Hungarians spend the least in the EU, experts are pessimistic

In 2023, the average Hungarian consumed less per capita than individuals in any other EU nation. Experts from the Hungarian National Bank (MNB) warn that the future appears bleak unless there is a radical change in government fiscal policy.

Lower wages result in reduced spending

The Hungarian economy contracted significantly in 2023, leading to decreased spending. Not only were prices high in the country last year due to soaring inflation, but real incomes also lagged behind European Union averages, making everyday life more expensive for Hungarian residents, as per Népszava.

Albeit the cost of products like clothes and that of services in the country remained relatively stable compared to EU trends, foodstuffs saw a vast increase in prices in the last 20 years. While in 2004, Hungarian prices were approximately 60 percent of the European Union average; by 2023, Hungarians were paying over 95 percent of what the average EU citizen paid at checkout. Meanwhile, Hungarian incomes remained at half, or in some cases one-third, of EU levels.

Hungarians earned less but paid more in 2023 than their counterparts in neighbouring countries.

As we previously reported, the war in Ukraine, increased demands following the lifting of COVID restrictions and government transfers before the 2022 elections led to skyrocketing prices in the service industry. Consequently, fewer people were able to dine out regularly, negatively impacting not only restaurants but potentially raising the price of ice cream come summer.

Hungary versus the EU

Negative trends persist despite recent boosts in household incomes, as they still remain low compared to other European countries. Purchasing power parity is only 64 percent of the European Union average, while domestic gross average earnings reach less than half of EU rates.

Inflation in the country continues to pose a central issue, which explains why the relative income of individuals remains low. Between 2004 and 2024, prices rose by an average of 140 percent in the European Union, while Hungarian consumers experienced a 240 percent increase in costs during the same period.

The economy also underperforms compared to other Visegrád countries. The increase in prices in Hungary outpaced that of Czechia, Slovakia or Poland. In 2023, the Hungarian economy fared worse than Romania’s, and last year’s 17 percent inflation rate ensured that Bulgarians could now spend more on goods than Hungarians.

Possible avenues for fiscal policy

Experts from the Hungarian National Bank argue that the government must change its economic model to limit the outflow of capital from the country and ensure that sectors contributing to gross national income (GNI) can flourish.

As we covered earlier, Finance Minister Mihály Varga stated at the annual economic policy forum organised by the Hungarian Chamber of Commerce and Industry (MKIK) that government measures to reduce the budget deficit could lead to higher wages and a strengthening of the consumer price index.

During the same event, as reported by Index, Prime Minister Viktor Orbán emphasised the importance of the Hungarian economy lending more than it borrows from others, keeping the deficit low and maintaining high employment rates.

Read also: Pricing paradox: Hungarian food costs less abroad – here is why – Read HERE

New survey shows that Hungarians are fearfully poor compared to other EU citizens – Read HERE

Source: Népszava