BUDAPEST – Magdolna Gozon nibbles spicy green peppers from a fruit and vegetable stall at a sprawling indoor market in Budapest, sampling them to make sure they're hot enough for a soup she's cooking.
The 83-year-old retiree can't afford to buy more if they don't have enough kick — not with her small pension and Hungary facing the biggest spike in food prices in the European Union.
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“I don't buy fruits. We got potatoes from the municipality, so we don’t have to buy that, but onions became expensive," said Gozon, who has stopped buying dairy and rarely shops for meat.
Food prices have risen dramatically across Europe in recent months, jumping 19.6% in March from a year earlier and becoming the main driver of inflation as energy costs have fallen. But in Hungary, food prices have surged more than 45% over the year, according to EU statistics office Eurostat, far surpassing the next highest figure of just over 29% in Slovakia.
Such price hikes are hitting consumers hard in the Central European country, forcing them to change what kind of food they buy and how much of it they can afford, and leading businesses to rethink what they offer for sale.
“Habits have definitely changed, so people are really thinking about what they buy. We’re almost to the point where sausage and ham are considered luxury food items,” said Szilvia Bukta, a manager at a butchery stall in Budapest’s historic Grand Market Hall.
“We also have to buy less because the prices are more expensive, and we know that there are not as many customers, so we definitely make purchases more carefully,” Bukta added.
Some types of food in Hungary have nearly doubled in price in the past year. Staples like eggs, milk, butter and bread cost 72% to 80% more, pinching pocketbooks in a country where the median net wage is just over $900 per month.
While most European economies are facing similar difficulties as Russia's war in Ukraine fuels a cost-of-living crisis, inefficiencies in Hungary's farming and food processing industries and a historic devaluation of the forint currency made the country's “extreme inflation” worse than anywhere else in the EU, said Peter Virovacz, chief economist at ING Hungary.
“There have been droughts everywhere, energy prices have increased everywhere, supplier costs have increased everywhere," he said. "But if production is not efficient enough, then of course the domestic producers will find that it is much more burdensome to pay for these costs.”
To make ends meet, not just farmers but restaurants, bakeries and other businesses have raised prices for customers and changed what they offer to avoid the most expensive ingredients.
Cafe Csiga, a restaurant and bar on a leafy square in central Budapest, took hamburgers and French fries off the menu late last year in response to the soaring price of ingredients like meat and cooking oil, general manager Andras Kelemen said.
“The (price of) raw materials has sharply increased. There were some items that went up around 100%,” he said. “Vegetables, especially in the winter period, and certain meats and meat products rose unbelievably.”
It has sent Hungary's overall inflation rate up to 25.6%, also the highest in the EU, whose average slowed to 8.3% last month. The rising cost of living has led to rapid increases in wages — added costs that businesses are partly pushing onto customers.
"All our costs are constantly rising, and we have to raise wages in the meantime," Kelemen said. “There is a certain point above which we do not want or dare to raise sales prices — but a 30% increase has been typical.”
Eszter Roboz, owner of Babushka Bakery in Budapest, said she too has had to charge customers more. She also began using olive oil in some cakes because butter prices jumped 68% in March.
“All the ingredients have risen in price to some degree, but for us, it was probably butter, olive oil and flour that were the most noticeable,” she said.
While Hungary is a major producer of wheat, corn, oil seeds and meat, some 30% of food items in its grocery chains are imported, according to a 2022 study by the National Food Chain Safety Office.
The Hungarian forint weakened more than 40% against the U.S. dollar and over 20% against the euro last year, making the costs of imports — and thus prices off the shelf — much higher, Virovacz said.
“This simply means extra costs for suppliers, which they try to pass on to consumers in the end,” the economist said.
Hungary's food prices have shown meager signs of slowing, dropping three points from a peak in December of nearly 50%.
But Hungary, Poland, Slovakia and Bulgaria recently banning grain imports from Ukraine amid a glut they say is hurting local farmers could drive food inflation higher, said Ian Mitchell, an economist and London-based co-director of the Europe program at the Center for Global Development.
Virovacz, however, said people are spending less as their purchasing power and savings erode, so they likely won't be willing to pay more for locally made bread and other food, preventing suppliers from passing on the extra costs.
“We have reached a point where there is such an increase in prices and such a depletion of household reserves that people have actually started to tighten their belts and have started to consume much less,” he said.