Standard & Poor's has cut Hungary's credit ratings on concern the government's plan to fix the budget deficit may not be sustainable.
The rating agency has lowered Hungary's long-term credit rating to BBB+ from A-, citing the country's runaway budget deficit and rising debt. S&P has downgraded the country's outlook to negative, pointing to “continued deterioration of public finances''. High budget deficit also poses a risk to the country's economic stability, S&P said.
Hungary’s reelected Socialist-Liberal government unveiled on June 10 a plan to cut the country's soaring deficit by Ft 350 billion ($1.6 billion) this year to 8% of GDP through tax hikes and spending cuts, and lower it by a further Ft 1 trillion forint in each of the next two years.
But the program relies two heavily on higher taxes instead of cutting spending, S&P said.
The forint fell to 271.33 per euro by 2:38 p.m. in Budapest from 270.16 late yesterday, reaching its lowest in 2 1/2 years. (Bloomberg)