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October 24, 2022

Chart of the Week: Growing risk of a Hungarian sovereign crisis

by Fathom Consulting.

The UK is not the only European country at risk of a financial crisis. Hungary is also in the spotlight. The Hungarian forint (HUF) recently plunged to record lows, prompting the central bank to intervene and hike its collateralised lending rate to 25%, which appears to have stabilised the currency for now. While the forint is no stranger to bouts of volatility, some of the challenges facing Hungary are particularly severe. Not only is the country dealing with high inflation, higher rates and a weaker currency, but it also remains very exposed to geopolitical tensions east of its border, and its government is still at loggerheads with the European Union about unlocking significant amounts of EU Cohesion and Recovery and Resilience funding. Fathom’s Financial Vulnerability Indicator (FVI) estimates that the probability of a sovereign crisis in Hungary is set to peak at 42% in the second quarter of next year.

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The views expressed in this article are the views of the author, not necessarily those of Refinitiv Lipper or LSEG.

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