Experts Pessimistic as Hungarians Spend the Least in EU
The Hungarian economy is facing challenges as the average individual in Hungary consumed less per capita than individuals in any other EU nation in 2023. Experts from the Hungarian National Bank (MNB) are warning that significant changes are needed in government fiscal policy to prevent a bleak future.
One of the primary reasons for reduced spending in Hungary is lower wages, which have resulted in decreased purchasing power for residents. The cost of living in Hungary has become more expensive due to high inflation and lower real incomes compared to EU averages. While some product prices have remained stable, food prices have seen a significant increase over the past two decades, with Hungarians now paying over 95 percent of what the average EU citizen pays.
The impact of external factors such as the war in Ukraine, post-COVID demands, and government transfers before the 2022 elections has led to skyrocketing prices in the service industry. This has not only affected the dining out habits of people but also potential increases in prices for everyday items like ice cream.
Despite recent increases in household incomes, Hungary still lags behind other EU countries in terms of purchasing power parity and gross average earnings. Inflation remains a central issue, with prices in Hungary rising more rapidly than in other neighboring countries. The economy also underperforms compared to other Visegrád countries, with Romania and Bulgaria now surpassing Hungary in terms of consumer spending.
Experts from the Hungarian National Bank are calling for a change in economic policies to limit capital outflow from the country and promote growth in sectors contributing to gross national income. Government measures to reduce the budget deficit could lead to higher wages and a strengthening of the consumer price index, according to Finance Minister Mihály Varga.
Prime Minister Viktor Orbán has also emphasized the importance of the Hungarian economy lending more than it borrows, maintaining a low deficit, and high employment rates. It is clear that significant changes are needed in government fiscal policy to address the economic challenges facing Hungary in the coming years.
