Hungary's Food Price Fix

On 17 March 2025, the Hungarian government launched a comprehensive price control initiative known as the margin cap, a temporary measure in force until 31 May. Designed as a rapid response to Hungary’s rising inflation, particularly the sharp increase in food prices, the measure restricts retailer profit margins to a maximum of 10 per cent across thirty essential food categories. With household budgets under significant pressure, the policy is intended both to curb inflation and to offer protection to families struggling with everyday expenses.

This intervention comes at a critical moment. According to the latest national statistics, Hungary’s average inflation rate reached 24.5 per cent in January 2025, while food inflation climbed even higher to nearly 30 per cent. The disproportionate rise in the cost of food has been a major contributor to overall inflation, prompting urgent action from policymakers.

Prime Minister Viktor Orbán, speaking in late February, expressed the government’s dissatisfaction with the current trajectory of price increases. He described the inflation levels, particularly in food items, as unacceptable and emphasised the administration’s commitment to shielding consumers. Orbán explained that the government had consulted retail sector representatives to identify ways to prevent similar uncontrolled price rises in the future. He added that if voluntary agreements could not be reached with retailers and suppliers, the government would introduce further regulatory measures.

Early indications suggest that the margin cap has produced swift and significant effects. Observations from participating stores, along with data from the Economic Competition Authority (GVH), show notable price drops across most targeted food items. According to the Ministry of National Economy (NGM), approximately 80 per cent of the affected products, especially in large supermarket chains including Spar, Penny and Lidl, experienced price reductions by the end of 17 March. Across these thirty categories, the average price decrease was recorded at 16 per cent, surpassing initial government expectations. Some individual products saw even greater reductions, depending on supplier dynamics and the specific characteristics of each item. Further adjustments are expected, as certain products remain under evaluation for price revision.

At a press conference on 18 March, National Economy Minister Márton Nagy highlighted the early success of the measure. He described the initial phase as generally smooth and praised the cooperation between government agencies, suppliers and retailers. Nagy also noted that negotiations were continuing with suppliers, urging them to voluntarily freeze prices in order to reinforce the margin cap’s impact. He stated that if suppliers refused to comply, further regulations could be introduced. Retailers appear to have implemented the policy effectively. Dr Tamás Kozák, Secretary-General of the National Association of Commerce (OKSZ), confirmed that retailers were adequately prepared for the measure and had complied fully with the requirements. He explained that average prices across affected goods had fallen by more than 10 per cent, although some variation existed within product categories due to differing supplier costs and logistical considerations.

To ensure the availability of discounted goods and to prevent stockpiling, several major supermarket chains have introduced purchase limits. Lidl has placed restrictions on certain items for customers who do not request VAT invoices, effectively limiting access for bulk buyers. Spar has imposed quantity caps on bulk products, while Tesco has introduced limits on dairy items, allowing only fixed amounts to be purchased per transaction. These measures aim to ensure that the benefits of price reductions are widely accessible, particularly for households experiencing financial difficulties.

The margin cap forms part of a wider economic strategy intended to stabilise living costs, promote affordability and encourage responsible behaviour within the supply chain. By prompting retailers and suppliers to align their pricing with national economic priorities, the Hungarian government hopes to reduce the immediate impact of inflation and establish higher levels of market accountability. As Hungary continues to navigate persistent inflationary pressures, the early results of the margin cap offer evidence that targeted intervention, when carefully monitored and broadly supported, can provide meaningful relief for consumers. Whether this initiative becomes a foundation for longer term structural reforms will depend on its sustained effectiveness, the willingness of market participants to cooperate and the evolution of the economic landscape in the months ahead.