May 24 (SeeNews) - Bulgaria and Romania will be the least affected by the expected decrease in European Union funding available to Central and Eastern European (CEE) sovereigns from 2021 as the UK's planned exit from the EU reduces funds and as income convergence and additional distribution criteria reduce available volumes, Moody's Investors Service said.
However, the capacity of Bulgaria and Romania to mitigate a shortfall is weakest among the CEE states, Moody's said in a statement late on Thursday.
It noted that Hungary (Baa3 stable), Poland (A2 stable) and Slovakia (A2 positive) will lose most EU funding from 2021 onwards, adding that Hungary will be in a weaker position to mitigate the negative impact.
EU funding flows have supported Moody's sovereign economic strength assessments and the expected lower funding volumes will be credit negative for the region's sovereigns, given the historic importance of these flows.
Moody's also said in the statement:
"Funding volumes under the next EU Multiannual Financial Framework (MFF) 2021-27 are likely to decline unless EU members can agree on how to offset the Brexit-related funding shortfall," said Heiko Peters, a Moody's Assistant Vice President - Analyst and the report's co-author. "This coincides with a decline in the proportion of funding available to the CEE, mainly related to continued income convergence."
Hungary, Poland and Slovakia will lose most from 2021 onwards when aggregating the Brexit-related shortfall and the May 2018 European Commission (EC) proposal. Croatia (Ba2 positive), Hungary, Bulgaria (Baa2 stable) and Poland would lose most if EU-27 countries are unwilling to compensate for the Brexit shortfall.
Hungary, Poland, Slovakia and Czech Republic (A1 positive) would see a significant decrease in EU funding if the EU implements its May 2018 proposals mainly because of their economic catch up. Bulgaria and Romania (Baa3 stable) are the least affected by lower EU funds, but their capacity to mitigate a shortfall is weakest among CEE countries."