Fitch downgrades Hungary to junk status

Fitch ratings agency downgraded Hungary to junk status on Friday and warned its unorthodox policy measures made reaching an aid deal with the International Monetary Fund more uncertain. Fitch knocked Hungary's benchmark rating down one notch to BB+ with a negative outlook due to "further deterioration in the country's fiscal and external financing environment and growth outlook, caused in part by further unorthodox economic policies which are undermining investor confidence and complicating the agreement of a new IMF/EU deal", the agency said. The downgrade came just days after the government passed a central bank law decried by the European Union. In the last days of December, Hungary passed a raft of controversial reforms, including changes to rules regulating the central bank, that critics said undermined the institution's independence in deciding monetary policy. "Additional unorthodox policy measures have further undermined confidence in policy making," Fitch said adding that the Hungarian growth outlook is "continuing to deteriorate". As a result, Fitch said "the importance of securing a timely new IMF agreement has increased, while the prospects of reaching it have become more uncertain." In response to the unorthodox measures, the International Monetary Fund and European Union officials broke off negotiations last month about a possible credit line of 15-20 billion euros ($20-25 billion) to Hungary due to worries about the reforms.