Fitch cuts Hungary

Fitch Ratings said it downgraded the Republic of Hungary's long-term foreign-currency issuer default rating to BBB- from BBB, long-term local-currency issuer default rating to BBB from BBB+ and country ceiling to A- from A. The agency said it affirmed its short-term foreign-currency issuer default rating at F3.

The outlooks remain negative.

The downgrade reflects a material worsening in the underlying medium-term budget position, while relatively high levels of public, external and domestic foreign-currency bank debt leave the country vulnerable to negative shocks, Fitch said.

The Hungarian economy has undergone a significant period of adjustment over the past few years under an International Monetary Fund-led international support package, the agency said, after acute fiscal indiscipline from 2004 to 2006 and then the severe impact of the global financial crisis.

The country has made significant progress in rebalancing the economy, Fitch added. But, the new government that won elections in April 2010 has set out fiscal plans that go in the wrong direction for further fiscal consolidation, the agency said.

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