Hungary’s economy in shambles: recession, persistent inflation, empty shelves

Even though the government is trying very hard to convince citizens that everything is okay with the Hungarian economy, every single one of us can feel on our own skin that it is just not true. Even according to official data, Hungary is battling with stagflation: high inflation combined with slow economic growth or even recession, and high unemployment.

Stagflation in Hungary

According to official data, there is stagflation in Hungary. This means an economic situation where inflation remains at a persistently high level despite a significant slowdown and a decline in household consumption, 444.hu reports.

Two of the three necessary elements have been met so far. The inflation figure for October published by the Hungarian Central Statistical Office (KSH) is a shockingly high: 21.1 percent. Within this, food prices rose by around 40 percent. This puts domestic inflation among the highest not only in the region but also in Europe.

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People have to spend more money on fewer things

The retail sales data for October are not yet known. Nonetheless, September was the fourth month in a row where consumption failed to keep up with inflation. This means that we were worse off. People are spending an incredible amount of money in the shops. According to KSH data, people left HUF 133 billion (EUR 323 million) more at the checkout than in September last year. Meanwhile, the amount of food they bought fell by 2.8 percent.

Recession is just around the corner

According to expert Gergely Suppan, further contraction is expected in the next two quarters due to: falling real wages due to rising inflation, higher-than-average increases in household energy prices, power cuts due to energy costs rising several times as much for businesses, municipalities and public institutions, and steeply rising interest rates. In other words, a technical recession seems inevitable.

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Shortages to be expected due to price caps

Sensing a problem, the Hungarian government decided to extend the price freeze on certain basic foodstuffs. The price restrictions now also apply to chicken eggs and potatoes. This has already resulted in a mostly deficit economy.

Just as sugar and milk run out of the shelves in no time due to the impact of the official price, the fixed price of fuel is causing shortages. This is also likely to happen for eggs and potatoes, as several shops have introduced quantity limits for these products. For example, in Tesco stores, a customer can buy up to two kilos of potatoes and one box of eggs at a time.

Source: 444.hu, vg.hu, DNH