GKI: Artificial Prices Keep Hungarian Inflation Down

Hungary's inflation would have been much worse than now, the highest in the EU, without state intervention, the Hungarian economic research company GKI reported.

In May, Hungarian inflation was the ninth highest in the EU at 10.8%, and while all EU countries have yet to release their June figures, it is already known that Hungarian inflation has accelerated to 11.7%. The GKI Economic Research Institute has now calculated that if it were not for the price freezes, Hungarian inflation would be the highest in the EU at 31%.

They calculate that if the price of natural gas were of the world market, this alone would push up inflation by 8.5 percentage points, while the fuel price cut would add 4.4 percentage points. For electricity, the impact would be 2.4 percentage points and for food 1.9 percentage points.

On a household basis, this means that paying the market price for natural gas would mean an extra expenditure of HUF 10,000 per person per month on average, as well as extra HUF 2,800 for electricity and HUF 2,150 for food. For fuel, the extra cost per person would be HUF 5,000, but since not everyone uses a car, it is more appropriate to consider that the average extra expenditure per vehicle would be HUF 20,000.

As the business news site hvg.hu has demonstrated, Hungarian inflation is quite different from the inflation seen in other countries on the continent: everywhere else (except for Malta) energy is very expensive, while in Hungary it is kept artificially low, while food prices are among the highest in Europe, and industrial goods and services are also well above the European average.