Inflation decreasing, core inflation increasing in Hungary in Q1 2023

By in
287
Inflation decreasing, core inflation increasing in Hungary in Q1 2023

March inflation data has just been published, and they allow some insight into the latest developments in Hungarian economy. Get a quick overview here.

March inflation in Hungary

The Hungarian Central Statistical Office has just published the inflation data for March. For now, yearly inflation remains above 25%, although there is a declining trend visible since the start of the year.

  • March: 25.2%
  • February: 25.4%
  • January: 25.7%

Inflation remains most visible in the prices of foodstuff, which have become 42.6% more expensive compared to last March, and 1.5% more expensive than in February. The prices of eggs, dairy, and bread increased most.

The prices of retail energy decreased by 3.8% on average since February, although prices are 43.1% higher than last March. The products most affected by inflation are piped gas, firewood, bottled gas, and electricity.

The price increase since last March is notable also for

  • durable goods: 11.2%
  • alcoholic beverages and tobacco products: 19.7%,
  • and services: 13%

Inflation vs. core inflation

While inflation is slowly decreasing in Hungary, core inflation is still on the rise. This is mostly due to how core inflation does not include items that are considered more volatile, which lets it reflect processes in the economy more faithfully. It excludes raw materials for foodstuff (which in fact have become more expensive), and also energy prices, which have been going down for some time.

Analysts suggest that the increasing core inflation is mostly due to the inflation of the prices of processed food and services. As a result of Hungarian economic policies, service prices typically increase periodically, staying on plateaus for some time, and then make bigger leaps when providers are finally forced to put price tags on their risks.

Driving forces behind inflation

Inflation is a complex phenomenon, but the main driving forces include the following:

  • Price caps – While they intend to mitigate the effects of inflation on essential foods, retailers must compensate for losses, which drives the prices of other items up. Price caps are currently in place until 30 April, but they might be extended further, as there are no news of their abolition.
  • Energy prices – Energy prices affect all kinds of overhead costs, especially that of the transportation of the goods to be sold, so they will be incorporated in the prices seen by customers.
  • Foreign currency exchange rates – In Hungary, the exchange rate of EUR is the most important due to the country’s heavy reliance on import. The EUR exchange rate was HUF 360 in January 2022, and even though it is “only” HUF 370 now, the Hungarian currency is quite volatile, and the EUR exchange rate peaked around HUF 420 in October 2022.
  • Salary increases – While salary increases (and especially the increase to the minimum wage) intend to let people keep the purchase power of their salaries, they can lead to an increase in demands, which can again put a pressure on prices, creating a vicious cycle.
  • Monetary policy – While the increasingly stricter monetary policy since H2 2022 is intended to keep Hungarian inflation down, its beneficial effects need more time to unfold.

Control what you can

In such an environment, it is essential to keep a close eye on your Hungarian business. In this, your accountant is your best ally, who can support your operation with precise bookkeeping and reporting. Helpers Finance offers accounting services to small and medium sizes companies in Hungary, with special expertise in working with foreign owners.

Was this article useful? Follow us on Facebook to never miss an update

DISCLAIMER: The information on this page is provided as general information only and it reflects the personal opinion of the authors. Nothing on this website constitutes investment advice or an investment offer as defined by Act CXXXVIII of 2007 (“Investment Service Act”), 4.§. (8) and (9). The content should not be used for financial or investment decisions, and it is not a personalized investment analysis. The information is provided without warranty of any kind. The authors, publishers and editors take no responsibility for any direct and indirect damage resulting from the use of the content of this site.