Hungarian forint’s low value uncovered: Big Mac Index highlights price disparities
According to the latest Big Mac Index from The Economist, Switzerland and Norway remain the most expensive countries in the world. In these two European nations, a Big Mac costs EUR 6.71 and 6.26, respectively. In contrast, Hungary ranks at the bottom of the list, with an average price of just EUR 2.65 for the same sandwich.
The Big Mac Index
The Big Mac Index was introduced by The Economist in 1986 as a quirky way to measure purchasing power parity across countries. Since then, it has become a widely recognised global economic indicator, Pénzcentrum writes. The index compares the price of Big Macs in different countries to the price in the United States, offering insights into economic conditions and serving as a practical tool for gauging consumer purchasing power worldwide.
In the United States, a Big Mac typically costs around EUR 5.15, though prices vary by region. Of the 78 countries included in the index, only five—Switzerland, Norway, Uruguay, Sweden, and Canada—have local average prices higher than those in the U.S.
Switzerland tops the list with a price of EUR 6.71, which is about 30.3% higher than the U.S. average.
This substantial difference is driven by factors like higher labour costs, different purchasing power, and taxes. Following Switzerland are Norway, Uruguay, Sweden, and Canada, each with varying degrees of price differences.
On the other hand, countries like Lebanon, Israel, and the United Arab Emirates have slightly lower Big Mac prices compared to the U.S. In Lebanon, for instance, a Big Mac costs EUR 5.08. In several European countries, such as Andorra, Austria, and Belgium, Big Mac prices are about 7.47% lower than in the U.S.
At the bottom of the list, the ten countries with the lowest Big Mac Index include Turkey, Hungary, Taiwan, Malaysia, Egypt, India, Indonesia, South Africa, Romania, and Venezuela. In Venezuela, a Big Mac costs just EUR 1.76, reflecting the country’s ongoing hyperinflation and currency devaluation. These significant price disparities highlight the varying economic conditions across the globe.
Undervalued and overvalued currencies
The index also reveals the extent to which national currencies are either undervalued or overvalued relative to the U.S. dollar. The Uruguayan peso, for instance, is overvalued by 51.8%, while Taiwan’s dollar is undervalued by 59.3%. Overvaluation means that, based on the per capita GDP differences, a Big Mac should cost less in a particular country than in the U.S., but it ends up being more expensive. Undervaluation is the opposite.
According to The Economist’s latest rankings, other significantly overvalued currencies include the Argentine peso (47%), the Swiss franc (45.6%), the Norwegian krone (22.5%), and the Costa Rican colón (20.6%). In the eurozone, the euro is overvalued by 19.7% compared to the U.S. dollar, while the British pound is overvalued by 14%.
In stark contrast, the Hungarian forint is undervalued by a significant 20.3%, as indicated by the Big Mac Index.
Read also:
- Hungarian government plans significant minimum wage increase – Could EUR 1,000 become the new standard?
- Real wages fell brutally: Big Mac index plummeting in Hungary
Featured image: depositphotos.com
One needs to explicitly warn against such interpretations of statistical data. A global comparison of a product that is locally produced for a local market is frivolous. Any conclusion drawn from this is meaningless.
Investor, when I was working in Hungary about 12 to 13 years ago £1 could buy you 200 to 220 forints.
The £1 now buys 460 to 480 forints.
This is even after the £1 has lost about 20% of its value in the same period.
@Attila
Then they screwed you over hard, because in the last 30 years the GBP-HUF rate was never that low.
@Attila, then they scammed you hard. Because the GBP-HUF rate was never that low in the last 30 years (probably more, but I was lazy to find a chart that goes further back).
A much better version of the BMI when it’s not just it’s price that matters in the comparison, instead you compare how much Big Mac you can buy in a country from it’s median/average salary.
Yeah maybe in Hungary a Big Max costs 2.5 times less (2.65 against 6.71, but the median net salary in Hungary is around 1000 EUR and in Switzerland it’s around 6400 EUR so a Switzerland they can buy more Big Macs from their salary than in Hungary. Ironically if you do the calculations they can buy 2.5 times more than Hungarians. Even if it costs 2,5 times more.
That shows how big the difference is.
Yeah but the median salary in Hungary is around 1000 EUR and in Switzerland it’s around 6400 EUR… so despite it costs 2.5 times more Swisses can buy 2.5 times more Big Macs from their salary.