All conditions for the margin stop removal have been met

According to the latest announcement, the government will decide in November whether to extend the margin cap, which is emphatically described as a temporary measure. Although the measure was not based on any impact study in March, and the specific goals of the decision were never stated in a decree, Minister of National Economy Márton Nagy has repeatedly stated that the condition for its elimination is food inflation permanently below 5 percent.

“We can safely say that this condition has been met. According to data from the Central Statistical Office, food inflation in Hungary measured in retail trade has been below 5 percent since March – i.e. for more than half a year. In September, the food inflation indicator supplemented with restaurant prices also fell below 5 percent, although the retail margin has a minimal effect on catering prices anyway,” says Tamás Kozák, Secretary General of the Hungarian Confederation of Trade Unions.

As many analysts have pointed out, the margin stop, as a base effect, will expire from the year-on-year inflation indicator next April at the latest. At that time, the inflation that was swept under the carpet will become visible again, and the now artificially distorted statistical data will return to its original trajectory. The figures showing this will be published by the Central Statistical Office in the data release at the beginning of May, i.e. immediately after the parliamentary elections.

“That is why there is no basis for maintaining the margin cap,” says Tamás Kozák. If the government does maintain it, it will contradict its own declared goals and further worsen the situation of the population, suppliers and retail trade. The biggest losers of the margin cap are the population, and within that the population of settlements with fewer than 5-10,000 inhabitants, those villages and smaller towns where there are typically no or very few shops, and no units belonging to better-known retail chains can be found at all.

According to the Secretary General of the OKSZ, the unfavorable effect of the margin cap in connection with this is the further strengthening wave of store closures. Smaller local shops (independent traders, members of smaller and larger Hungarian food chains) are suffering from the fact that customers are turning away from them due to government interventions. 18 percent of smaller players, which account for 48 percent of food retail, are preparing to close their store(s), which further worsens the security of supply. In Hungary, there are already 400 settlements without a grocery store, and in several hundred more settlements it is not possible to make a large purchase.

In addition, the Hungarian food industry is a big loser, its performance remains weak and shows a downward trend. This is particularly bad news for the SME sector, which plays a larger role in production (in 2024, 14 percent of food industry production was provided by enterprises employing fewer than 50 people, 31 percent by enterprises employing 50–249 people, and 55 percent by enterprises employing at least 250 people).

In this situation, retail chains have limited options to effectively manage the rising costs of domestic suppliers. As a result of this economic pressure, players are forced to turn to cheap imports, and economic policy encourages them to do so. This strategy systematically distorts domestic product paths, increases the country’s dependence on food imports, and thus directly undermines the market position of Hungarian producers and processors. These problems pose a threat to the entire Hungarian food industry.

Since the added value of agriculture was already 11.4 percent lower than the same period of the previous year in the second quarter, the shift towards imports further aggravates the already weak performance of the domestic food industry and the economy. In addition, the unpredictable, constantly changing regulatory environment without meaningful consultations, which greatly restricts the market, also makes the situation difficult for traders and domestic manufacturers. “Ill-considered measures lead to shortages of goods or price increases in some cases,” says Tamás Kozák. A good example of this is the energy drink and Trappist regulation, the increase in waste management product fees (EPR fees), or the reduction of handling fees in the bottle return system (DRS).

Due to the resulting losses, the investment capacity of the retail trade decreases, which has a negative impact on customers, the quality of service deteriorates (or does not improve), and the number of people employed in the sector decreases, which does not support growth or development at the national economic level