Background information

Inflation in Hungary reached 8.3% in February and 8.5% in March 2022, and the country’s central bank predicted it could exceed 9% by the end of the year. In response to increasing inflation, the government issued decree 6/2022 concerning food items, providing for caps applicable to a list of basic food products.

Content of measure

On 1 February 2022, the government capped selected food prices at their level of 15 October 2021. The price limit in place concerns basic food items such as sugar, flour, sunflower oil, pork legs, chicken breasts and other chicken parts and milk. Retailers must ensure that the items remain in stock, but they were allowed to sell other, similar items at higher prices. The prices are capped also for the online retail sector. Hungary’s government implemented the price caps in response to surging inflation and a record weakness of the forint against the euro with the intention of helping struggling families. The price caps were extended several times.

Use of measure

In the March 2022 inflation report, the central bank said the food price cap reduced inflation by 0.4 percentage point. Retail turnover rose by 7.3% month-on-month in March 2022 and by 16.2% year-on-year, according to statistical office data. Analysts however said that there has been increased consumption of non-food items which is not a result of the price caps on basic food. Food sales rose by 0.2% while fuel sales, where a price cap was also in place, rose by 50%.

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. The author, András Balatoni, noted that the food price caps affected 2.4% of the whole consumer basket, while food items make up 20% of that basket, so retailers had a chance to raise the prices of non-capped items. A ripple effect could be observed in rising prices of food and food-related services, which also dented competitiveness on export markets.

Another report on G7.hu showed that low-income households experienced nearly 30% inflation in September 2022. Examining inflation inequality, data show that earners in the lowest quintile experience higher inflation than those in the highest quintile and that the gap has been rising over the past few months.

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	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

No involvement was reported by social partners.

Views and reactions

The Trade Union of Retail Workers predicted that there would be a rush on stores as a result of the price caps. A Független Szakszervezetek Demokratikus Ligája (LIGA) and Munkástanácsok Országos Szövetsége (MOSZ) leaders said the price caps were only temporary and that higher-than-expected inflation would call for a second round of wage negotiations mid-year. LIGA also said the price cap was an important measure in putting breaks on inflation, which was beneficial especially for low-income groups.

Sectors and occupations

This case is not occupation-specific.

Sources

• 01 February 2022: Government decree 6/2022 (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)
• 09 December 2022: Price caps and inflation (www.mnb.hu)