May’s Inflation Rate Comes in Below Expectations at 4%
In May, Hungary’s inflation rate of 4% was below expectations, according to Gergely Suppan, the chief economist of the Ministry for National Economy. Despite this, inflation has been consistently between 3.6% and 4% since the beginning of the year, which is relatively low compared to previous years. However, Suppan emphasized the need for ongoing attention, especially regarding the high rate of increase in service prices. He mentioned that the 4% inflation falls within an acceptable tolerance band.
Suppan attributed the lower perceived rise in prices by households to government initiatives, such as compulsory price actions and the implementation of a price monitoring system last year. Additionally, he highlighted a significant decrease in raw material and commodity prices following the price shock of 2022.
Fuel prices, which decreased by 4.4% from the previous month, were also influenced by government actions. Suppan mentioned agreements between the economy minister and fuel distributors to align domestic fuel prices with those of neighboring countries, resulting in prices below the regional average. Favorable trends in the oil market further contributed to the month-on-month decline.
Furthermore, the chief economist noted a positive correlation between Hungarian wage growth, surpassing inflation, and increasing real wages, which has bolstered household spending. Consumption began recovering in the first quarter, with expectations for continued acceleration. If consumption maintains its upward trajectory, it could serve as a catalyst for growth across other sectors of the economy.
The projected 2.5% growth for the Hungarian economy this year seems feasible, according to Suppan, and with sustained positive economic indicators, growth rates could surpass 4% next year. Other countries in the region like Croatia, Estonia, and Poland have reported higher inflation rates compared to Hungary. The outlook for Hungary’s economy appears positive, with the potential for continued growth in the coming years.
