S&P rating action, Guardian on local courts, construction industry and the strong dollar: the forint is under some pressure again

HUNGARY - In Brief 15 Aug 2022 by Istvan Racz

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The forint is still trading on the strong side of the important EURHUF 400 line, which is great, but it has come under some pressure this morning. Besides today's strong dollar, which is normally negative for the Hungarian currency, there are some domestic factors behind this as well. First, S&P lowered the outlook for its BBB sovereign rating to negative from stable still on Friday. This was not outright expected, but Hungary clearly had it coming. Recently, major agencies cut the outlook on ratings for Italy, Czechia and Slovakia, just to mention a few names from the neighbourhood, on concerns about the Russian gas imports situation. For Hungary, S&P made a similar move with reference to external risks, as the agency called it: (a) the same gas supply problem, as Hungary remains one of the most exposed economies to gas imports from Russia, and (b) the pretty realistic chance that Hungary may not be able to get RRF money and development funds from the new EU budget, or at least it may lose a substantial part of the funds in question. As the reader will surely remember, Fitch Ratings affirmed its BBB/Stable to Hungary in late July, on the assumption that the EU funds issue will still be solved through the ongoing negotiations. Moody's still has a preset review date for Hungary on September 23, and it might follow S§P's move by cutting its stable outlook for a Baa2 rating. The writing is clearly on the wall. Another, closely related story was an article in Guardian yesterday, a pretty thorough summary of the (lack of) independence of Hungarian courts, centred around a rare anti-government statement by a Hungarian judge made recently, on how the government has been putti...