Sad news: food prices in Hungary exceed EU average
Hungarian prices are the highest in 9 of the 12 major commodity groups, with food, communications and housing being the most expensive, according to Eurostat.
In Hungary, food prices are particularly high, now above the EU average, according to Eurostat data, reports Portfolio. Hungarian price levels are much higher than those in Poland and Romania, which is why development and welfare indicators in purchasing power parity (PPP) are converging despite nominal differences.
Hungarian household consumption stood at 70% of the EU average in 2023, placing it at the bottom of the ranking. This is partly due to the fact that some of the value produced in Hungary does not become national income (this is the GDP-GNI gap), and the share of household income in national income has been steadily declining over the last 25 years, while the share of corporate and state income has been increasing.
Moreover, a very high share of GDP generated has been directed towards investment rather than consumption, slowing the convergence of average earnings across regions. Additionally, the population’s propensity to save has risen in recent years at the economy-wide level, meaning that a smaller proportion of income earned is being consumed compared to before.
According to the EU statistical office’s database, the price level of final consumption (AIC) for Hungarian households is 69.4% of the EU price level. Meanwhile, in the similarly developed Polish and Romanian economies, the figures are 63.5% and 54.1% respectively.
Food prices reach EU average for the first time
Although the exact reasons for the price spike in Hungary are unclear, in the case of food prices, a high VAT burden, inefficiencies in the food industry, and poor price competition may be contributing factors. The high cost of communication may also play a role. Housing is more complicated, as household energy and rent are involved. In terms of household energy, Hungary seems relatively cheap due to the policy of reducing energy costs. For rent, there are no specific statistics, but it can be assumed that the price level is high. Recent data also show that food is the product area where Hungarian prices have caught up with the EU average for the first time.
It should be noted that convergence in economic development often goes hand in hand with convergence in price levels. This is evident in Hungary, particularly with products traded abroad, according to Portfolio.
Despite the high food prices and the rapid price catch-up in recent years, the Hungarian price level cannot be considered particularly high overall, according to the portal’s analysis. The data indicate a significant variation in price levels within our development bracket. Relative price levels in countries with a similar level of development vary between 60% and 90%. The Hungarian indicator is not abnormal, but rather the Polish and Romanian price levels seem excessively low. Even the level of food prices is not extraordinary, as the price levels in Croatia, the Czech Republic, and the Baltic countries are similar.
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