Interview: Analyst sees turning point in Hungary's inflation

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BUDAPEST, March 20 (Xinhua) -- Hungary's inflation rate is still the highest in the European Union (EU), but it may have peaked in January and has started a slow, Zoltan Torok, an analyst at Raiffeisen Bank, said here on Monday.

According to the latest official figures released by Eurostat, the statistical office of the EU, inflation in Hungary was 25.8 percent in February, higher than that in Latvia (20.1 percent) and the Czech Republic (18.4 percent).

Hungary's Central Statistical Office (KSH) said that consumer prices in the country were up by 25.4 percent in February, a figure slightly lower than that posted by Eurostat, which uses a different methodology. For January, KSH posted a 25.7 percent annual inflation rate.

According to Torok and other local analysts, inflation in Hungary peaked in January and started to fall in February. "Imported inflation (price increase due to an increase in costs of imported products) is decreasing, and raw material prices are also on the decline."

Torok expects this gradual decline to continue, mainly because prices for food and services need more time to readjust. The drop, he predicted, would be faster in the second half of this year.

He explained that the reasons for Hungary's high inflation rate included international factors, such as high energy prices and the supply chain disruptions, as well as domestic problems.

"The forint was the worst performing currency in the region," Torok said. "It has lost a lot of its value in recent months, and the government's administrative measures also contributed to the current situation."

The price caps on fuel and staple food products had a temporary braking effect on prices, but commercial players soon transferred their losses accumulated on fixed price products onto other products, which eventually pushed prices higher, said Torok.

Electricity, gas and other fuels in Hungary were 49 percent more expensive in February than in the same period of last year, and food prices surged by 43.3 percent, according to KSH.

In a paper released at the end of February, the International Monetary Fund (IMF) said that "multiple shocks and events have fueled inflation (in Hungary) since 2020," including the "extraordinary loosening of fiscal and monetary policies, globally and in Hungary," and the "additional round of fiscal stimulus ahead of the April 2022 parliamentary elections, (which) further compounded inflationary pressures.

"A widening external deficit led by high energy prices and sustained demand, tightening global financial conditions, and disputes with the EU (over billions of euros of development funds) added to risk perceptions," the IMF said, "which intensified pressure on the exchange rate and imported inflation."

Under a deal reached with the EU over the frozen funds at the end of last year, the government of Hungary expects inflation to fall into the single digits by the end of this year. Enditem

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