Hungary has entered the group of the 10 riskiest countries for sovereign debt investors, according to a study by CMA Datavision published January 7. Hungary's credit default swaps (CDS) closed December 31 at 378 points, which is the eighth highest level among the 65 countries in the study. The cumulative probability of default (CPD) was 23.6%, meaning the probability that Hungary will not be able to honor its debt obligations is close to 1:4, according to CMA's methodology.


This high risk premium places a heavy burden on Hungary, which is struggling against a national debt that is approaching 80% of GDP. While Prime Minister Viktor Orbán's cabinet wants to lower debt levels using the money it requisitions from private retirement funds, market players are waiting for the structural reforms that the administration has promised for Februrary. Should these fail to pacify the markets, Hungary may continue to lose ground against its neighbors in the competition to attract investment. Hungary, unlike other Central European counties, has seen its debt-risk premiums rise dramatically over the past six months.