At 3.4 percent, inflation in Hungary only fourth highest in EU

Inflation in Hungary was at 3.4 percent in August, making it only the fourth highest in the European Union, according to the report of GKI Gazdaságkutató Zrt (Economic Research Institute) based on Eurostat data. The last time inflation in Hungary was as low as in August this year was in early 2021, before the start of the inflation crisis. In Romania, inflation was 5.3 percent, in Belgium 4.3 percent and in Poland 4 percent last month. The annual CPI in the European Union stood at 2.4 percent in August.

The improvement is significant given that a year ago, in August 2023 Hungary still had by far the highest inflation (14.2 percent) in the entire EU. At the time, Hungary preceded the Czech Republic (10.1 percent) and Slovakia (9.6 percent), according to GKI. However, thanks to the high base rates and the successful economic policies aimed at reducing inflation, these countries managed to keep inflation well below 3 percent on average over the past six months, compared to Hungary's average rate of 3.7 percent between March and August of this year.

The level of inflation in Hungary started to significantly depart from the other countries' price indices in the summer of 2022, as a result of the increase in special taxes and new taxes imposed on businesses. According to the GKI, this alone raised the domestic price index by 8-9 percentage points.

The special taxes also contributed to the price index of food reaching record high levels in Hungary. The process had already started during Covid, but became really striking from April 2022 onwards compared to other countries in the region. While in August 2024, food inflation in the Czech Republic and Austria was 14 percent and 16 percent respectively compared to April 2022, in Hungary, this number was 35 percent. GKI says this is an indication that the government's measures, such as price freezes, have not been successful. They also point out that the current lower inflation is mainly due to international developments, not the government's interventions.