Moody’s on Friday afternoon downgraded Hungary’s local as well as foreign currency government bond rating, while the outlook remained stable. The forint was hit by this news and retreated relatively sharply to EUR/HUF 256.
Our view: On one hand the downgrade was widely expected, because Moody’s sovereign rating of Hungary was above other rating agencies grades and did not reflect true state of Hungary’s economy, on the other hand the timing was at least surprising. The downgrade came after the government published its austerity measures and also it has implemented many of them. On the top of that this effort was recently appreciated by rating agency Standard and Poors, which upgraded its outlook from negative to stable.
All in all we would not overestimate the impact of rating downgrade on Hungary’s markets as downgrade only align Moody’s rating with other rating agencies’ grades.