S&P downgrades Hungary’s ratings to ‘BBB-/A-3’, outlook ‘stable’

(Reuters) -Credit ratings agency S&P on Friday cut Hungary’s long- and short-term foreign and local currency ratings to ‘BBB-/A-3’ from ‘BBB/A-2’, citing persistently high inflation and external pressures.

An economic slowdown, surging energy bill and suspension of most European Union funds Hungary is entitled to are pressuring state finances, while the central bank interest rates are the highest in the European Union.

The ratings agency revised its outlook to “stable” from “negative” on expectations that Hungary’s economy will avoid a substantial economic downturn over the next two years and weather the indirect effects of the Russia-Ukraine war.

S&P expects the Hungarian government, which has pledged to reduce the 2023 budget shortfall to 3.9% of gross domestic product, to gradually reduce fiscal deficits over the next few years.

Last week, Fitch cut its outlook on Hungary’s long-term foreign currency issuer default rating to “negative” from “stable”.

(Reporting by Aatrayee Chatterjee and Richard Rohan Francis in Bengaluru; Editing by Sriraj Kalluvila)