Chances are that Hungary will extend the margin cap - EcoMin

Margin cap

When questioned by journalists, the minister said that the government would decide on the future of the margin cap around 21 May.

What are the chances that it will not be phased out? I think there is a good chance.

"There's a good chance..." Okay. We have an extremely strong suspicion that the margin cap, which was introduced on 17 March and should be abolished on 31 May, will remain in place for longer.

On the question of extending the margin cap to other products, which he suggested on Sunday was a done deal, he said that the government would discuss on 7 May whether to extend the freeze to household and toiletry items and childcare products.

A very interesting question is whether margin regulation has a raison d'être, even in perpetuity. [...] Why doesn't a regulation have a raison d'être which essentially says what is the maximum profit margin that can be applied in trade?,

he pondered.

International examples

In many countries these price restrictions are not temporary but permanent, he said.

The Economy Ministry expects inflation to fall to around 4% in April from 4.8% in March and food inflation to 5%.

We are satisfied if we can keep inflation between 3-4% and food inflation below 5%.

Countries such as Croatia, Romania, and North Macedonia also took similar measures earlier – but they also lowered VAT rates on basic foods, which the Hungarian government does not intend to do. Hungary has the highest VAT rate in the world at 27%.

EuroCommerce, has expressed its concerns about price transparency and price intervention measures in Romania about a month ago. (EuroCommerce is the principal European organisation representing the retail and wholesale sector. It embraces national associations in 28 countries, sector associations and international companies.)

In Bulgaria the government is also working on a legal proposal that would cap retail margins.

Croatia implemented a price freeze on certain retail products on 7 February. The original list, set in September 2023, included 30 products, which number has recently been raised to 70.

Croatia has three VAT rates: a 5% tax applies to some basic foodstuffs, such as bread, milk, dairy products, and breast milk substitutes, baby food and processed cereal-based food for infants and small children, edible oils and fats of plant and animal origin, butter, and margarine, certain fresh or chilled meat, fish, and vegetables, as well as approved medicines, tickets for cinema, concerts, sports events, and cultural events, among others. A 13% tax rate is applied to baby diapers, menstrual supplies, accommodation services, certain newspapers and magazines, catering services provided within and outside a catering facility, and water supplies, among others. The top VAT rate is 25%.

The ‘temporary’ Romanian margin caps have been in force since 1 July 2023.

(i) The commercial markup applied by the processor is a maximum of 20% compared to the production cost of the product. (ii) The commercial mark-up applied by the trader for retailers and wholesalers is a maximum of 20% compared to the purchase price. (iii) It initially applied to 14 food products, now to 17.

The Hungarian margin caps has been in force since 17 March 2025. Retail margins are maximised at the average margin applied in January 2025 but not higher than 10%. It applies to 30 food product categories, and should be phased out on 31 May 2025.

The Hungarian government also said it could reintroduce price caps on food products if it is not satisfied with the results of the measure. In September 2024, the Court of Justice of the European Union ruled price caps were disproportionate.

GDP data

Commenting on the first quarter GDP data, he said that a small increase is expected.

Manufacturing, exports are highly dependent on foreign demand and the first quarter did not show a turnaround. We don't see a turnaround in Germany either. There has been a change in the German fiscal issues, but the impact will come later through the defence industry or even through infrastructure investment.

Commenting on this year's Easter period, he said it could give a big jolt to retail sales. The slightly weaker retail sales were due to inflation and the Easter effect, he added.

Reducing insurance premiums

On the issue of reducing insurance premiums, he said that voluntary commitments are being negotiated for all sectors. If the voluntary way doesn't work, there will be regulation. "In the case of insurance companies, we have asked for voluntary commitments, similar to banks and telecom companies, not to increase premiums."

We want the sum insured to rise with inflation, but not the premiums, and that is something that insurers should do away with this year. That is what we have asked them to do.

Here's a gun. It's loaded. Point it at your foot! Good. Now pull the trigger! If you don't, I will. But I sincerely hope you volunteer to shoot yourself. I hope you've learned your lesson and now know that when the government tells you to do something 'voluntarily', it's just a sarcastic way of saying it's a bona fide ultimatum.

Donald Trump Jr. visit

In response to a journalist's question about Donald Trump Jr's recent visit to Hungary and what he thinks about Hungary's economic relations with the US and China, he said:

Basically, we don't see the same investment potential from the US side as from the Chinese side.

The most important thing for Hungary is to attract investment, and here I have a very pragmatic view, putting Hungary first, he added.

Dunaferr

On the Dunaferr tender, he said there were two serious contenders. "One from the West, and very close, and the other from the East, both from the industry. Both are companies with a lot of capital". The tender will be launched at the beginning of May.

Demján Sándor Programme

Commenting on the current situation of some of the eight pillars of the Demján Sándor Programme launched at the beginning of the year, Márton Nagy said that the interest rate on investment loans under the Széchenyi Card Programme was gradually lowered to 3% in two steps last autumn and in February this year. Since the interest rate cut, HUF 240 billion in loan applications have been received, which is HUF 20 billion more than a year ago.

Regarding the 1+1 SME Investment Support Programme, which has a budget of almost HUF 50 billion, he said that 269 completed evaluations worth HUF 29 billion have been carried out so far.

In the HUF 9 billion "Every business should have its own website" programme, 2,273 positive decisions worth HUF 3 billion have been taken so far.

Commenting on the resumption of the EXIM export credit programmes, he said that 194 applications worth HUF 108 billion had been submitted so far under the HUF 350 billion sub-programme.

HUF 73 billion has already been disbursed under the loan and capital programme to support Hungarian investments abroad.

The HUF 100 billion capital financing programme has so far received four positive decisions worth HUF 1 billion.

Nearly HUF 390 billion have been announced in the area of accelerating EU business development programmes.

Regarding the reduction of administrative burdens, he said that the lowering of the audit threshold will benefit more than 16,000 companies.

Cover photo: Portfolio