Budapest, January 7 (MTI) – Transfers of European Union funding to Hungary could drop by more than 3 percentage points of GDP this year from last year’s peak, and state investments could drop by 2 percentage points of GDP as a result, according to a study by the central bank.
The inflow could temporarily drop by as much as 1.2 trillion forints (EUR 3.8bn) this year from the peak level of the past two or three years with the lull between the closure of disbursements for the previous funding cycle and the genuine launch of the new one, National Bank of Hungary (NBH) researchers projected in a research note published on the NBH website on Thursday.
Last year, the utilisation of EU funds could have slightly exceeded the previous year, equaling to about 5-6 percent of GDP, similar to the previous two years, the authors Daniel Babos and Gabor P. Kiss estimated, projecting a drop to 2.5 percent of GDP in 2016.
While current transfers are likely to fall, too, the big problem will be the drop of capital transfers, the authors said, noting that about two-thirds of the EU funding went to the state sector in the past few years, financing mainly investments.
About half of all state investment was financed from EU funds in recent years, and part of the other half was co-financing, also related to the EU funds, the study said.
As state investments helped the private sector, too, generating orders, both sectors would suffer from the fall of EU funding, the study said, projecting an about 900 billion forint reduction in the funds available for the government sector and a 350 billion drop for the private sector.