Inflation in Hungary in 2023: the highest in Europe

Hungary is becoming the European inflation champion. According to analysts’ forecasts, prices will rise by an annual average of 14 percent this year, and inflation could reach 16 percent next year.

The latter will be by far the highest price index in the EU. It will also be the highest on the continent, meaning that even Russia will manage with lower inflation (13 percent) in 2023, according to Kopint-Tárki’s continent-wide inflation forecast, Népszava reports. One exception will be Turkey. The country has been struggling with extra-high inflation for months. There, prices could rise by 54 percent next year after 63 percent this year.

In recent months, the 12-month price indices have been at the centre of the public debate, as the accelerating price rises from month to month are most visible in this indicator. According to KSH (Central Statistical Office) data, the 12-month price increase reached 20.1 percent in September. Analysts expect it to rise to close to 22 percent by December, which would bring this year’s annual average inflation to 14 percent.

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While the price index has been rising steadily this year, inflation will start from a high of 22-23 percent in 2023. Then, it will fall below 20 percent by mid-year and could even fall below 10 percent in September, after the August 2022 energy price increase is taken out of base. By the end of the year, all moderate forecasts suggest that the pace of monetary deterioration could slow to 6-8 percent in Hungary. This imply an average annual inflation of 14-16 percent.

Népszava writes that while governments in Europe and around the world have allowed energy prices to quickly pass through to consumers, forcing people to save and adapt, here in Hungary the cabinet has left the utility cuts in effect until the last minute, and only took action from August this year. This is one of the reasons why inflation will slow down almost simultaneously in European countries next year, while the annual price index will still rise in Hungary.

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This year, annual inflation in the three Baltic countries will be even higher than in Hungary, which will prevent Hungary from even getting into the top three. However, Latvia, Estonia and Lithuania will already start to experience strong disinflation next year, which will put Hungary in the lead according to current forecasts.

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Source: Népszava, Pénzcentrum