Whilst the pandemic hit the labour market and the overall city unemployment remained 0.8 percentage points above the pre-pandemic rate, the Budapest office employment seems to be fully recovered. In addition, the GKI Business Sentiment Index has reached its pre-pandemic level by the end of Q2. Office investment volumes reached EUR 550 million in H1 2021, with domestic funds remaining the most active buyers. Q2 itself has seen seven transactions at a total volume of EUR 352 million.
Private consumption will be driven by the release of pent-up demand and the normalisation of saving after the increase in 2020. The authorities have started gradually lifting restrictions from April 2021, which supports the recovery of private consumption. As a result, retail sales volume index improved 5.4% y-o-y in Q2 and consumer confidence index has improved to pre-pandemic levels in June 2021, according to EUROSTAT. Minimum wages are agreed to be raised by 8% in 2020 and 4% in 2021 respectively, backing wage growth to remain high. Gross earnings of full-time employees in the private sector continued to register strong growth in the range of 8.9% in early 2021. There has been a slight resumption of international tourism activity from early June, with higher footfalls are being registered at popular tourist attractions.
External demand is strengthening with the recovery of major European partners further benefitting growth, given the economy’s dependence on exports. The industrial production and exports have strongly rebounded, and even exceeded pre-pandemic levels by April 2021. As a result, the industrial confidence index published by EUROSTAT has strongly improved. It is expected the industrial sector will grow by 13.5% this year and 7.3% in 2022 respectively.