Hungary's EU Fund Reliance Risks Long-Term Dependence, Expert Warns

Hungary's economic strategy, heavily reliant on European Union funds, faces a significant risk of perpetual dependence on continued financial inflows, according to economist Csaba Lentner. While the EU's release of withheld funds is seen as a prestige issue, Lentner cautions that focusing solely on these resources for economic stimulus could create a long-term dependency, potentially hindering independent progress.

Lentner emphasized that while EU funds can provide a short-term boost through increased purchasing power for services and production, the true economic revitalization lies in "smart investments." He suggests that financial support should be directed towards green economy development, transportation infrastructure improvements, research and development, and healthcare.

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The economy's acceleration is focused unilaterally, even somewhat deliriously, on EU funds. This inherently assumes that Hungary will receive significant resources after the 2021-2027 budgetary period.

The current economic situation is described as stable, but the future remains uncertain. Lentner points out that the favorable exchange rate of the Hungarian Forint is attributed to international speculators and circles in Brussels who see potential in the new government. However, he warns that macroeconomic data has not significantly improved since before the elections, and the current strong Forint-to-Euro exchange rate could rapidly shift, potentially exceeding 400 Forints per Euro.

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The current favorable Forint-Euro exchange rate can shift in an instant, potentially exceeding 400 Forints.

A major concern is the lack of concrete plans to significantly reduce the budget deficit and state debt. Lentner notes that the current government appears to be maintaining the previous administration's social programs without immediate austerity measures, suggesting that the deficit and debt will not decrease. He argues that even with a projected GDP growth of around 5%, it will be insufficient to overcome the already high public debt, given the economy's actual growth potential of only 2-3%.

Furthermore, the stability of the Hungarian National Bank (MNB) is under scrutiny. Lentner highlights that the MNB is operating with billions of Forints in negative capital and is projected to close 2025 with a loss. He characterizes it as a monetary institution without equity and persistently loss-making, whose operations are sustained primarily by trust rather than a solid financial foundation. The bank's gold reserves are also noted as being difficult to mobilize.

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The National Bank is operating with billions of Forints in negative capital and is projected to close 2025 with a loss. Essentially, it is a monetary institution without equity, persistently loss-making, which is the issuer of the Forint, a bizarre situation in monetary theory.