Huge price jump to follow the abolition of food price freeze in Hungary

On 1 February last year, the Hungarian government introduced a price freeze on certain food products. Later, following the impact of rapidly rising inflation, the number of price-capped foodstuffs was extended even further. However, all signs now point to the likelihood of abolishing official prices in Hungary within a few months. The possibility of such a measure has already been raised by the Prime Minister himself. This measure could, however, lead to a massive hike in the prices of products that are currently subject to official prices.

According to an expert interviewed by rtl.hu, the price freeze is likely to be abolished in the last weeks of spring or early summer. But, as the expert warns, the prices of the relevant products could even double afterwards.

The government’s view

At the beginning of the week, Prime Minister Viktor Orbán hinted during a parliamentary session that the government was considering abolishing the price freeze. He said the abolition was much needed, as it would trigger a noticeable fall in inflation. According to him,

as soon as inflation is on a convincing and permanent downward path, the price caps can be removed.

He also pointed out that it would be wrong if this kind of state intervention in the economy became a practice.

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Record high inflation in Hungary

Currently, however, inflation still seems to be showing no sign of falling in Hungary. As rtl.hu notes, according to the January data of the Hungarian Central Statistical Office (KSH), consumer prices were 25.7 percent higher than a year earlier. Such a high rate has not been seen for 27 years, the news site adds.

The site contacted an economic expert to find out when inflation is expected to start falling. According to the expert József Hornyák, a slight fall in inflation is expected in the months of spring. According to him, if a small decrease of one month is enough for the government’s decision-makers, it is unlikely that the food price freeze will be extended. The official prices are currently in force until 30 April. So, if the price freeze is not extended until then, it would end after 30 April.

However, the expert stresses that Orbán referred to a persistent decline in inflation last time. Therefore, it is more likely that the food price freeze will be abolished if inflation shows a persistent decline for several months. According to the expert,

this is most likely to happen in late spring or early summer. A persistent decline will occur by May or June.

• Read also: Hungary expected to see the highest average annual inflation in the EU this year

What can consumers expect?

Hornyák warns that shoppers can hardly hope for much good after the removal of the price cap. He expects to see price increases of between 50 and 100 percent for products with a price cap. This means that some products could cost up to twice as much. He explains this by saying that once the food price freeze is abolished, prices will have to catch up with a year and a half of inflation. This will be responsible for the huge jump.

The expert also points out that basically, nothing will become cheaper in shops with the abolition of the price cap. He says that food prices are currently rising by 40-50 percent in Hungary. But with the removal of the price cap, consumers can expect an increase of only 20-30 percent. This means that groceries will not become cheaper, but the rate of price increases will slow down.

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Source: rtl.hu