Inflation in Hungary

A short history of inflation in Hungary

The Pengo Hyperinflation (1945 to 1946)

Hungary had the worst hyperinflation ever recorded. In July 1946 prices were doubling roughly every fifteen hours, and by the end banknotes were cheaper than firewood and were burned for heat. The cause was the war: the country had been fought over twice, industry and transport were wrecked, the state had almost no tax base and a vast reconstruction bill, and the only way to pay it was to print money. The pengo was replaced by the forint on 1 August 1946 at a rate that removed twenty-nine zeros.

Planning, Transition and the Euro Question (1946 onwards)

The forint held its value under central planning and then had to survive the transition to a market economy, which brought high inflation again through the 1990s as controlled prices were released. Hungary joined the European Union in 2004 but has not adopted the euro, so the National Bank of Hungary still sets its own interest rates, and inflation has been consistently higher than in the euro area since.

Post-Covid Inflation (2021 to 2023)

In Hungary, prices rose fastest in January 2023, at 26.2%. The causes of the post-Covid inflation were global in nature, beginning with the lockdowns: factories and ports closed and the shipping between them fell out of sequence, so goods took longer to make and longer to arrive. Governments had spent heavily supporting household incomes through those closures, so when restrictions lifted there was money waiting to be spent and not enough on the shelves to spend it on. Then in February 2022 Russia invaded Ukraine, disrupting two of the world's largest suppliers of wheat, fertiliser, oil and gas at once, and the cost of everything grown, heated or transported rose with them.

Because the causes were shared, so was the timing: most countries peaked within a few months of one another in late 2022. The major inflation events covers this episode and the others in more detail.