Hungary’s credit rating cut to junk

BUDAPEST - The Associated Press

Standard & Poor’s Ratings Services on Dec. 21 downgraded Hungary’s credit rating to “junk” level because of worries about proposed policy changes regarding the country’s central bank.

S&P analysts lowered their ratings on Hungary’s debt to the non-investment grade with a “Negative” outlook. That means there is at least a 1-in-3 possibility of another downgrade over the next year if Hungary’s fiscal performance deteriorates.

The lower rating could mean that Hungary has more difficulty borrowing and has to pay higher rates on its debt. Moody’s, a rival credit-ratings agency, had downgraded Hungary’s rating to junk status in late November.

S&P analysts said on Dec. 21 that policy changes related to Hungary’s central bank appear to curtail the bank’s independence. Such changes complicate the operating environment for investors, they said.

“The downgrade reflects our opinion that the predictability and credibility of Hungary’s policy framework continues to weaken,” the statement said.

Prime Minister Viktor Orban’s government has taken steps to gain greater influence over the National Bank of Hungary, led by Andras Simor.

A new law regulating the central bank is being debated in Parliament.