The decision on capping prices will remain in effect for three months but can be extended, the prime minister’s chief of staff said. Gergely Gulyás said the reason last October’s prices were used as the reference for the cap was that there had been no inflation pressure then and “nobody was complaining yet” about prices at the time. Gulyás said that hopefully the measure would make life easier for those struggling to make ends meet. He noted that the price of sugar, wheat flour, sunflower-seed oil, pork leg, chicken breast and milk with 2.8 percent fat will be reduced to their price on Oct. 15 last year.
Retailers must stock the products in question and “a multi-level, strict system of penalties” for rule-breakers included a possible ban on trading, he said. The decree to be published within the next few days will stipulate fines against violators at the earliest stage, he added. In response to a question, he said it was a reasonable cause for concern that retailers may counterbalance the loss resulting from the new measure by raising other prices. The government will monitor the developments, he added.
The government also has access to other means of regulating prices, he said, adding that Hungary’s legal system recognised the institution of centrally regulated prices.
In response to a question, he said
the government would not compensate retailers for a shortfall in their revenues stemming from the rollback of food prices.
Retailers have an annual 150 billion forints in profits, while the new measure will not even cost them 20 billion, he argued. Gulyás said the government had been careful not to cripple any of the industries when it determined the specific products the policy would apply to.
Regulating the price of bread, for example, would have generated losses for bakeries,
The government is seeking ways to suppress inflation and hopes that predictions about inflation returning to 2-4 percent this year would turn out to be the case. He added that no other government was introducing as many anti-inflation measures as Hungary’s.
The measures aimed at reducing inflation are expected to result in a combined 2 percentage point reduction, he added.
He also said that reducing VAT tended not to lead to a drop in retail prices but rather increased retailers’ profits.
Commenting on the planned purchase of Budapest Airport, he said, “We will wait until after the [April 3 general] election” but the government’s position remains unchanged:
“We always considered it right for the national airport to be in state ownership, or at least in Hungarian ownership.”
Meanwhile, Gulyás noted that the French president had participated in a Visegád Group meeting during Hungary’s presidency of the group, adding that the German chancellor, too, was welcome to attend a V4 meeting.