Sad news: Drastic growth in prices continues in Hungary

One of the most significant rises in prices in the EU has been happening in Hungary for years already.

As the world slowly reopens and people will have the possibility to travel and go on holidays this summer, we should expect a significant rise in prices almost everywhere. Entrepreneurs in the hospitality sector, for instance, will have to try to make up for the losses of the past year due to the pandemic.

Consequently, Lake Balaton is already filled with tourists, but people have to prepare for quite shocking prices.

Hotels and accommodations are just one aspect when we talk about price changes. It is more alarming that essential food items in Hungary are being sold for drastically higher prices.

Many people could feel this increase in the past weeks, 24.hu writes why.

The Central Statistical Office reports a 5.1% inflation for April.

This means that prices have increased by this percentage compared to costs of the same good from the same month of last year. Economists were expecting a constant increase in prices, however, this number even exceeded their expectations. Furthermore, this data is the highest from the past eight years.

The inflation rate of April exceeded that of March, which stopped at 3.7% and even topped the expectation of the market consensus. On the other hand, the increase itself was not unexpected. The Hungarian National Bank warned for the rise in the upcoming months.

As Sándor Jobbágy, leading macroeconomist of Concorde Értékpapír Zrt. said:

“It is a crucial question in Hungary as well, not only in the world’s leading economies, how consistent the factors influencing the inflation increase will be.

Factors that are mostly linked to the reopening of economies of given countries. The data from March and these influencing factors did not worsen very much. Quite a big part of April’s inflation was due to the rise in taxes on alcoholic beverages and tobacco, together with the increase in fuel prices.” Based on current estimations, these prices will further increase.

Even though a general rise in prices is experienced in most countries, the Hungarian data is still outstanding. On the other hand, it is not unexpected, as Hungary experienced the second-highest inflation in the European Union last year. Among others, due to the significant decrease in the value of the Hungarian forint (HUF).

The European Commission already forecasted the most considerable increase in prices for this year and the next one to happen in Hungary.

It is important to note that

those products whose prices have experienced a significant increase in these past months (basic food items and fuel) are the two most important purchases Hungarians make on a daily basis.

As opposed to many European countries, these two groups are not necessarily products on which EU citizens spend the most.

From another point of view, as the minimum wage also experienced a 4% increase, naturally, it pushed the purchasing power to be a bit stronger.

Many economists say that similarly high inflation is expected for the upcoming months until around autumn. As mentioned above, it is partly due to the reopening of the country both internally and internationally. In case Hungary will be able to avoid a further wave of the coronavirus pandemic or mitigate it thanks to the vaccination, thus avoid another total lockdown without the need to introduce harsh restrictions,

the rate of inflation will further increase towards the last months of the year, as people will be able to take advantage of their purchase power freely.

The question right now is whether we will return to an inflation rate seen before the pandemic (1-1.5% in the EU; around 3-4% in Hungary) or we will face an even faster increase in prices.

Read alsoCoronavirus – Hungarian parliament votes to extend special pandemic measures

Source: 24.hu