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EBRD's new country strategy to deepen support for Hungary
As Hungary approaches EU accession, the European Bank for Reconstruction and Development has adopted a new strategy to support strengthening the country’s economy and institutions. In its analysis, now available on www.ebrd.com, the Bank notes that Hungary’s economy has withstood the global slowdown remarkably well, with growth rates of 3.7 per cent in 2001 and 3.3 per cent in 2002. However, recent macroeconomic developments, such as a large fiscal expansion, will limit Hungary’s room for manoeuvre while it tackles the challenges of EU accession.
This shows that transition, though considerably advanced, is not yet over in Hungary. The Bank can continue to make an important contribution to transition and will focus in particular on five key priorities:
• Completing the privatisation process, with a particular focus on transactions leading to the restructuring of enterprises or to capital market deepening. The EBRD will support the further liberalisation and opening of the electricity, gas and telecommunications markets.
• Deepening and broadening of the funds and instruments available for small and medium-sized enterprises (SMEs) through the financial sector and co-investment with specialised equity funds. The EBRD will support the preparation of medium and larger local companies for the challenges of the post-accession period through equity and quasi-equity investments.
• Supporting renewed inflows of foreign direct investment, targeting medium-sized investors and projects located in lesser-developed regions.
• Supporting the consolidation and development of the financial sector, which still fails to address the needs of the private sector in a balanced way. The EBRD will seek to increase the availability of finance to SMEs, in particular with the expansion of the EU/EBRD SME Finance Facility. Furthermore, it will introduce new instruments that may include higher risk and structured products. The Bank will also support the nascent mortgage market by providing long-term financing to residential mortgage finance providers.
• Supporting the upgrade of transport, environmental and municipal infrastructure, where investments in excess of €20 billion are required over the next 12 years to meet EU requirements. The EBRD will concentrate on schemes that do not rely on a sovereign guarantee, increase the supply of long-term capital and actively support public-private partnership in infrastructure.
The EBRD is one of the most prominent investors in Hungary, having invested €1.3 billion in 60 projects, and mobilised a further €4 billion from business partners. This year the Bank expects new signings in Hungary worth approximately €300 million.
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