The Daily Star reports, that Hungary’s annual inflation sank to -0.5 percent, the lowest level since 1968, official data showed Friday, mainly due to government-mandated household utility price cuts. The Hungarian central bank forecasts average inflation of 0.1 percent this year and 2.5 percent for 2015. While Hungary is not part of the eurozone, many EU countries have shared in the currency bloc’s drop to ultralow inflation that officials worry could turn into a dangerous deflationary spiral.
In the case of Hungary, which just two years ago had the EU’s highest inflation rate at 5.6 percent, the drop in prices is mainly due to government measures. PM Viktor Orbán’s right-wing government, elected in 2010 and re-elected last April, has forced utility providers to cut prices.Government-mandated energy prices — an essential feature in Prime Minister Orban’s policies, often seen as a populist — have helped push headline price growth to well below the central bank’s medium-term target of 3 percent.
“The decline in prices was driven by an annual 12 percent fall in household energy prices and base effects,” Borbála Minary of the national statistics office KSH said on Friday. Zoltán Reczey, an analyst at Buda-Cash Brokerhouse, was quoted by MTI new agency as saying “the dominant factor in deflation was the effects of the government-mandated energy price cut.” Gergely Gabler, an analyst at Erste Group Research, estimated that inflation could return in December, but until then it will remain in the negative territory.