Effects of COVID-19 in the Hungarian retail sector

By Gyula Gyalay-Korpos

The virus has struck the whole of Europe mercilessly and all countries are facing the same problem of trying to prevent the virus from spreading further quickly. The only difference is how the various governments had reacted, what type of measures they had introduced and perhaps most important, when and how efficiently. After the first soft measures in early March, a curfew restriction was imposed in Hungary from March 28 until April 11. Together with the compulsory closing of all non-food shops at 3:00 PM this has had a huge impact on the retail sector. Further steps like assigning the shopping hours from 9:00 to 12.00 AM to customers over 65  while younger customers may shop before 9.00 AM and after 12.00 AM seemed like a good idea, but caused a headache for the working people who were facing crowds and queuing in the food shops.

Due to the imposed curfew restrictions the centers and hypermarkets had a sudden and drastic drop in footfall. Some of the tenants had turned to the government asking to close down the centers and started to dismiss their employees. They did not take into account that closing shopping centers and hypers is not that simple, as they provide basic services for people (besides food, medications, hygienic and health products, pet food, banks, and various other services). Even today, centers are operating with a few dozen shops open, but not all of these shops belong to the aforementioned categories.

In this painfully complex situation all participants of the retail sector tried to convey their message to  the government as quick as possible and found a common communication channel to the government in the form of the Hungarian Chamber of Commerce and Industry which has good connections to the government, is sufficiently influential and was willing to coordinate the joint recommendation of the various organizations, unions, and associations of the retail sector, including the Hungarian Council of Shopping Centers (HCSC). A joint proposal was submitted on March 30, but two days later tenant representatives had submitted a separate request with some unfavorable items concerning shopping center operators. In response, the HCSC also submitted a separate proposal on April 3. 

In this very confused period, efficient intervention, well balanced regulation, and financial support of the government is urgently required, otherwise many insolvencies and high unemployment rates will follow. The government has announced that a Government Action Plan will be published in which new resolutions regarding  the prevention of further increases of the unemployment rate and new measures concerning the retail industry will be formulated. However well-intentioned this Action Plan will be–and let us hope that it consists of reasonably rational regulations–it is nevertheless to be expected that a lot of legal debates will ensue among the participants of the retail real estate industry. According to the latest official announcements it is possible that additional taxes will be introduced to support the fight against the spread of the virus.