The Hungarian government is considering cutting the VAT rate on certain "strategic" food items if the weather-reduced harvest results in excessive price rises, Reuters has reported.

Agriculture Minister Jozsef Graf indicated on Friday (3 Aug) that there might be selective cuts in VAT rates.

Hungary's orchards suffered severe frost damage while drought has dramatically reduced the grain crop.

Graf had earlier said that food price rises of 15% to 20% look inevitable. If price increases are substantially higher than that a cut in VAT for certain products such as fresh meat could be considered, Graf said in the press conference on Friday.
 
However, cutting VAT rates on food across the board would not be considered, Graf said, because that would put too large a strain on the budget.

Economists have suggested that food price rises will fuel inflation, but Finance Minister Janos Veres said there is no need at the moment for the Government to revise its 7% inflation forecast for the year. Hungarian inflation was running at 8.6% in June.