Consumer prices were on average 0.4 percent higher in December year-on-year, while for the entire year of 2013 the inflation rate was 1.7 percent. In the last month of the previous year, consumer prices continued to decrease: the Hungarian Central Statistical Office (KSH) even published data over the past half a year indicating that inflation hit new record lows month after month. The prices of goods which the inflation basket for pensioners contains also declined, which is an unprecedented phenomenon hitherto.

Parallel to slowing inflation, wages and pension benefits increase in real terms and so do households’ discretionary incomes which consequently lead to higher consumption and economic upturn. It has to be stressed that low inflation has a favourable effect for every economic stakeholder. Low inflation creates a predictable business environment for enterprises. Low inflation is also positive from the aspect of economic policy, as it expands the manoeuvring room of a note bank to stimulate the economy. In Hungary, the gradual lowering of the base rate eased financing conditions of new investment projects for enterprises which will eventually also result in economic output growth.

Along with the cutting of utility prices, favourable data were also the consequence of decreasing food prices stemming from a rich agricultural harvest. From an international perspective, the Hungarian inflation figure is more favourable than those at the countries of the region (according to the latest data from November: Slovakia: 0.5 percent, Poland: 0.5 percent, Czech Republic: 1 percent, Romania: 1.3 percent), while in comparison to the EU average (0.8 percent) the Hungarian figure is much more favourable.

Parallel to low inflation, the Government has managed to establish fiscal balance and lay down the preconditions of economic growth, thus 2013 budget data are even better than formerly expected and the fiscal deficit-to-GDP ratio will be maximum 2.7 percent.

(Ministry for National Economy)