Standard & Poor''s Rating Services placed the credit ratings of Ukraine and Hungary on watch for downgrade amid deterioriating economic conditions and concerns about financial-sector funding pressures. The ratings firm - which put Ukraine''s foreign currency and local currency sovereign credit ratings on CreditWatch with negative implications - said it is concerned about Ukraine''s economic situation and associated exchange-rate depreciation on its financial-sector asset quality. S&P said Ukraine''s current account deficit increased sixfold during the first half of 2008, but it expects the figure to "shrink markedly" during the rest of the year and into 2009. Ukraine has been hit hard by the weakening global economy. The National Bank of Ukraine has injected almost 11 billion hryvnias ($2.2 billion) of refinancing to banks thismonth alone. Its widenening current account deficit makes Ukraine - along with other countries in the region, such as Romania, Turkey, Bulgaria and the Baltics - increasingly financially vulnerable. Ukraine may ask for financial support from the International Monetary Fund during forthcoming talks to aid the country''s stressed economy and to help restore confidence in the market, a central bank official said Wednesday. It joins Iceland, Hungary and Serbia in the basket of countries that launched talks with the IMF this week. S&P said it likely will decide what action to take on Ukraine''s rating this month after the government clarifies its strategy in addressing the stresses facing the financial sector. The firm said it''s assessing the potential costs and impact of weakened growth prospects on Ukraine''s budget. As for Hungary, the ratings firm - which put Hungary''s sovereign credit rating on watch - said it is concerned about the potential of financial-sector funding pressures raising the general government debt from its current level of 67% of gross domestic product. "Domestic and foreign-owned banks are facing sharply higher financing costs and reduced access to international markets," S&P said. The Hungarian government, the National Bank of Hungary and the state debt management center AKK said Wednesday they would soon unveil a complex set of government bond market measures to "restart the market." Hungary''s government bond market has been paralyzed since last week as liquidity dried up. The government and the central bank have unveiled several measures since then to restore investor confidence in Hungarian assets. S&P - which also placed the credit rating of the City of Budapest on watch for downgrade - said it plans to resolve Hungary''s CreditWatch placement before the end of the year. Several countries have faced credit downgrades or reviews amid the credit crisis sweeping the globe. Iceland - which has seen its financial status downgraded - is in the middle of an ever-increasing economic crisis. Last week, the government''s bank regulator was forced to take complete control of the nation''s third-largest bank only a week after the government purchased 75% of it and only a day after the government took over the second-largest bank. Earlier Wednesday, Iceland''s central bank cut its key policy rate for the first time since 2003 and said it will hold a daily foreign currency auction to determine the value of the krona, in a temporary arrangement with foreign exchange market participants to facilitate foreign trade. -By Shara Tibken, Dow Jones Newswires; 201-938-2168;
shara.tibken@dowjones.com Click here to go to Dow Jones NewsPlus, a web front page of today''s most important business and market news, analysis and commentary:
http://www.djnewsplus.com/al?rnd=Qrt...jOAk%2Bw%3D%3D. You can use this link on the day this article is published and the following day. (END) Dow Jones Newswires 15-10-08 2106GMT Copyright (c) 2008 Dow Jones & Company, Inc.
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16.10.2008, 10:25 (12:25)
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