

Answering a question, Mr Matolcsy said the government had aimed to get the most flexible credit line agreement, but it appeared this could no longer be a goal. He stressed, however, that the government wanted to get the more flexible agreement possible among the precautionary and standby agreements.

Talks on the support will start in December, he said.

Mr Matolcsy said the government does not want to return to financing from the IMF, the EU or the European Central Bank. Hungary can finance itself successfully on the market and that will not change in the coming months or years, he added.

"We do not intend to call on a future credit line but present it as a financial safety net to financial markets", he said.