EU funds 12 August 2019, 11:20am

Hungary steps up EU grant allocations in July

Portfolio

The number of new EU grant winners jumped from about 250 in June to 600 in July, the highest even monthly figure, indicating that the allocation procedure has gained momentum in Hungary. However, Portfolio's monthly summary also reveals that the combined volume of new grants awarded dropped from HUF 42 bn to HUF 28 bn in July, and grants paid out also decreased from HUF 106 bn to HUF 83 bn. The latter number also means that in July, Hungary has received more transfers from the EU (HUF 94 bn according to Finance Ministry data) than authorities paid out to domestic winners, slightly closing the increasing gap.

Decision-making in full swing

In our monthly summary, we compare the volume and number of approved EU grant applications at the beginning of each month, inferring the previous month's trends from the data.

As the table below shows, the number of winners announced grew by 599 between 1 July and 1 August, mostly due to a high number of grants awarded in the economic development and regional development schemes, while the total volume of grants already awarded this year rose HUF 28 bn to HUF 9,330 bn. As mentioned above, this represents a jump in monthly grant numbers but a drop in volumes.

As the graph below shows, the number of new winners announced was the highest since December 2018. As we mentioned in July, winners were being announced in large numbers in the Economic Development and Innovation Operational Programme (EDIOP/GINOP), and this trend has kept on. Most of the projects approved in July were for implementing trainee programmes or installing solar panels, with grants worth a few million forints awarded in these cases. A few new winners were announced in the schemes for digitalisation of corporate operations, R&D&I and on-the-job training.

Aside from newly approved grants, it is also important how earlier winning projects are progressing, which is indicated by how much new funding has been allocated in the meantime. In this regard, there has not been much activity, and the HUF 83 bn paid out by authorities during July is in the HUF 80 to 100 bn average monthly band. Nearly half of the monthly amount, HUF 42 bn, went to the Integrated Transport Development Operational Programme (ITDOP/IKOP).

With the July payments, we are now at HUF 6,152 bn total for the seven-year EU budget period, which means Hungary has disbursed two-thirds of the total grant volume available to it between 2014 and 2020. The biggest grants have been awarded on programmes with the largest seven-year budgets, including the GINOP, the IKOP, the Territorial and Settlement Development Operational Programme (TSDOP/TOP) and the Environment and Energy Efficiency Operational Programme (EEEOP/KEHOP).

Regarding the HUF 83 bn disbursed in July, it is worth noting that the figure is lower than the HUF 94 bn in EU transfers to Hungary during the period according to Finance Ministry data. Portfolio's own database, however, indicates that incoming EU transfers only amounted to HUF 34 bn in July, although some of the difference could be down to accounting technicalities.

According to the European Commission, the EUR 8.31 bn total payments made so far to Hungary represent 33% of the structural and investment funding available for the seven years, which is slightly below the EU average of 34%. Meanwhile, as the figure below shows, Hungary produced outstanding results in allocating the funding to winning projects, leading the field with an impressive 106% ratio. At the other end of the scale there is Finland, which has only allocated 87% of its budget for the seven-year period but has already disbursed the highest proportion, 57%, to winners.

Source: European Structural and Investment Funds: EU Overview Finances: Implemented

Finally, we should take a look at the four key indicators regarding the seven-year budget available to Hungary. As we can see, the combined amount of tenders announced is already well over HUF 10,000 bn, compared to HUF 9,200 bn available in total, for a tenders/total budget ration of 113% according to our calculations, while allocation to winning projects was 2% higher than the available total at HUF 9,330 bn.

Domestic disbursement is at HUF 6,150 bn, or 67% of the seven-year budget. Meanwhile, as mentioned above, EU transfers have only reached 33% of the total, and this increasing gap between incoming transfers and outgoing payments is making quite an impact on the cash-based general government balance, even if Hungary has been keeping a very low deficit trajectory this year. As shown in our earlier article, Hungary posted a January-July budget surplus, which means that the fundamental processes are on track.

Cover photo: MTI / Zsolt Szigetváry

This article is part of the work programme titled "The impacts of EU cohesion policy in Hungary - Present and Future" which is carried out by Net Média Zrt., the publisher of Portfolio.hu, between 1st April 2019 and 31st March 2020 with European Union financing. The views in this article solely reflect the opinions of the author. The European Commission as the funding entity does not take any responsibility for the use of information presented in this article.