Why is the Hungarian inflation the most problematic in Europe?
Regarding all products, Hungarian inflation was the third highest in Europe, but food prices rose by far the highest in Hungary. In addition to the global causes, there are also domestic reasons behind this high inflation rate, one of which being the weak forint.
The third-highest inflation in Europe
Regarding all products, Hungarian inflation was the third highest in Europe. However, food prices rose the highest in Hungary. The Hungarian price increase of 21.9 percent was surpassed only by Estonian and Lithuanian inflation, reports 24.hu. The smallest price increases were measured in France (7.1 percent) and Spain (7.3 percent). According to Portfolio’s estimate, Hungarian inflation could easily be the highest in Europe in November. One of the most significant reasons behind the extremely high inflation in Hungary is the rapid increase in food prices. In October, the price increase regarding processed (44.6 percent) and unprocessed (38 percent) food was by far the highest in Hungary.
What influences inflation?
In each country, the inflation indicator is strongly influenced by the subsidies and regulations used by national economic policies to deviate prices from the market. Moreover, price control measures in the fields of energy, fuel and food also have a considerable effect on inflation. That is why the consumer price index does not explain the high inflation rate in a country. Eurostat published a filtered indicator that is very close to the concept of core inflation. According to this method, they do not take energy and unprocessed food into consideration. They only look at the price rise. However, if we remove the increase in the price of unprocessed food in Hungary from the price index, the situation will not be more flattering. In fact, according to this measure, the resulting indicator is the highest in Hungary in the entire EU.
Domestic triggers
In order to understand why the situation in Hungary is so problematic regarding inflation, we have to dig deeper. According to Portfolio, there are also domestic reasons that negatively influence inflation. For instance, the weak forint makes imports more expensive. Furthermore, the election distribution led to the rise of prices from the demand side. Therefore, a solution could be the strengthening of the exchange rate. The central bank is confident that the rate of price increase may reach its peak in the coming months and then decline from there.
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Source: portfolio,hu, 24.hu