Hungary Newsflash, Week 20, 2022
Double-digits inflation on the horizon, a temporary burst in GDP growth, bovine tuberculosis found at a cattle farm in Southern Hungary, and accelerationg price increases of agricultural products - The week in Hungarian agriculture
Hungarian National Bank expects double-digit inflation
Barnabás Virág, Vice-President of the Hungarian National Bank (MNB) stated at a conference on Tuesday that Hungary reaching double-digit inflation this year will be „unavoidable”.
In our last Newsflash, we reported on increased inflation in Hungary.
According to Mr. Virág, the inflation trend might break by the second half of the year. The VP also stated that if lockdowns do not return, Hungary’s economy might produce one of the best growth figures in Europe this year.
Mr. Virág has also stated that while inflation will be heavily influenced by global trends, strict monetary and fiscal policymaking, increasing competition in certain sectors and „cooperation on the individual level” can help stem the tide, adding that MNB will continue with its strict monetary policy which, according to the portal 444.hu projects further interest rate increases.
Mr. Virág listed the populace’s growing savings as a success of the economic governance of the post-2010 era. (2010 was the first year of the recently re-elected Fidesz-KDNP administration.)
While according to official reports, aggregate savings have increased in the population, the news portal Azénpénzem.hu reported last year based on a study by the GKI Gazdaságkutató research institute that two million people in Hungary currently live under the poverty line. In 2019, the richest 10% of the population concentrated 23% of the aggregated national income. The bottom 30% of the population on the other hand made up only for 14% of the national income and the poorest 10% had 3% of the income.
8% GDP growth in Q1, 2022
According to the latest data by the Central Statistical Office (KSH), Hungary’s (adjusted) annual GDP growth rate was 8% until the end of March and the quarterly GDP increase was 2.1%.
This is the best Q1 GDP growth figure in the past five years. According to the news portal Telex.hu, there are multiple reasons behind this high level of increase. One is a low baseline compared to 2021. The ending of the lockdowns and the restart of tourism played a major role in the GDP growth acceleration. Another is the fiscal expansion in the first months of the year. Coinciding with the period leading up to the April general elections, the government instituted massive tax reimbursements to families in Hungary, as well as a number of other expenditures, e.g. 13th-month pensions as well as pre-financing large governmental projects.
All stakeholders and analysts agree that this growth rate will decline once data from Q2 comes in since Russia’s aggression against Ukraine dominated the global as well as the European economy in the past month.
Bovine tuberculosis identified in Southern Hungary
The news portal Agrárszektor.hu reported this week that the National Food Chain Safety Office (NÉBIH) has identified the presence of bovine tuberculosis at a cattle farm in Csongrád-Csanád County, in the Great Plains in Southern Hungary.
The disease was identified in four animals which were slaughtered and laboratory testing has confirmed the presence of mycobacteria in the carcasses. The authorities are currently investigating the origin of the infection. Due to the enforcement of the relevant EU veterinary regulations, infected meat did not enter the human food supply.
Bovine tuberculosis is present in the wild game population in the country, which leads to a few isolated infections in the grazing cattle stock. The annual intradermal testing of all cattle livestock for bovine tuberculosis is mandatory in Hungary.
NÉBIH will repeat the testing of livestock at the farm where the infection happened in May.
Purchase prices of agricultural products on the rise
The business news portal Trademagazin.hu reported earlier this week that purchase prices of various agricultural products increased substantially by March.
The increase in the purchase prices was 24.9% in February, which accelerated by 12.5 percentage points to 37.4% by the end of March. While in Q1, 2021, producer prices increased by 13%, in Q1, 2022, these prices increased by a further 33.9% compared to the same period in 2021.
The prices of crops and horticultural products rose by 15.6 percentage points from February to March while their y-o-y increase was 41.8%.
The main drivers of the increase of the prices of plant-based products were cereals and industrial crops (19.9 percentage points to a total of 58.9%).
One shocking figure is the y-o-y increase of the price of wheat, which was exactly 60% in March (With a 18.3 percentage points acceleration from February).
The purchase price of fruits is still lower than the 2021 figure, however, the gap is closing fast, in February the price was -18.7%, by March this rose to -6.7%, with an acceleration of 12 percentage points.
The prices of legumes and vegetables were at a 18.8% increase level, with an acceleration of 4.3 percentage points from February. Cabbages and tomatoes saw the highest rate of increase in prices.
The acceleration of the increase in the prices of live animals and animal products was 5.4 percentage points to a total of 26.9%, of which the annual rise in prices of live animals was 6.1 percentage points to 27.9%.
The aggragated increase in the purchase prices of live animals was catalyzed by a 9.6 percentage point y-o-y increase in the price of pigs compared to February.
The price of cattle for slaughter also increased by 24.1% y-o-y but with only a 3.1 percentage points acceleration compared to February.
The purchase price of poultry increased by 33.5 percent in one year, which is only 0.6 percentage points higher than in February. Within this, however, the 38.7% annual increase in prices for slaughter ducks and the 3.8 % annual increase in geese showed a monthly acceleration of 7.8 and 7.4 per cent, respectively, while the 19.0% annual increase in turkey prices was 5.6 percentage points lower than in February.
In the case of chickens, the 37.6% annual increase represents an almost imperceptible 0.2 percentage point moderation from the February price increase. The purchase price of milk is 24.5% higher and that of eggs is 13.8% higher than in March last year, which is an annual increase of 4.1 and 5.8 percentage points, respectively, compared to February.