Without 14 billion HUF of EU funds, the Hungarian economy would have shrunk by approximately 1.8% between 2007 and 2015 – rather than growing by 4.6% during the same period.

Yellow line: Actual growth; Blue line: Growth without EU funds (estimated) Source: KPMG, GKI

The Hungarian economy greatly benefited from EU funds between 2007 and 2013. The positive effect show in GDP, as well as in consumption, employment growth, social cohesion, investment and the internal and external stability of the economy – according to a paper written by KPMG and GKI (Economic Research Institute) for the Office of the Prime Minister.

Without that 14 billion HUF, the economy would have shrunk by approximately 1.8% during that period, and Hungary could not have left the EU’s excessive deficit procedure.

Conclusions of the study:

• Tax revenues resulting from EU investments have eclipsed Hungary’s contribution of the EU budget.
• Government debt would have grown above 84% of GDP without the effect of EU funds (stands at 73%)
• Without EU funds, investment would have shrunk by 31.3% – rather than growing by 2.8%.
• At the same time, however, Hungary’s competitiveness has greatly deteriorated according to WEF rankings – especially painful in comparison with other V4 countries.
• EU funds have failed to considerably lower regional inequalities because the most disadvantaged regions were not able to draw funds.
• Agricultural subsidies were the least effective in creating employment and growth – underperformed in proportion to their weight in EU funds.
• Due to the recent exodus of skilled workforce, the justification of job creation efforts became questionable – and workforce retention efforts would be necessary due to the severe shortage of skilled workers.
• The financial monitoring system of the funds was insufficient and opaque.
• Usage of funds was often motivated by the direction of subsidies – rather than actual market demand.
• Education and healthcare have received plenty of subsidies – but with negligible results, due to lack of concept and wasteful spending.
• Money given to startups has no visible positive effect.
• The conversion of EU funds by the central bank has contributed to the currency reserves of the state – which was then used to finance the conversion of the CHF denominated mortgages to HUF.

 The Hungarian economy with (YELLOW) and without (BLUE) EU funds between 2007-2015

Employment

(Number of employed – thousand people)

Investment

Without EU funds, investment would have shrunk by 31.3% – rather than growing by 2.8%.

(Billion HUF – 2006 prices)

Consumption

(Billion HUF – 2006 prices)

Output

(Billion HUF – 2006 prices)

Source of all graphs: KPMG/GKI study

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