Hungary is suffering from high inflation rates. For Prime Minister Viktor Orban, the high inflation comes at a bad time, because elections are in April. That’s why he sometimes freezes the prices. However, his economic policy contributes to the malaise.
Hungary’s Prime Minister Viktor Orban sets upper limits on prices and interest rates.
Things are going badly for politicians with a penchant for populism. Part of their legitimacy is based on the fact that they prudently steer the economy and provide for the population. Soaring inflation rates are eroding that reputation, and it’s particularly dangerous when elections are imminent.
Hungary’s Prime Minister Viktor Orban has found himself in such an uncomfortable position. Elections will be held in the country in early April and inflation is currently at a high 7.4 percent. Especially in rural areas, where Orban’s electoral base is concentrated, wages are nowhere near as high as in the city. Rising costs for energy and food are therefore causing particular problems for the population in more peripheral regions.
Orban is reacting to inflation the way authoritarian politicians have always reacted: he sets ceilings. Prices for granulated sugar, wheat flour, sunflower oil, pork drumsticks, chicken breasts and milk will be frozen in February at the October 15 level. The Prime Minister had previously taken similar measures. There are also upper limits for petrol and mortgage interest rates, which are also rising because the central bank is fighting inflation with higher interest rates.
Orban’s transparent maneuvers carry risks. He runs the risk of alienating business people. And the opposition is rubbing it in his face that although he has been in power for twelve years, he now has to take quick action. However, it is also Orban’s favoritism that is crippling the economy. Many domestic sectors are dominated by protégés of the prime minister – price-dampening competition has been partially eliminated.