Although EU money helps catch up, it is not enough on its own. The fact that we are building a factory will not make the economy more developed: this requires that the share of high-value-added activity be as high as possible in the economy, and that profits do not flow, but are reinvested at the highest possible rate.
Gábor Regős, head of the turn-of-the-century macroeconomics business, told VG.
The expert noted that there is also a phenomenon in Hungary, mentioned a few years ago by German EU Commissioner Gunter Oettinger, according to which a large part of aid flows returns to donor countries, and therefore net contributors also benefit from the existing framework. Gabor Regos said that in Hungary this can take two forms, on the one hand, imported products are used in investments, and on the other hand, subsidies are given to a foreign-owned company, so the profits generated later flow out of the country.
In addition, the examples of many European countries show that EU funding alone does not guarantee success.
The Irish economic miracle also unfolded long after its accession to the European Community, as the country that joined in 1973 failed to catch up after two EU sessions, but it was the economic policy reform of the late 1980s that transformed it.
Gabor Regos also pointed out the problem of the emergence of a kind of dependency in institutions: they tend to invest their investments only from non-recoverable sources. At the same time, one of the developments in recent years has been the steady decline in the weight of EU funds in investment. The latest report of the Central Statistical Office (CSO) in 2020 also drew attention to the fact that investment activity between 2017 and 2019 was no longer due to projects in the current EU budget cycle, and companies also began to increase significantly: while in 2014- 23 were funded -30 per cent of projects in 2016 were funded by the European Union, last year only 12 per cent.
In addition to the private sector, the state’s share in investments may increase significantly, and the language of the balance sheet is already clearly tilted in the 2022 budget: the amount of national resources reaches 3800 billion forints, compared to 3000 billion forints. European Union funds.
Given the discussions with the EU, it is also inconceivable that in the future the scissors will be opened further and many of the developments that the EU would have originally covered will be carried out at the expense of the Hungarian budget. In any case, the current slip payments to the European Recovery Fund will rise to 326 billion this year and 450 billion in next year’s budget, and the issuance of foreign currency bonds last week was also aimed at offsetting these resources.
However, the end-of-century expert believes that it would be too early to draw far-reaching conclusions about the current budget period, 2014-2020, because we are actually in the middle of the cycle and grants will continue to be used until the end of 2023. At the same time, I acknowledge that these resources have also contributed to The high rate of investment, and thus certainly contributed to the rapid growth before the crisis and the recent recovery.
However, at the end of the cycle, it will require a more thorough analysis of whether these resources have already been used effectively, that is, to what extent they contributed to the transition to higher value-added activities.
Gabor Regus confirmed.
Hundreds of billions of dollars have been reallocated by the government
According to Magyar Kozloni published on Tuesday evening, the Cabinet has reallocated HUF 289 billion from the Economic Restart Fund and HUF 10 billion from extraordinary government measures. The largest amount, 180 billion fort, was allocated to higher education tasks, and the Budapest regions received 14 billion fort for development.
