Moody's Investors Service has placed some of Hungary's ratings on review for possible downgrade. Moody's vice president Jonathan Schiffer said the agency will review the country's A1 local and foreign currency government bond ratings and its A1 foreign currency bank deposit ceiling rating. Hungary's Aa1 foreign currency country ceiling for bonds, the Aaa local currency deposit ceiling and the Aaa local currency guideline are not affected by this rating action. Schiffer explained Hungary has run substantial current account and fiscal deficits for several years and has continually failed to meet its own fiscal targets, and government debt has risen accordingly. Despite the country's fairly good macroeconomic performance recently, this favourable environment may not last for much longer, Moody's experts believe. The new government's policy prescriptions of higher taxes combined with regulated price hikes will likely slow growth and affect government revenues while increasing inflationary pressures. Current political events along with piling up social tension for the cabinet of Prime Minister Ferenc Gyurcsany to resign suggest a more volatile short- and medium-term future.

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