Hungary hit back today at what it termed "financial attacks" after Moody's downgraded its credit rating to non-investive status, condemning the decision as "unfounded."
"As the rating of Moody's lacks all real basis, the Hungarian government cannot interpret it in any way but as being part of the financial attacks launched against Hungary," the economy ministry said.
The downgrade was "professionally unfounded", it added, citing Hungary's budget and current account surplus in 2011 and insisting that the country "cut back on the sovereign debt by 10% this year."
"Clearly neither the performance of the Hungarian economy, nor the state of the budget explains the drop in the forint, therefore a speculative attack against Hungary must be in the background," it said.
Moody's downgraded Hungary's government bonds last night by a notch to Ba1 with a negative outlook, the first of the three main rating agencies to downgrade the country to junk status.
The agency justified the move by citing "the uncertainty surrounding the Hungarian government's ability to meet its targets on fiscal consolidation and public sector debt reduction over the medium term, in view of higher funding costs and the low-growth environment."
It also cited the government's high debt burden, heavy reliance on foreign investors and large financing needs at a time of market volatility.
Standard and Poor's said it would hold off on a likely downgrade of Hungary's credit rating until it sees whether it can strike an aid deal with the IMF and EU. Budapest turned to the International Monetary Fund and European Union on November 17 to avoid a downgrade.
S&P also criticised however the poor "predictability and quality of Hungary's policymaking," including crisis taxes on several sectors to plug budget holes. Analysts saw Moody's downgrade as "surprising" after S&P's wait-and-see announcement, but warned that uncertainty about government policies could cause further concerns.
