Under the Christmas tree: EU Commission approved Hungary's plan to use 2021-2027 cohesion policy funds

HUNGARY - In Brief 22 Dec 2022 by Istvan Racz

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In a major forint-positive step, the EU commission approved the Partnership Agreement with Hungary, that is essentially the country's plan to utilise its €22bn cohesion policy grant quota set for the 2021-2027 medium-term budget period. This followed the signing of Hungary's plan for the utilisation of its €5.8bn Recovery and Resilience Fund (RRF) quota set for the coming two years earlier this week. By these two steps, the government has achieved its objective to get approval for both plans before end-2022. Minister Navracsics, Hungary's chief negotiator with the EU said today that the approval of the Partnership Agreement has opened the way for Hungary to receive a HUF130bn advance payment from the EU and for the government to start to call tenders for development projects under new cohesion policy programs. For sure, access to the whole of the RRF quota and to 55% of the budget quota for three major cohesion policy programs, with a total effect of €5.8bn + €6.3bn = €12.1bn will remained blocked until Hungary implements all of the 17+10 anti-corruption and other rule-of-law measures it has agreed to carry out at recent talks with the EU Commission. It was quite long ago that we had this much reason to be positive about macro prospects, despite the fact that the economy is clearly in recession, the BOP remains ugly, the 2023 budget requires further tightening, and getting access to all of EU funds will require further serious efforts. But: fiscal policy tightening should not be disproportionately big and is officially promised to come up very soon, energy import prices have fallen, and the forint seems remarkably stable for now.  Should the forint's exchange rate rema...