Hungary imposes mandatory price cuts on basic food items

Hungary has seen a 38.5% increase in food prices
calendar icon 1 June 2023
clock icon 2 minute read

Hungarian Prime Minister Viktor Orban on Thursday imposed mandatory price cuts on some basic food items by large retailers as his nationalist government tries to tame the European Union's highest inflation rate from levels exceeding 20%, reported Reuters.

Under the plan, retailers with annual turnover of more than 1 billion forints ($2.96 million) will have to offer weekly discounts on 20 food items including poultry, milk, cheese and bread of at least 10%, compared with the lowest price offered in the previous 30 days.

Orban's government, which is facing its toughest challenge since coming to power in 2010, is hoping the measure will help rein in inflation, which was 24.5% in April, including a 38.5% increase in food prices, both the highest in the EU.

Hungarian trade alliance OKSZ has said retailers have voluntarily reduced food prices over the past weeks whenever a decline in domestic supplier prices made it possible. Barring a further decline in these costs, the OKSZ said food retailers would likely need to boost imports.

The price surge is taking a toll on Hungarians, with food sales falling by 10.3% year-on-year in March.

On Thursday, Orban also announced an increase in the tax rate for large retailers in 2024 to 4.5% from 4.1% on revenues above 100 billion forints, as part of wider efforts to stabilise the budget against the backdrop of a sharp economic slowdown.

The European Commission, which last week said the retail tax disproportionately burdened large foreign companies, said it was analysing Orban's latest measure to cut food prices.

Countries ranging from Italy and France to Britain are also considering exceptional measures to rein in food inflation.

In central Europe, Romania's government agreed to a voluntary scheme for food processors and retailers to each cut 10% of their mark-up prices for milk produced in the country that cost more than 7 lei ($1.57) per litre in stores as of May 1.

The Czech government plans to cut the value-added tax on most food items to 12% from 15%, while in Poland, the region's main economy, the deputy finance minister has said a 0% VAT rate on basic food products would be extended beyond 2023.

($1 = 4.4664 lei)

($1 = 338.010 forints)

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