Unexpected turn: Hungary no longer has the highest inflation in the EU

For months, Hungary was leading the list of inflation in the EU, even if recent figures in November indicated a minor improvement. Nevertheless, Hungary was still expected to close the year with the highest inflation rate in the EU. However, after a prolonged period, another country has now seized that dubious distinction. 

Fresh data

Portfolio writes that Eurostat has released the latest national inflation statistics. Contrary to expectations, according to the harmonised inflation indicators, Hungary did not have the highest annual inflation in the EU in November. When discussing inflation in the EU, we should also note that the EU methodology differs slightly from the methodology used by the member states. Thus, the two figures may differ slightly. However, international comparisons can only be made based on the Harmonised Index of Consumer Prices HICP using the common methodology.

Shift in inflation leadership

For about a year, Hungary held the undesirable title of having the highest inflation in the EU. However, this pattern was broken in November when Czechia assumed the lead. Hungary recorded an annual inflation of 7.7%, whereas Czechia surpassed it with 8%. The statistics also highlight that Central and Eastern European countries are the weakest performers in terms of price increases. Slovakia and Romania, both neighbouring countries, registered an annual inflation of 6.9%, while Poland recorded 6.3%. In November, the European Union averaged 3.1%, and the eurozone averaged 2.4%. This underscores the substantial impact of inflation on Central and Eastern European countries. While not the worst performers, the statistics provide little cause for contentment, particularly given Hungary’s cost of living increase since the onset of the energy crisis.

Subdued real economic growth in Hungary

The recession has played a major role in the moderation of Hungarian inflation. Hungary’s Real Economic Growth Rate has been one of the weakest in the EU in recent years, acting as a mitigating factor against rapid price increases. The European Central Bank considers an annual inflation rate below 2% desirable, and several countries have already achieved this. Belgium experienced a 0.8% decrease in prices the previous month, with Denmark at 0.3% and Italy at 0.6%. German prices rose by 2.2%, while France recorded the highest annual inflation among major EU economies at 3.9%. Anticipations suggest a potential uptick in inflation early next year. However, it could only be temporary.

Monthly inflation trends

Examining monthly inflation, most member states reported a decline in prices, with several experiencing a reduction of over 1%. While monthly inflation statistics offer a more precise snapshot of current price dynamics, it’s crucial to consider data over multiple months. Seasonal or one-off events can distort a single month’s data, potentially providing a misleading picture of a country’s economic situation. In Hungary, prices stagnated in November compared to October, suggesting a likelihood of an upward drift in the monthly inflation rankings.

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