Chief Economist: May Inflation of 4% is Below Expectations

In May, the inflation rate of 4% was below expectations, as highlighted by Gergely Suppan, the chief economist of the Ministry for National Economy, in an interview with M1 news channel.

Despite this, inflation has consistently hovered between 3.6% and 4% since the year began, a relatively low range compared to previous years. However, the chief economist emphasized the ongoing need for attention, particularly regarding the continued high rate of increase in service prices. He indicated that the 4% inflation falls within an acceptable tolerance band.

Mr. Suppan attributed the comparatively 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 noted a significant decrease in raw material and commodity prices following the price shock of 2022.

Fuel prices, down by 4.4% from the previous month, were also influenced by government actions, according to Suppan. He cited 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, Gergely Suppan highlighted the 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. Mr. Suppan suggested that 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 appears feasible, according to the chief economist, and with sustained positive economic indicators, growth rates could surpass 4% next year.

Via MTI; Featured Image: Pixabay