EU fund inflow into CEE to intensify in 2019-2020, Hungarian central bank to stand pat in July – Erste Group

According to an Erste Group research report, EU fund inflow into CEE will intensify in 2019-2020 and peak in 2021-22. The EC’s statistics show that Hungary has spent just 4.2 percent of total available EU funds including co-financing planned for the programming period. But about the value of decided projects, it already reached over 50 percent of the total amount of available funds that is outstanding among regional peers.

These figures indicate that government’s solid commitment to drawing a majority of EU funds as early as possible and actively justify its plans for the use of EU funding. Furthermore, as the 2018 elections approach and the expected rebound in investments and GDP growth is solidly dependent on the utilization of EU funds, currently the government is actively pre-financing the already decided projects. Therefore, the cash-based budget deficit reached HUF 700 billion in June. Thus, the budget deficit of the first half of 2017 reached nearly 80 percent of the FY deficit target, stated Erste Group.

Meanwhile, the Hungarian central bank is expected to keep its policy on hold during its meeting on Tuesday, noted Erste Group. In spite of the rise in core inflation in recent months, the MPC is expected to sound dovish, with the comparatively strong forint being the source of worry for the MPC members.

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