Inflation is at record levels around the world. States are trying to cope in their own way. Hungary and Mexico have decided to take measures to limit the rise in the prices of certain products to protect the purchasing power of their populations.
Hungary caps the price of some basic necessities
In Hungary, inflation reached almost 14%. The government of Viktor Orban has frozen the prices of certain products, but this is not enough to curb this galloping inflation. The price of gasoline is capped at 1.20 euro per liter for individuals. Since February 2022, so before the start of the War in Ukraine, the Hungarian president has frozen the prices of basic necessities such as flour, milk and oil.
But Hungarians’ wallets continue to be eaten away by inflation. It is officially assessed at 13.7%, but in reality it must be much higher. “Cheese has increased by 40%, margarine by 50%! Same for cakes and pasta. And inflation would only be 13%? I do not believe it. It’s probably at least 20%gets annoyed Gabor. This Budapester is not wrong. According to an independent Hungarian research institute (GKI), food prices have increased by 34% over one year. For some products, such as bread, spaghetti, the price has even doubled.
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According to the Hungarian government, the inflation is due to the war in Ukraine and soaring energy prices. But there is another reason: the populist government of Viktor Orban spent a lot before the elections last spring, which fueled inflation.
Another problem: the forint, the Hungarian currency, has fallen by 10% since the beginning of the year. Moreover, the European recovery funds have not arrived because the Hungarian government has not made the reforms requested by the European Union. This worries investors and the decline of the forint increases the price of imported products.
Mexico tries to freeze the price of 24 food staples with a ‘goodwill deal’
In Mexico, inflation reached record levels: 8.62% in August compared to 2021. This is unheard of for more than 20 years. Until now, Mexico was an exception in Latin America, with inflation traditionally under control. From now on, the country no longer escapes soaring prices.
The increase relates in particular to basic food products. The cost of eggs, potatoes and onions, for example, has jumped 8-15% per month this year. Concretely, Mexicans spend 150% more for a kilo of onions compared to last year.
Rising prices further widen the inequalities between the rich and the poor. The poorest Mexicans devote a greater proportion of their budget to food, which accounts for around 50% of their expenditure. As inflation affects foodstuffs more than other goods and services, we see that it is ultimately the households with the lowest incomes who see their money melt away more quickly. In response, the government defined 24 staple foods whose prices had to stop rising. It relies on a strategy that includes the abolition of import taxes. “It’s a goodwill agreement”announced the Mexican President, Andres Manuel Lopez, at the beginning of May 2022. For the moment, the effects of this strategy have not really been felt.