Background information

Inflation in Hungary reached 7.4% in both November and December 2021 and continued to rise, reaching 8.5% in March 2022. The country’s central bank predicted that inflation could exceed 9% by the end of the year due to the continued war in Ukraine. In order to react to increasing inflation, among other measures, the government issued decree 624/2021 concerning fuel prices. The measure was put in place to offset soaring inflation.

Content of measure

On 15 November 2021 the government capped fuel prices at their level on 15 October 2021. For 95-octane fuel and diesel the price cap was set at HUF 480 per litre (about €1.23). Hungary’s government implemented the price caps in response to surging inflation and record weakness of the forint against the euro. They expect that the price cap would help the economy and help curb inflation. As the price cap puts strains on fuel merchants, the government also capped wholesale prices at the same level and reduced excise tax on fuel by HUF 5 per litre. The price caps were extended several times.

Use of measure

In the March 2022 inflation report, the central bank said the fuel price cap reduced the rate of inflation by 2.5 percentage points. Retail turnover rose by 7.3% month-on-month in March 2022 and by 16.2% year-on-year, according to statistical office data. Food sales rose by 0.2% while fuel sales rose by 50%.

According to retail data published by the Hungarian Central Statistical Office KSH, fuel sales continued to rise year-on-year, by 32% in the second quarter of 2022 and by 21% in the third quarter 2022.

A report by the central bank in December 2022 said that price caps were not successful in curbing inflation, instead they were stoking it, as can be seen by food prices rising higher in Hungary than anywhere else in Europe.

Target groups

Workers	Businesses	Citizens
Does not apply to workers	Does not apply to businesses	Applies to all citizens

Actors and funding

Actors	Funding
National government Company / Companies	National funds

Social partners

Social partners' role in designing the measure and form of involvement:

	Trade unions	Employers' organisations
Role	No involvement	No involvement
Form	Not applicable	Not applicable

Social partners' role in the implementation, monitoring and assessment phase:

• No involvement
• Main level of involvement: N/A

Involvement

In response to rising fuel prices, trade unions jointly proposed the government should raise the fuel travel compensation employers can give tax-free to employees from its 2022 level of HUF 15 per kilometre to HUF 50 (about €0.13) per kilometre. The trade unions’ proposal was partly successful, as the travel compensation was raised to HUF 30 per kilometre as of 1 January 2023, likely in part to compensate for the fuel price cap's removal.

Views and reactions

LIGA trade union said the price cap was an important measure to counter inflation, which is espeacially beneficial for low-income groups. They warned, however, that the rising cost of fuel increases the cost of going to work and in the long term it will impact the labour market.

In August 2022 the Hungarian Mineral Oil Association (MÁSZ) warned that as many as half of its 1,000 member petrol stations may be closing as they will no longer be able to supply fuel at the capped price.

Sectors and occupations

This case is not occupation-specific.

Sources

• 15 November 2021: Government decree 624/2021 (njt.hu)
• 28 February 2022: Govt decree 57/2022 (njt.hu)
• 21 April 2022: Unruly price rises in Europe
• 27 April 2022: Hungary extends cap on fuel and food prices to July 1 (apnews.com)
• 04 May 2022: Huge retail growth in March (www.penzcentrum.hu)
• 11 May 2022: Effects not seen in decades in Hungary (www.liganet.hu)
• 30 July 2022: Government decree 94/2022 (njt.hu)
• 13 August 2022: Hungarian Mineral Association MÁSZ warns fuel could run out (www.portfolio.hu)
• 09 December 2022: Price caps and inflation (www.mnb.hu)