Economy 19 January 2023, 2:31pm

Hungary's sky-high inflation in EU perspective

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Hungary's inflation was the highest at 25% in annual terms in the European Union in December 2022. Disregarding Turkey (64.3%), only Latvia (20.7%) and Lithuania (20.0%) came close, followed in the narrower region by Czechia (16.8%). The dramatic rise in Hungary's consumer prices becomes even more apparent when we put the figures in perspective. The country leads the rankings in several product groups.

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The menu of charts in this article:

Dec 2022 annual inflation - Hungary vs. EU
2022 annual inflation - Hungary in the region
Dec 2022 month-on-month inflation - Hungary vs. EU
Aug-Dec 2022 month-on-month inflation - Hungary in the region

Prime Minister Viktor Orbán has repeatedly claimed that the sanctions imposed by the EU on Russia for the invasion of Ukraine are behind the country's plight and should be lifted, because then prices would immediately fall and inflation would at least halve.

This argument has been refuted many times, e.g. energy prices started to climb well before Moscow launched its offensive in Ukraine on 24 February 2022. It is also interesting to see how drastically these sanctions are affecting consumer prices in Hungary, while others in the EU - and in the region - suffer a lot less.

Annual price increases - Hungary vs. EU

Let's see the annual rates first. Hungary's 25% Harmonised Index of Consumer Prices (HICP) in December 2022 compares with 10.4% in the European Union, and in the region the next country in line is Czechia with 16.8% (see CEE comparisons below).

The 12-month data show MASSIVE price increases in Hungary in various categories, such as food and non-alcoholic beverages (47.9% vs. 17.8% in the EU), alcoholic beverages and tobacco (13.1% vs. 6.2%), energy (55.7% vs. 37.2%), transport (20.5% vs. 7.8%), restaurants and hotels (29.7% vs. 9.8%), and recreation and culture (15.2% vs. 6.5%).

Here are the main charts for an EU-HU comparison for the December 2022 HICP (total and according to select consumption purposes).

Annual price increases - Regional comparison

Hungary's 25% yr/yr inflation was the highest in the entire bloc. Click on the link below for the rankings (yr/yr, m/m) of the headline figures in the EU.

Hungary's HICP was by far the highest not just in the EU, but also in its more immediate neighbourhood.

Czechia was before Hungary in July, but then it was taken over in August and Hungary's lead just kept growing. If we zoon in on the Aug-Dec period we find that the rankings in CEE have not changed much in this period.

Food inflation was also immense, but - unlike in the case of the headline index - Hungary's lead over its regional peers was there throughout the year and kept on growing. This time Slovakia was the one to be on Hungary's heels.

As regards the yr/yr price increase of alcoholic beverages and tobacco, Hungary has been in the lead in CEE since July.

As regards the price of utilities, the partial abandonment of the household overheads reduction scheme in August is evident not just in the EU-HU chart above, but also in the regional comparison. The increase has moderated somewhat in December, though.

The over 20% yr/yr jump in transport prices in December is utterly surprising given the 12-14% monthly readings throughout the year.

As for restaurants and hotels, Hungary was first 'able' to beat Czechia last year in November and it extended its lead in the last month of 2022.

The price of relaxation has also been growing the most in Hungary in this region since September.

Monthly changes - Hungary vs. EU

Hungary's consumer prices grew by 1.8% month on month in December 2022, which comes after a 1.7% rise in November and a 2.1% growth in October. In monthly terms, prices already dropped in the EU in the last month of the year (-0.2%), after an 0.1% rise in Nov.

Food inflation in Hungary came down to 2.0% m/m from as high as 4.7% in October, while the EU average dropped to 0.9% from 2.0% in the same period.

The monthly price rise of alcohol and tobacco products came in at 0.3% m/m in both Hungary and the EU in December, but while the monthly readings in the EU have never been higher than 0.6%, Hungary's index peaked at 3.9% in July.

The price of electricity, gas and other fuels dropped 6.0% m/m in Hungary in December, which compares with a 4.8% moderation in the EU, but while the peak in the latter was 5.9% in October, Hungary's overheads policy change caused a 47% leap in August.

Hungary's 8.3% m/m rise in transport prices compares with a 1.6% drop in the EU. The Hungarian figure stands out in the region. Only Poland had an even higher month-on-month reading in March. (See regional charts below).

Restaurant and hotel prices rose 2.9% m/m in Hungary in December, well over the EU's 0.7%, while prices of recreation and culture went up more in the EU (2.0%) than in Hungary (0.4%).