In Hungary, a government measure to cap the profit margin of traders at 10% for a range of basic foods took effect at the beginning of the week of March 17, 2025. This action has led to significant price reductions, with some products experiencing drops of over 50%, particularly milk, yogurt, and cream. Economy Minister Márton Nagy announced in a press conference on Tuesday, March 18, 2025, that this profit margin cap affects approximately 1,000 products across 30 categories, resulting in an average price reduction of 16% across the board.
Data released last week indicated that food prices in Hungary rose by 7.1% year-on-year in February 2025, amidst a backdrop of an annual inflation rate of 5.7%. This inflation rate marks Hungary as having the highest level in the EU, where the average stands at just 2.8%. In the days following the introduction of the profit margin cap, specific categories of milk, yogurts, cottage cheese, oil, and lard saw price cuts exceeding 50%. According to Minister Nagy, out of the total 1,000 products affected, around 760 reported price declines, while 160 products maintained stable pricing, likely because their margins were already below the capped threshold prior to enforcement.
To ensure adherence to this new regulation, the government will upload the pre-capping prices to the online Price Monitoring platform (Árfigyelő). This tool allows citizens to compare daily price fluctuations and ascertain compliance by retailers. The Hungarian government, led by Viktor Orban, plans to reassess the profit margin cap at the end of May 2025 to determine whether to extend, suspend, or expand the measure or if a broader price reduction becomes necessary.
The introduction of the profit margin limit follows the government’s concerns over resurgent inflation and a modest economic recovery. As part of broader fiscal measures intended to protect consumers, the administration announced tax cuts for mothers and other adjustments aimed at mitigating the financial burden on families. Nagy emphasized that if the government detects non-compliance from retail chains regarding the profit margin regulations, they are prepared to extend the cap to all food categories. Furthermore, the administration is willing to reintroduce officially regulated prices as a last recourse.
During the significant inflation spike that previously hit Hungary between 2022 and 2023, food prices aligned with the EU average—as highlighted by a study from the Hungarian Central Bank. The central bank attributed prior price increases partly to low productivity and high energy intensity within the food industry, challenges that have persisted even as inflation began its downward trend. The recent cap is framed as a necessary intervention to prevent retailers from implementing unjustifiably high prices in response to inflation, as noted by the Ministry of Economy.
According to the Association of Hungarian Retailers (OKSZ), this latest measure could decrease food inflation by 1-2 percentage points, provided no further price hikes occur along the supply chain. Peter Virovacz, an economist from ING, projected that inflation might peak at 6.5% in October 2025, with average inflation rising to approximately 5.6%. Such figures could position Hungary to register the highest inflation rate in the EU for the second time in less than three years.
While the government’s actions aim to control inflation, they reflect a broader strategy as Hungary approaches parliamentary elections in 2026. Analysts suggest that similar to the U.S. elections of the previous year, rising dissatisfaction among voters regarding inflation could influence outcomes. The opposition parties have started to gain ground in opinion polls, presenting a formidable challenge for Orban’s administration in the upcoming elections.
In the context of rising prices across Europe, Romania has also faced its share of soaring costs, leading economist Mircea Coșea to reflect that a similar measure would not be feasible in Romania due to its dependence on imports.
The current economic landscape remains critical for Hungarian families, particularly pensioners and households facing escalating food costs. The government's proactive measures symbolize an attempt to alleviate some pressures associated with inflation and signal its commitment to ensure food affordability as citizens grapple with the implications of rising prices in daily life.
This approach, marked by a renewed watchfulness over cooperation among retailers and government mandates, may reshape the dynamics of the Hungarian food market significantly over the coming months.
