Orban introduces new price tags in Hungarian supermarkets to encourage spending

Spending surge initiated: New price tags have appeared in Hungarian supermarkets as Prime Minister Viktor Orban endeavours to encourage spending amongst citizens following the European Union's severe food price surge. The labels, displaying warnings about products that have been downsized but not reduced in price, aim to combat the effects of last year's recession and the country's inflation rate, currently the highest in the EU at 17.6 per cent.

Size reduction alerts

Implemented on Friday, the new regulations mandate large retailers to alert consumers about any reductions in product size compared to the period between January 1, 2020, and July 1, 2023. These warnings, depicted by a prominent red exclamation mark and accompanying text, intend to expose the tactic employed by some manufacturers and retailers to mitigate rising costs by reducing product sizes while maintaining prices.

Although the inflation rate has decreased from its peak of over 25 per cent a year ago to 3.8 per cent in January, Hungarian consumers remain cautious amidst ongoing price hikes. Many express skepticism regarding the efficacy of the new measures, perceiving downsized products as disguised price increases.

Last year witnessed a decline in retail sales as Hungarian households grappled with soaring food prices, which outpaced those in the eurozone by a considerable margin. Despite efforts to align grocery prices with EU averages, Hungarian salaries remain substantially lower, exacerbating financial strain for citizens.

Wage-cost imbalance

Concerns persist regarding the disparity between wages and living costs, with many expressing doubt about Hungary's economic trajectory. The European Commission's recent survey highlights prevailing pessimism in Hungarian retail sentiment, signalling a challenging path towards economic recovery.

The Economy Ministry hopes that the implementation of price warnings will stimulate consumption and contribute to the government's target of achieving 4 per cent economic growth this year. However, lingering consumer caution, exacerbated by recent inflationary pressures, poses a formidable challenge to Orban's administration as it navigates the path to economic revitalisation.

(With Reuters Inputs)