March inflation in Hungary at 25.2 percent

Inflation remains above 25 percent in Hungary, with consumer prices in March averaging 25.2 percent higher than a year earlier, according to data published by the Hungarian Central Statistical Office (KSH) on Wednesday. Viktor Orbán has repeatedly promised to bring inflation down to single digits by the end of the year, but as can be seen, the rate of decrease is very slow. In January, inflation was 25.7% and in February, it was at 25.4%.

Over the past year, household energy and food prices have risen the most in Hungary.

Food prices rose by 42.6 percent compared to March last year, while the price of household energy rose by 43.1 percent.

In terms of food, the price of eggs (74 percent) rose the most in a year, but the price of dairy products (72.8 percent), butter and butter cream (68 percent) and bread (67 percent) also rose significantly.

KSH data also reveal that the price of piped gas increased by 62.8 percent, firewood by 55.9 percent, bottled gas by 51.6 percent and electricity by 27.6 percent.

The average price of consumer durables was 11.2 percent higher in March than at the same time last year, the average price of spirits and tobacco was 19.7 percent higher, and the average price of services was 13 percent higher.

Consumer prices rose by 0.8% on average over the past month. Food was 1.5 percent more expensive than in February, while the price of household energy fell by 3.8 percent.

Although they are making good money on it, they would prefer to overcome it

Tackling inflation has become a key issue in Hungarian politics in recent months. According to the government, the main reason for the rise in prices is the war in neighbouring Ukraine, and the sanctions imposed by Brussels in response to the war are the second reason.

In his annual State of the Nation speech, Viktor Orbán compared inflation to a tiger and set a target to bring it down to single digits by the end of the year.

But there is another side to the issue, and that is rising tax revenues due to inflation. At 27%, the Hungarian VAT is a world record, while inflation above 25% is an EU record. This means that with such high inflation and such a high VAT rate, the state's VAT revenue increases significantly, which is no small help to the budget.

Last year, this meant that instead of the planned HUF 5,487 billion, HUF 6,860 billion of VAT went into the state budget, which is a difference of 25 percent compared to what was expected. Naturally, this is good for the state, as its expenditure doesn't grow so fast, but it is a huge burden for the population (and especially the poor, who use up most of their income immediately).

Many countries have responded to the growing burden of their populations by cutting sales taxes, for example Spain has made bread, milk, cheese, eggs, fruit and vegetables VAT-free. Hungary hasn't done so, but introduced price freezes instead, which the government claims will reduce inflation, but critical economists and the Central Bank (MNB) say they actually brutally increase the inflation rate.

Inflation has already been decreasing in most European countries in recent months, as global energy prices are on the way down, and this will eventually filter through to Hungary. So the brutal price rises will come to an end, but the question of when and how quickly this would happen still remains.

Orbán's dream has already come true – in the eurozone

According to the Eurostat forecast, the average March inflation rate for the 21 eurozone countries was at 6.9%, meaning that most of these countries have already achieved the target that Viktor Orbán had set for Hungary to reach by the end of this year: single-digit inflation.

According to preliminary data, in March 2023, inflation, which the Hungarian government has blamed on the misguided Brussels sanctions was

• only 3 percent in Luxembourg
• 3.1 percent in Spain,
• 4.5 percent in the Netherlands

and at the other end of the scale, Latvia was at 17.3 percent, Estonia at 15.6 percent and Lithuania at 14.6 percent.

The average inflation rate in the euro zone has been in single digits since December last year, when it stood at 9.2 percent, and has since fallen further month by month. Only six of the 21 countries had double-digit inflation in March this year.