Food price caps set to stay in Hungary despite inflation decrease

The Hungarian government will soon make its decision about the potential abolition of the food price cap. But as consumer prices could have increased by another 26 percent, Prime Minister Viktor Orbán might not take this risk.

The Central Statistical Office (KSH) will publish shortly the latest data in the consumer price index about how inflation affected the Hungarian stores in March. Index.hu reports that after KSH’s publication Prime Minister Viktor Orbán is set to make an announcement regarding the food price cap.

The food price cap is currently in force until 30 April, but Hungarian politicians repeatedly hinted that the measure is set to stay until inflation will decrease.

In February, there was a 25.4 percent rise in prices, including a 43.3 percent rise in food prices. Gergely Baksay, Executive Director of Economic Analysis and Competitiveness of the Hungarian National Bank (MNB) told RTL.hu that they are expecting a 26 percent average food price in 2023. That is 17.3 percent lower than the price increase in February, therefore food inflation should lower in the following months.

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According to index.hu, the majority of organisations and market players agree that the measures will remain in place, even though everyone deems that the price cap is unsustainable. The government may likely make an announcement regarding the cost cap on 12 April.

According to index.hu, the majority of respondents believe that the price caps will remain in place until July-August, but some expect the new deadline to be 30 June, a more cautious step.

The last word on the issue

Index.hu reports that opinions regarding the price cap are even divided within the government. However, Prime Minister Viktor Orbán has the last word on this issue and what may be decisive is that he prefers an extension. Orbán reckons that the price cap helps to “protect families”, and until that remains the case, the political risk for potential unrest is too high to phase out the food price cap.

Gergely Gulyás, minister in charge of the Prime Minister’s Office, said that they expect that by June-July-August, the decline in inflation will accelerate rapidly in Hungary. The food price caps are set to remain until inflation hits single digits.

However, as the projections by the National Bank indicate, it is difficult to make positive predictions about the date of the abolition of the food price cap, which is causing more and more economic damage to traders every day.

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