The inflation situation in Hungary

Response to Katalin Botos „Inflation and our finances” and István Ábel – Gergely Bognár – Máté Lóga – Attila István Szabó „Changes in the explanation of inflation”

Abstract

The article examines the factors driving inflation in 2022-2023. We explore why inflation in the Hungarian economy has risen more sharply compared to neighboring countries with similar economic structures. The goal of the article is to highlight these factors and provide policymakers with recommendations for a more resilient inflation policy.
First, we respond to Katalin Botos’ views on inflation, and then we analyze some global inflationary trends. Our study focuses specifically on inflation in the agricultural sector.
Our findings indicate that, in addition to global cost-push inflationary pressures, several country-specific factors have contributed to the rise in domestic inflation. Energy prices have surged, and some supply chains in the East have been disrupted. For Hungary’s less productive but energy-intensive food industry, the energy price shock, combined with higher exchange rate volatility in 2022-2023 compared to neighboring countries, has had a strong impact in the short to medium term, causing significant deviations from long-term equilibrium. In our view, beyond enhancing food self-sufficiency, special attention should be given to the domestic development of the agricultural supply chain.