Hungary's 44% food inflation is 10th highest in the world

World Bank: Hungary in top 10 countries hardest hit by food inflation

The World Bank posted on Twitter in the end of December its list of countries most hit by food inflation. Hungary is the tenth most severely affected country according to the organization’s analysis with a food inflation value of 44%.

The highest figure, 321%, was recorded in Zimbabwe.

We reported on the price increases in the grocery industry in our last report in December. Multiple independent stakeholders as well as press outlets in Hungary believe that the government’s price cap policy contributed to the high food inflation.

The Governor of the Hungarian National Bank also criticized the government’s price cap policies.

Most companies expect a weak national currency in the first half of 2023

According to the latest “large company growth index” survey by banking corporation K&H, most Hungarian large companies have already been affected by the low exchange rate and volatility of the Hungarian Forint. Based on financial data from Q4, 2022, 65% of companies in Hungary expect a weak state for the Hungarian Forint in the period until the summer of 2023, with an exchange rate of HUF 01-433 to the euro.

Moreover, K&H’s survey shows that the volatility of the currency does not only affect companies selling in markets abroad. The positive export balance does not help the financial situation of Hungarian companies substantially.

57% of exporting companies reported in the survey that the weakening of the Forint is already negatively impacting their operations. A year ago, one-fifth of companies primarily supplying the domestic market had been negatively affected by the weak currency. In the latest survey this rate has gone up to 48%.

The survey concludes that 8 out of 10 companies in Hungary are negatively affected by the volatility of the Forint. The weak national currency has contributed to the increase of production costs, primarily, operational costs and the cost of materials and labor. The cancellation of the price cap on fuel and the skyrocketing prices of utilities following the ending of the government’s signature utility subsidy policy have also been reported to have contributed to companies’ increasing costs.

Fish still reigns supreme at Hungarian Christmas dinners, despite price increases

The most common Christmas dinner for Hungarians is seafood, namely, freshwater or marine fish. A survey in December by Agroinform.hu has revealed that despite a 35-40% increase in the average prices of seafood in Hungary, 84% of Hungarians still sought fish for their Christmas night family dinners in 2022.

85% of the majority Christmas Fish-Eater Tribe goes for carp, while the second-most popular choice is catfish. Some of the other popular types of seafood served and consumed at Christmas dinner tables in 2022 included African sharptooth catfish, salmon and bighead carp. 81% of all fish consumed at Christmas in Hungary ascend to Christmas Dinnerhood in the form of the traditional Fisherman’s Soup.

Fish and seafood consumption in Hungary is one of the lowest in the EU with 6.7 kg/capita annually. (For comparison: EU: 24 kg/cpt, highest: Portugal with 59.91 kg/cpt, Netherlands: 20.6 kg/cpt.) One-third of Hungary’s seafood consumption is concentrated around the Christmas season.

In total, 26 thousand hectares of land is used in Hungary for aquaculture by 2200 fish farms, mostly covering the domestic demand. Hungarian aquaculture is facing hard times due to the cataclysmic drought of the summer of 2022. Due to severe water shortages, around 10% of Hungaries’ fisheries lost their entire stock and the reduction in fish stocks will impact their production for years. Moreover, stakeholders report that the 35-40% increase in prices does not cover the increased production costs caused by high energy prices.

Hungary’s potato reserves to last until the end of January (and pork probably as well)

The National Potato Alliance reports that by the end of November 2022, most stakeholders thought that with the inclusion of potatoes in the list of food items with capped prices by the government, the country would effectively run out of domestically grown potatoes by the end of 2022.

Recent data suggests that the domestically grown stock might actually last until around the end of January. However, Agrárszektor.hu reports that according to leading agriculture economist, György Raskó, Hungary will run out of potatoes and also pork in January and will entirely depend on imports.

A governmental decree published in the end of December 2022 mandates that grocery stores are to stock twice the amount from products with price caps than they had had at the time when the prices were frozen in order to maintain a stable supply for the populace. This decree will enter into force on January 13.