Government efforts fall short as Hungary faces sharp rise in food prices

The government has recently employed every possible effort to limit the rise in the cost of groceries. By early summer, inflation trends were already influenced by various factors, both positive and negative. Changes in food prices largely shape the degree to which consumers perceive inflation as severe, as these are the prices people encounter daily.

In July, the government relaxed compulsory measures, with new regulations defining the price at which previously price-frozen food products could be sold. This “soft” price cap established the current purchase price as the minimum selling price, while at least one product group was mandated to be sold at a lower price every week, reports HVG.

The impact of price regulations on everyday items and the cost of groceries

HVG examined how various supermarkets performed regarding the rising cost of groceries. Auchan had the lowest increase, followed by Penny and Lidl. For alternative products, the ranking was almost identical, with Auchan first, Lidl second, and Penny third.

Looking ahead, it is unlikely that inflation will be driven by the surge in the cost of groceries in the long term. Instead, the additional tax burdens introduced by the government, starting in August, to balance the fiscal budget, are expected to play a more significant role. However, the special retail sales tax, which has been an extra burden on retail for some time, has not increased. Overall, there is no trend encouraging Hungarians to boost their consumption.

The end of the price freeze has led to visible price increases in shops: the overall cost of groceries of groceries, except for some seasonal vegetables, has risen. In some cases, the increases are significant. For example, sugar prices have risen by an average of 28.5 percent compared to the previous month, and fine flour has increased by over 24 percent. The price of a basket of products previously subject to the price cap is now 14% higher than at the end of June.

Looking at an imaginary basket filled with basic food items, the level of increase in the cost of groceries between January and July would be concerning on an annual basis. Alternative food items’ prices have been virtually stagnant, and there is little sign of price change for the ‘normal’ versions of these items. Only one previously price-fixed item, the relatively low unit price of milk, has seen a significant increase. For products not previously under the price freeze, there is a slight decrease, indicating that market developments do not justify the current price increases.

However, these fully market-driven prices are unlikely to fall significantly in the near future. The economic landscape remains uncertain, and external factors such as global commodity prices and supply chain disruptions continue to influence local markets. Consumers are advised to stay informed and plan their purchases carefully to navigate this challenging period.

While the government’s efforts have provided some relief, the overall trend of rising cost of groceries and economic pressures suggests that consumers will need to remain adaptable in their spending habits. The market’s response to these regulatory changes and economic conditions will be crucial in determining the future trajectory of prices and inflation in the country.

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• This Hungaricum is much cheaper in Italy than in Hungary – Read here

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