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Inflation hits 24.5 percent in December

January 21st, 2023

As year-on-year inflation breaks another record, economists wonder if rapidly rising prices have any potential benefit.

On Mandiner, Géza Sebestyén, economist of the pro-government Matthias Corvinus Collegium writesthat high inflation is actually good news for Hungarians. Sebestyén dismisses suggestions that Hungary’s galloping inflation is a result of economic mismanagement. He explains that a combination of last summer’s drought, the war in Ukraine and EU sanctions have increased energy and food prices throughout Europe. The same nominal price hikes caused by these external factors translate into higher inflation in countries where prices were lower, he argues. If we calculate nominal price increases in Euros, it becomes clear that Hungarians do not have to spend more in Euros on products than most Europeans. As an example, Sebestyén mentions heating gas prices. Even those Hungarians who use more than the subsidized amount of heating gas have to spend less extra Euros on heating than citizens of most west European countries, he suggests.

Hírlklikk’s Péter S. Föld finds Sebestyén’s suggestion completely ridiculous. The left-wing commentator reads Sebestyén’s claim as implying that it is better to be poor than wealthy as the poor are hit less hard by inflation.

On Portfolio, Károly Beke contends that record high inflation has several benefits for the government. The independent analyst points out that higher prices yield higher revenues and help the government inflate debt away. In Beke’s calculation, by the end of the year, Hungarian public debt will inevitably sink below 70 per cent (and may sink to 66 per cent) of the annual GDP from the current 73.5 per cent – even if the economy does not grow at all.

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