EU transfer allocations for 2021-2027 may be even less than thought initially

HUNGARY - In Brief 31 May 2018 by Istvan Racz

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In our May report, we said that between 2021-2027, Hungary's allocation of EU development transfers may fall to 2.2% of GDP from 2.9% in 2014-2020 and 4.1% in 2007-2013, assuming it will change the same way as the EU's total allocation on its various transfer programs will, according to the EU Commission's proposal at least.Now the situation seems even worse, as the EU Commission went into specific country details on cohesion policy funds the other day, proposing to cut Hungary's allocation by 8% between the current and the next budget, in current EUR values, rather than to raise it by 5%, which would be the number for total cohesion funds for all member states.Our updated table below shows the specific cohesion policy figure in yellow. The consequence of this change is that the total of development transfers available for Hungary from the EU would fall to 1.9% of GDP in the next seven years. Adding in CAP (agricultural) direct payments would raise this to 2.6% of GDP, down from 4% currently, but the budget contribution required from Hungary would again reduce the total net figure to about 1.7%, down from the current 3.2%. In other words, incoming net EU transfers would be roughly halved from the current level, in proportion of GDP.Details of the EU Commission's Transfer Proposal for Hungary between 2021-2027Note: At current prices; Sources: EU Commission, own estimatesThe reason is that the EU Commission changed its distribution formula: less will depend on relative regional development levels and more on unemployment rates, population, environmental protection efforts and spending on the integration of refugees. These changes work systematically against CEE countries...