Hungary Newsflash Week 3, 2022

Food price cap: More details revealed

As we reported last Friday, Prime Minister Viktor Orbán announced in a video on his Facebook page last week that Hungary would introduce price caps on basic food products. The governmental decree on the measure is now out in the Hungarian Official Gazette.

According to the fine print, the food price cap measure will stay in force between February 1 and May 1, 2022.

The measure will freeze the prices of granulated (white) sugar, wheat flour, sunflower cooking oil, pork thigh (hock/ham), chicken breast and carcass/back, and 2.8% cow’s milk at their respective gross retail price levels as of October 15, 2021.

Minister for Agriculture István Nagy has called the price capping a “brave decision” and has commented that “retail companies can more than afford to practice solidarity and help stop inflation within their discount strategies.”

Péter Márky-Zay, mayor of Hódmezővásárhely and Prime Minister candidate of the electoral alliance of the six major opposition parties has commented that “the governmental-controlled chicken back meat price is a bitter symbol of the last twelve years of governance.”

At the end of last week, both Minister Gergely Gulyás of the Prime Minister’s office, as well as PM Viktor Orbán have stated that Hungary’s price capping policy follows Serbia’s example. (See our report on the Serbian price cap measure here.)

While the inflation surge following the COVID-19 crisis continues, Hungary will see other events that might affect the economy as the next parliamentary elections are scheduled to be held on April 3.

Avian influenza continues to spread in Hungary

Another outbreak of highly pathogenic Avian influenza was identified at a duck farm in Szabolcs-Szatmár-Bereg county, Eastern Hungary. The National Food Chain Safety Office (NÉBIH) has confirmed the presence of the disease at the duck farm on January 18. The facility houses 37 thousand heads of poultry livestock.

The extermination of the livestock populace has since been commenced. A protection area and a monitoring area have been set up within a 3-kilometer and a 10-kilometer radius of the facility, respectively. Since these areas cross the border into neighboring Romania, the Chief Veterinary Officer has notified the Romanian authorities of the developments.

Auchan Hungary to spend €8.9 million on raising wages

Auchan Retail Hungary Kft., the Hungarian branch of the Auchan multinational retail chain, has recently reached an agreement with the domestic retail workers’ union in which the company has agreed to raise employment wages between January 1 and July 1, reports the agricultural news portal Magyar Mezőgazdaság. In total, the company will spend €8.9 million on wage raises this year.

From January, monthly wages in regions with the most employees will be between €900 and €1,184 before taxes, and should the company reach its declared goals, these figures will increase to €962 and €1.251, respectively.

Skilled workers are expected to get higher wages. For example, in the second half of 2022, bakers are expected to make a monthly €1.365 before taxes. The news portal also reports that employee benefit plans, including the company’s employee stock option plan, will be further expanded.

Consumer prices continue to rise in Hungary as the inflation curve continues to climb. According to the Central Statistical Office (KSH), the December data shows an annual 7.4% core inflation increase in Hungary for the year 2021.

Producer price increases accelerate

According to the Hungarian news agency MTI, the latest data shows that in November 2021, the increase in producer prices for agricultural products mostly accelerated.

In total, aggregated average producer prices increased by 26.1% m-o-om and by 27.2% y-o-y.

Between October and November, field crop cultivation and horticultural products saw a price increase acceleration of 1.1 percentage points to a total of 36%, the acceleration figure for live animals and animal products was 0.2 percentage points to a total of 9.8%. Potato stands out with a 21.6 percentage point increase to 55.7% in total.

The annual increase of cereal prices started to slow down in the fall: With an additional 1.2 percentage points, the total m-o-m increase was 47.2% in November. However, within the cereals category, wheat saw a steeper climb with 4.2 percentage points to 44.3% while maize went through a milder climb with 7 percentage points. Still, the price increase of maize reached 50.8%.

Industrial crops saw a 4.4 percentage points acceleration to a 52.4% m-o-m increase, while legumes and vegetables saw a decelerating price increase (from 10.2% in October to 7.6% in November). Within the category, tomato actually saw a price decrease of 0.3% y-o-y in the month of November.

Fruits also saw a price decrease of 3.1% y-o-y, however, this price decrease has decelerated from a y-o-y 13.8% in October.

In the case of live animals, the aggregate y-o-y increase figure is 7.7%, which shows a deceleration of 0.6 percentage points compared to October. The category breakdown shows that pigs for slaughter saw a 7.4% price decrease. Chickens however, saw an acceleration of 0.9 percentae points to a total of 20.5% price increase and turkeys and geese saw a 5.8 and 4 percentage points increase to and 23.2% and 19.4% y-o-y price increase figures, respectively. Ducks saw a decelerating increase in prices, with 0.5 points to 13.8%. Meat cattle prices also saw an acceleration of 5.6 percentage points to 18.7%.

Milk and eggs saw an acceleration and a deceleration, respectively: Milk went up by 2.4 percentage points to a 11.5% increase while eggs saw a price increase deceleration of 1.1 points to 13.2%.

Allianz Risk Barometer: The top business risks in Hungary in 2022

The insurance corporation Allianz has published the eleventh edition of its annual global risk assessment. The top global risks for businesses in 2022 are expected to be cybersecurity issues, business interruptions and natural disasters.

The trends in Hungary diverge from this global pattern. According to the 2022 risk barometer, this year, the number one business risk in the country will be pandemic outbreaks (E.g. health crises and labor shortages, pandemic lockdowns), followed by cybersecurity incidents (Cybercrime, IT malfunctions, service loss, data breaches and fines).

The number three risk on the list is a tie between three categories. One is business disruptions (including supply chain collapse). Another is macroeconomic developments (monetary policy changes, restrictive measures, price increases, inflation) – A problem area whose risk chances went up since 2021. The third competitor in the number 3 position on the list is a new risk category, skilled labor shortage.

The list continues with another tie for number 6 between legal and legislation changes and natural disasters, while number 8 is yet another tie between climate change issues and fire and explosions. Number ten on the list is market developments.