Inflation is Out of Control in

Hungary

December 2021, the Hungarian Central Statistical Office (KSH) registered a record high depreciation, with inflation rising to a level not seen for 14 years, which meant an overall price increase of 7.4%, yet the annual depreciation in Hungary was also over 5%.

Experts attribute this to a shortage of goods caused by the coronavirus crisis, to the brutal rise of energy prices and to the misguided economic policies of the government, as well as the central bank. If we were to break down the consumer´s market basket, food became, on average, 8% more expensive than a year ago. Yet, even within that, there are some products, such as cooking oil and sugar, which have risen by a quarter.

Hungary in the Market Economy

1990 Hungary started on the path of the market economy as we know it today, breaking away from the communist mentality driven planned economy. Although, the eternal break from the socialist state-owned economy can be seen as a great success, Hungary's first years in the liberal market economy were very turbulent, as the transition was difficult.

The early 1990s were mostly marked by high unemployment, inflation and falling GDP. It was only by the end of the decade that Hungarian economy was stabilised, at the cost of many painful austerity measures. Then, in the 2000s, the Hungarian economy recovered thanks to systemic reforms, strong industrialisation and significant infrastructure development.

The sacrificial efforts of the Hungarian government to catch up were crowned with success in 2004, when Hungary joined the European Union. As of that moment, billions of euros flowed into the domestic economy, resulting in a buoyant rise in living standards and a strong economy. All these advances seemed to be halted by the global crisis of 2008, to the extent that Hungary could hardly have avoided bankruptcy without the international monetary fund and other international assistance. Hungary's national economy was shaken by the 2008 crisis, a major recession and a series of negative effects sent the country's economy crashing to the ground. However, after administration change in 2010, the Orbán cabinet declared war on government debt and its levels started to shrink, for example through the reform of the pension system and the restructuring of loans. Over the next decade, public debt was significantly reduced, but the COVID-19 crisis put the Hungarian economy in a difficult situation again and the country went back to borrowing, which led to an unprecedented increase in government debt.

Unfortunately, in regional terms, Hungary was one of the biggest losers of the economic slowdown, falling two places in the regional development rankings by the end of 2021. 1995 we still had a significant advantage over the Baltic states, but today we find ourselves with even Romania hot on our heels ...