Price cap in Hungary to be abolished on 1 August

The Hungarian government has extended the price cap in Hungary by one month, after which it will be lifted.

In August, inflation could fall significantly to around 15 percent, and it is realistic to expect what was previously promised to be single-digit inflation next year.

“New tools are being introduced. These include an online price monitoring system, compulsory promotions and the possibility to use the SZÉP card for cold food. That’s why the food price freeze will end on 1 August”, Gergely Gulyás, the PM’s Chief of Staff, said.

However, the mandatory promotion rate for shops will be raised from 10 to 15 percent. Even after the price freeze is lifted, there will be a brake on the products concerned, which will have to be sold at 15 percent cheaper than the supplier price, and this will also be checked.

The price cap has served its purpose in bringing down inflation, Gulyás said.

UPDATE

Meanwhile, Gergely Gulyás said the government had reviewed the family benefit system and concluded that circumstances had changed fundamentally in the recent period, mainly due to the war in Ukraine, the related sanctions and inflation.

Concerning the prenatal baby support loans, Gulyás said the government wanted it to encourage women to have children as early as possible. Accordingly, from Jan. 1, 2024, only couples where the wife is under 30 will be eligible for the subsidy, he said. He added however that a transitional period will be introduced between January 2024 and Jan. 1, 2025 when women between the age of 30 and 40 will be eligible for it. The maximum sum of the loan will be increased to HUF 11 million (EUR 29,700) from the current 10 million, Gulyás said.

Meanwhile, he said the rules for the village CSOK programme will remain in place, with the subsidy being increased by 50 percent “or even higher in certain cases”.

However, CSOK will no longer be available in Hungarian cities, and a new subsidy scheme will be devised for towns with populations over 5,000, Gulyás said, noting a steep rise in home prices in Budapest and major cities which has led to a significant drop in CSOK applications.

Gulyás said CSOK was most popular in smaller places where the subsidy and the recipient’s co-payment was sufficient to buy a property, while in larger cities couples needed to take out a bank loan to complete the purchase price. Since banks have “practically stopped providing loans” as customers were discouraged by high interest rates, the number of CSOK applicants is also dwindling, he said.

The village CSOK continues to be available for new construction, buying a second-hand home or for renovation, and applicants will enjoy a VAT benefit below HUF 5 million, Gulyás said.

Concerning the new changes, he said the subsidy amount to build or buy a house would increase from HUF 600,000 to one million for one child, from HUF 2.6 million to 4 million for two children and from 10 million to HUF 15 million for 3 children.

For renovation, the subsidy will increase from HUF 300,000 to 500,000 for one child, from HUF 1.3 million to 2 million for two children, and from 5 million forints to 7.5 million for three children, Gulyás said.