Hungary is about to face brutal inflation

In July, compared to the previous year’s data, the rate of inflation reached 13 percent. To add fuel to the fire, the July calculations do not yet include the increase in overhead costs. Hungary is already suffering from high prices but the real inflation is just about to begin. 

The inflation in Hungary may have jumped to 13 percent in July, according to Portfolio‘s survey. In June, the KSH measured an annual rate of price increase of 11.7 percent. This means that a further significant acceleration in the rate of currency deterioration is expected.

What factors might cause inflation?

Although we cannot see the effect of the increase in overhead prices yet, there are other factors that can trigger inflation.

The factors are the following:

• the weakening of the forint
• the second-round effect of special taxes, integrated into prices
• the chip tax (NETA) and the excise duty increase
• war-inflicted supply shortages and rising prices of raw materials in production
• food price shock
• strong household demand
• the continuous inclusion of market energy prices which affect other products and services

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Inflation may peak at 16-17 percent in autumn

Experts believe that the price rise Hungarians experience in July is just the tip of the iceberg. The inflation may peak at 16-17 percent in autumn, and will likely not abate much by the end of the year. The forecast regarding the end of 2022 clearly shows how quickly the price increase accelerated. In January, the projected inflation for December was 3.4 percent, which surged to 8.6 percent in April and then reached 16.5% in the next four months.