Hungary is witnessing a significant economic downturn, marked by a staggering number of shop closures due to financial challenges. Recent data from the Hungarian Central Statistical Office (KSH) reveals a record-breaking number of shop closures, portraying a concerning economic scenario.
Nearly 4,600 shops closed for good within the first half of 2023, Portfolio reports. This alarming trend is primarily attributed to a combination of factors, including a price freeze and a decline in purchasing power. The KSH data reveals a stark reality, with 4,583 shops shutting their doors by mid-year. Notably, this represents twice the number of closures compared to the same period in the previous year. The total number of operating stores in Hungary now stands at just over 110,000, marking a record low for the country’s retail landscape.
Attila Bíró, an industry analyst from Pénzcentrum, shed light on the challenging situation faced by retailers. He highlighted that the price freeze allowed consumers to purchase products at artificially low prices, putting a strain on businesses. While this situation was temporarily sustainable, the prolonged duration of the price freeze became a burden that many shops could not endure.
An outlook for shop closures
The analyst further warned that if the current trend persists, the number of shop closures could reach a staggering 10,000 by the end of the year. The economic challenges, exacerbated by factors like inflation, have created a precarious environment for businesses, especially smaller retail units.
Inflation and increased costs
Despite a slight drop in inflation below 10% in October, Eurostat data reveals that Hungary experienced the most significant monetary deterioration in the European Union. László Molnár, CEO of GKI, emphasised that any measures increasing costs, such as an accelerated minimum wage hike, impose a substantial burden on smaller retail establishments. This added financial pressure diminishes the likelihood of these businesses considering price reductions.
As Hungary grapples with a surge in bankruptcies and a record number of shop closures, the economic landscape faces unprecedented challenges. However, it is not only the retail sector that is suffering, but the restaurant industry also has to face another year of uncertainty.