Moody's downgraded Hungary's rating to Baa3, its lowest investment grade. Moreover, the outlook is negative, which could mean further downgrades along the road. Standard & Poor's and Fitch Ratings already gave Hungary their lowest grades.
Hungary is the European Union's most-indebted eastern member, Bloomberg writes, with debt estimated at 79% of gross domestic product this year. It has taken measures to cut the budget gap to the E.U. limit of 3% of GDP next year. But the measures, many criticize, are short term, plugging holes, rather than addressing the real issues.
"Today's downgrade is primarily driven by the Hungarian government's gradual but significant loss of financial strength, as the government's strategy largely relies on temporary measures rather than sustainable fiscal consolidation policies," Dietmar Hornung, Moody's lead analyst for Hungary, said in the statement, according to Bloomberg. "As a consequence, the country's structural budget deficit is set to deteriorate."
The Hungarian currency, the forint, which is still in circulation, slid 1.1% Monday. The yield on five-year bonds rose 16 basis points.