Economy 28 May 2025, 3:50pm

Hungary keeps margin cap on food in place, retailers speak up

Portfolio

In response to the government's announcement that the margin cap on food will be extended until 31 August, the National Trade Association (OKSZ) said that it regrets the government's decision to extend the system of official prices without any professional consultation. This decision sweeps the tensions in the Hungarian economy under the carpet and ignores the long-term interests of the economy and consumers, it said.

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In their view, the margin cap has achieved the objective attributed to it by the government.

although drastic, it has prevented customers from experiencing the full impact of the high price increases in new supplier contracts.

In the view of the OKSZ, this objective is inherently flawed because it does not allow the strong hand that keeps the economy in balance through competition to prevail. Furthermore, the results of price regulation by public authorities can only ever be temporary. Tensions build up below the surface, amplifying each other, and will inevitably resurface over time.

It could have been painless

"This was the moment when it could all have been ended painlessly,.

writs the OKSZ.

To this end, proposals were put forward last week to ensure the gradual removal of the margin cap.

They warn that security of supply is already at risk in the 400 Hungarian municipalities where no food shops are operating. This figure is set to rise, as 18% of small chains and independent shop operators — who account for 48% of the food retail sector — plan to close one or more of their shops as a result of the margin cap.

In many cases, large Hungarian food retail chains source over 90% of the food product groups that account for the majority of their turnover from domestic sources. The margin cap opens the floodgates to foreign suppliers, which will cause significant and long-lasting damage to Hungarian agriculture and the food industry. By their very nature, supply chains are extremely slow to regenerate.

By keeping the margin cap in place, retailers lose their ability to mediate effectively between suppliers and consumers while absorbing and dampening price fluctuations in order to attract shoppers with competitive prices.

In light of this, the OKSZ is calling on the government to take the necessary steps to eliminate the margin cap as soon as possible, even if this means phasing it out gradually, given the expected economic consequences.

Cover image (for illustration purposes only): Getty Images