As shockwaves from the eurozone crisis radiate outwards, Hungary has felt the full force of their impact.
Budapest has endured three difficult bond auctions in a week, yields have shot up, and the forint has tumbled to record lows. That, in turn, is fuelling inflation and increasing the pain for hundreds of thousands of Hungarians who took out mortgages in foreign currencies when the forint was much stronger.
Fitch and Standard & Poor’s on Friday shifted their credit outlook for Hungary, rated on the lowest investment grade, to negative – making a downgrade to junk status appear only a matter of time.
With the highest government debt among central and east European countries, Hungary has seen credit flows slow as investors have fled risk and the growth outlook for its biggest market – the eurozone – has darkened.
There are now fears that Hungary’s predicament could foreshadow a new wave of contagion to CEE countries, which were particularly badly hit by the 2008 financial crisis. more