Moody's Investors Service has today placed the Baa1 foreign and local currency ratings of the City of Budapest on review for possible downgrade. This rating action follows Moody's decision to place the sovereign ratings of Hungary on review for possible downgrade on 23 July.
Moody's rating action on the City of Budapest reflects the close links between the city and the sovereign given that a large proportion of municipal direct debt benefits from a state guarantee and the presence of cross-default provisions that creates a link with the rest of the city's debt.
The outcome and timing of the city's review for possible downgrade will be linked to the review of the sovereign rating.
Moody's last rating action on the City of Budapest was implemented on 1 April 2009, when the rating agency downgraded the city's ratings to Baa1 from A3 and maintained a negative outlook.
As the capital of Hungary, Budapest is the country's economic and political hub. As such, its contribution to Hungary's GDP is higher than that of any other area (37% in 2007), and its GDP per capita reached 217% of the national average in 2007. With a population of around 1.7 million, the city accounts for 17% of the Hungarian population, covering just 0.6% of the Hungarian territory. (BBJ)