In Slovakia EU funds drawing up by 0.69pps m/m

Slovakia has absorbed 22.32% of EU funds under the 2014-2020 EU budget framework and the 11 operational programs (OPs) as of end-May, up from 21.63% as of end-April, according to the figures published by the finance ministry. In absolute terms, as of end-May the country has absorbed a total of EUR3.077bn in commitment appropriations of the total EUR13,906.1m commitment appropriations available to the country under the 2014-2020 programming period, up from EUR3.01bn as of end-April. The most or EUR1.322bn (up from 1. 3bn as of end-April) has already been drawn under OP Integrated Infrastructure or about a third of the EUR 3.949bn allocated to the program.

The ministry also said that by end-2019, the country has to apply to the EC for at least EUR1.41bn in fresh EU funds in line with the N+3 rule as otherwise part of the funds would be automatically de-committed by the EC if it has not been used or if no payment application has been received by the end of the third year following that of the budgetary commitment. Based on status of the declared expenditure as of end-May, it is necessary to submit payments applications of at least EUR679.72m, down from EUR 718.87m as of end of April, the ministry said. It also noted that as of end-May this milestone has been fulfilled by four operational programs, namely Integrated Infrastructure, Human Resources, Technical Assistance and INTERACT III.

Deputy PM for Investments and Informatization Richard Rasi (leftist senior ruling party Smer-SD) has previously informed that with a share of payments received from the EC at 24.22% (EUR 3.709bn) at end-2018, Slovakia ranked 23rd among the 28 EU countries (27.51% average) and fourth among the Visegrad Group (V4) countries. The EU funds absorption is problematic at the education ministry with the expected de-commitment under the operational program Research and Innovation being about EUR 80mn. Slovakia might lose a further EUR 40mn within the Integrated Regional Operational Program, managed by the agriculture ministry. Faster EU funds absorption will boost investments and GDP growth. Besides from EU funds, GDP growth will also benefit from private investments in new technologies and innovations to substitute for the scarce and expensive labor, we think. Yet, private investments this year are to be lower than in 2018 as the major investment by Jaguar Land Rover in new automotive capacities was completed already last year. Household consumption is also likely to remain generally supportive of the economic expansion, but its growth may be expected to moderate as households are already likely switching to ‘a savings mode’ in view of the expected economic activity slowdown, while the slowdown of economic activity abroad, in Germany in particular, is to prevent faster GDP growth that seems to have reported a peak last year.

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