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FGS significantly contributed to economic growth, says MNB official

Without credit disbursements available through the second phase of the National Bank of Hungaryʼs (MNB) Funding for Growth Scheme (FGS) economic growth would have been significantly slower in Hungary, department head at the MNB György Pulai said yesterday, according to Hungarian news agency MTI.

According to Pulai, the second phase of the FGS lifted Hungarian GDP growth in 2014-2015 by about 1-1.5 basis points.

Most of the allocated credit went to the trading sector, to agriculture and manufacturing, with the effects being especially significant in agriculture, said Pulai.

The MNB official deemed the program successful, but also referred to it as a temporary measure since making the program permanent would prevent lending from moving towards a market-based system.

Under the FGS, the MNB provides zero-interest refinancing to banks which they can lend to SMEs at an APR not exceeding 2.5%.

The central bank launched phase II of the scheme in October 2013 for an initial volume of HUF 500 billion which it raised to HUF 1 trillion in September 2014 and to which it later allocated further resources.

In the second phase, approximately 27,000 companies received HUF 1.425 bln in credit, said Pulai.

Including the first phase of the scheme, in June-September 2013, financing under the FGS came to about HUF 2.126 tln by the end of 2015, the central bank said in December. The credit went to approximately 31,000 businesses.