Hungary: food inflation, price caps and economic effects

Economy minister talks about price caps

Minister for National Economy Márton Nagy has talked on Facebook about the potential reintroduction of the price caps on food. The minister stated that he had met with representatives of the National Trade Association (OKSZ) to discuss the development of food prices. The minister stated that the government is ready for “any necessary measure” in order to “control prices”. One of these potential measures is the reintroduction of maximum food prices.

The minister also mentioned that they are expanding the online price tracking system to include a hundred new products, including various fish, coffee, tea, rice, milk cream, beef, bread rolls, and cocoa powder. If traders and suppliers “cannot reduce prices together”, the government is “prepared to intervene directly,” the minister stated.

Portfolio.hu reports that in the past weeks, the government had alluded multiple times to introducing new measures to curb food inflation.

In January, inflation in Hungary was 5.5%, which is significantly higher than the 4.9% value previously expected by analysts.

Food prices increased by 1.9% m-o-m in January, and the annual price increase was 6% y-o-y. KSH measured particularly large price increases at the beginning of the year for milk (5.8%), coffee (4.9%), chocolate (4.7%), as well as vegetables, fruits (4.4%), and flour (3.8.%) in just one month. The rise of food inflation is primarily due to the increase in global raw material prices, but the effect of the weak Hungarian forint is also contributed to the trend.

Prime Minister announces VAT return for senior citizens

In his Saturday state of the nation address, Viktor Orbán said that this year they will return part of the VAT on certain food groups to senior citizens. The Prime Minister also spoke about inflation and the rising prices of food. Mr. Orbán mentioned that for a while it seemed that previous methods (price caps on food, price monitoring, and mandatory promotions) would be sufficient, but he believes that the prices of some basic food items have been “significantly increased by traders.”

News outlets reported this week on the details of the VAT return scheme. According to the Ministry of National Economy, seniors will be able to use a special discount card in order to be able to use the VAT return discount. Following the identification, the VAT return will be issued with a bank transfer, or in cash, with the regular monthly pension payment.

Agriculture minister talks about import restrictions on Ukraine

Minister for Agriculture István Nagy has announced on X (formerly, Twitter) that the agriculture ministers of Bulgaria, Hungary, Romania and Slovakia have sent their position on the modification of the EU-Ukraine Deep and Comprehensive Free Trade Are (DCFTA) in a joint letter to the European Commission.

The Minister mentioned in his post a return to pre-war tariff rate quotas; bilateral safeguard provisions and automatic protection for border states; a review clause for reassessment of the DCFTA in two years’ time; the introduction of regulations on phytosanitary, sanitary, animal welfare, public health and environmental themes; a specific solution for corn; and a threshold for minimum import prices.

Farmers are aging, farm numbers declining, new figures say

According to the latest figures on the demographics of farmers in Hungary, their average age  is rising menacingly. This is based on the large scale 2023 agricultural industry survey that the statistical office has concluded.

60% of farm managers are over 55 years old in Hungary. The number of farms was 198 thousand on June 1, 2023, which represents an 18% decrease compared to 2020 and a 33% decrease compared to 2013. The largest decrease was in farms with smaller areas and fewer animals, leading to an increase in farm size and livestock numbers. Average farm sizes have increased in recent years.

The number of farmers decreased in all age groups between 2013 and 2023, but to varying degrees. The largest decline was in the 55-64 age group, where their number decreased from 91 thousand to 45 thousand. The proportion of older farm managers, aged 65 and over, increased to 37% in 2023, up from 29% in 2013. 60% of farm managers are over 55 years old, similar to the EU average. However, the proportion of younger farm managers under 35 decreased to just 4.9% in 2023, representing a 42% decrease compared to 2013.

The number of farms led by managers who are men decreased by 38%, while those led by women managers decreased by 18%.

International trade balance €458 million in December, 2024

Based on the latest report by Hungary’s Central Statistical Office (KSH) last December, Hungary’s export volume was 1.9% higher than in the same period the year before. The volume of imports fell by 9.8% y-o-y. The trade surplus amounted to €458 million, and the balance improved by €756 million y-o-y. The adjusted volume of exports was 0.1% higher and the volume of imports was 0.3% lower than in November.

While in 2022, the country’s exports were (at today’s exchange value) worth €139.4 billion, imports cost €148.4 billion, leading to a -€9 billion trade balance. In 2023, exports were worth €142.8 billion, the value of imports were €134.3 billion, leading to a trade balance of €8.55 billion. In 2024, the trade balance increased, mostly due to a fall in the value of imports: Exports slightly decreased, amounting to €142.56 billion in total, imports however, declined in value to €131.15 billion, leading to a trade balance of €11.4 billion (Source).

Measured in Hungarian Forints, the price level of foreign trade in goods increased by 9.0% in exports and by 10% in imports compared to the same month of the previous year. The terms of trade deteriorated by 1.0%. According to KSH, the Forint weakened by 7.9% against the euro and by 12% against the US dollar.

The volume of exports of food, beverages, and tobacco decreased by 4.8%, while imports increased by 2.1%. Changes in the volume of cereals and cereal products were the reason behind the falling export figure. The increase in imports, meanwhile, was driven by changes in the volume of tobacco and tobacco products.

The volume change realized by the food, beverages, and tobacco commodity group contributed to the overall decrease in export traffic by 0.4 percentage points and slowed the decrease in import volume by 0.1 percentage points.

Simplified employment limit might increase to 210 days in agriculture

Agrárágazat.hu reported this week on the latest legislative changes to the regulation of seasonal temporary employment. In a December legislative change, temporary seasonal work has been made more expensive.

From December 1, 2024, employer taxes and contributions on simplified employment (EFO) are tied to the minimum wage, meaning they will increase this year. This will have two effects. Firstly, from July 1 this year, an individual can work a total of 120 days per year under EFO. Secondly, while seasonal work cost the employer €3.75 per day until the end of January, from February it will cost €5.51 per day in social contributions.

The new regulation has caused serious negative reactions in the horticultural industry, according to the portal. The profitability of the sector has been significantly affected in recent years by the increase in investment costs, import pressure, high VAT, the activities of VAT fraudsters, and last but not least, the lack of efficient labor.

A new change to the regulation is now on the government’s agenda, which would increase the temporary employment limit by an additional 90 days, to 210 days in total, for the agriculture industry, Agrárágazat.hu writes.

Nearly 30 thousand ducks culled due to Avian influenza

Agrárágazat.hu reported on Thursday that at two duck farms the whole stock had to be culled due to Avian influenza in the Hungarian Plain.

In Magyarbánhegyes, Békés county, South-East Hungary, at a farm with more than 13 thousand breeding ducks increased mortality, neurological symptoms, decreased feed and water consumption, and reduced egg production were observed, leading to a suspicion of the disease.

In Bócsa, Bács-Kiskun County, a similar suspicion arose at a farm with over 13 thousand ducks due to increased mortality and neurological symptoms. The National Food Chain Safety Office (NÉBIH) has  identified the H5N1 strain of highly pathogenic Avian influenza in deceased animals at both farms. The affected flocks are being culled. A 3 km radius protection zone and a 10 km radius surveillance zone have been established around the farms.

Spinach becoming more popular, production volume increases

Agrárszektor.hu reported this week that as spinach is becoming more popular in Hungary, the amount that is produced in the country is also increasing. According to a survey by the National Agricultural Chamber (NAK) and the Hungarian Fruit and Vegetable Interprofessional Organization (FruitVeB), spinach is cultivated on approximately 541 hectares in Hungary, the portal writes.

While the leading producer is China, with an annual production volume of 30.6 million tons, the rest of the leading producers fall behind by order of magnitude. Agrárszektor.hu reports that in 2022, the EU produced 674 thousand tons of spinach. In the same year, Hungary produced 12.1 thousand tons. This was a 32% increase compared to the 2017-2021 average.