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Synthesis Report Ex-post Evaluation of the ERDF 2000-2006 reflecting the timing of their expenditure on projects and how quickly they were able to initiate these. In Spain and Ireland, expenditure built up relatively quickly reaching a peak in 2002 and in Portugal, the build-up was only slightly slower, the peak being reached in 2003. In the Mezzogiorno, by contrast, the peak was not reached until 2006 and in Greece, not until 2008. In all countries, it should be noted, the payments received were above or close to the annual average for the period in both 2007 and 2008, i.e. after the period had formally come to an end. In the EU10 countries, which received a total sum of EUR 22.1 billion over the period, the amount of funding going to them was relatively small until their entry into the Union in 2004. Expenditure then took three years to reach a peak in 2007, though as in the EU15 countries, most of the funding available was then spent in 2008 and relatively little remained to be spent in 2009. Much the same pattern of spending was true of most countries, though the peak occurred one year later, in 2008, in Lithuania, Slovenia and Cyprus and one year earlier in Estonia. The implication of the timing of expenditure from the Structural Funds is that any effect on the economy tends to extend well beyond the programming period as defined and once lags in the effect of expenditure on the economy are taken into account, even further so. 4.1.5 The effect of the Structural Funds on GDP growth As indicated above, the timing of the effect of cohesion policy on the economies assisted varies according to the two models. In both cases, however, the estimated effect on GDP is substantial, though the scale of the effect varies according to both the structure of the economy and the composition of the expenditure financed. According to HERMIN, therefore, GDP in the 6 largest recipients of funding taken together was over 13% higher in 2009 as a result of the expenditure financed by the Structural Funds made available for the programming period. The largest effects were in Spain and Portugal, where Structural Fund support resulted in GDP being just under 17% higher than it otherwise would have been in the absence of support (Table 4.2). In the Eastern part of Germany, by contrast, the addition to GDP in 2009 was estimated at only just over 5%, only a third of the effect in Spain despite the slightly larger amount of funding received relative to GDP. The difference is explained by the much bigger multiplier effects in Spain since much more of the additional expenditure remains within the economy than in the Eastern German Länder. In the latter, therefore, a large amount ‘leaks out’ to the Western part of the country where many of the goods and services purchased from the expenditure are produced. At the same time, the manufacturing sector is smaller than in Spain and gains less from increased productivity resulting from cohesion funding. Much the same is true of Ireland, where a relatively small amount of financial support is also estimated to have a significant effect on GDP, increasing it by 7% in 2009 over what it otherwise would have been. Here as in Spain, therefore, the Structural Funds, according to the model, can be expected to have led to an increase in productivity in manufacturing which boosted exports and fed through into economic growth. How far these estimated effects conform with reality, it should be emphasised, depends not only the structural characteristics of the model and its properties. It also depends on the critical assumption that the expenditure financed by the Structural Funds resulted in the outcome it was capable of achieving, that the support was used reasonably efficiently. This means, for example, that expenditure on transport infrastructure led to the savings in time and costs which experience and the empirical evidence available on similar expenditure indicate would be expected. Whether it did or not is to some extent indicated by the other parts of the evaluation summarised in 116
Ex-post Evaluation of the ERDF 2000-2006 Synthesis Report Chapter 3 above and in the second part of this chapter which examines developments in the regions receiving Structural Fund support. Table 4.2 Cumulative effect of Structural Funds on GDP in major recipient economies, 2000-15 Note: Aggregations are weighted averages of country estimates, using the GDP of countries expressed in EUR as weights. GDP in 2009 has been used to weight the estimates for the subsequent years. Source: Bradlley and Untiedt, An analysis of cohesion policy, 2000-2006, using the CSHM, and Janos Varga and Jan in’t Veld, A model-based analysis of the impact of cohesion policy expenditure 2000-06: Simulations with the QUEST III endogenous R&D model. The estimates produced by the QUEST model are somewhat different for the four EU15 Cohesion countries (the two macro regions in Italy and Germany are not separately distinguished in the model). For the period 2000-2009, they are lower for all the countries, though only slightly so in the case of Portugal which received the largest amount of funding relative to GDP. The difference is especially large in Spain, where QUEST estimates a cumulative gain in GDP of 9.5% as a result of cohesion policy (some 7 percentage points lower than HERMIN). The increase in demand still exceeds the demand resulting from the additional public expenditure but by less than in HERMIN. The same is the case in Ireland. In all the countries, the estimated effect of cohesion policy on GDP by 2009 is still larger than the amount of funding involved. If the period is extended beyond 2009, however, to take account of the lagged effects of expenditure on the productive potential of the economies concerned, the comparison between the estimates produced by the two models is changed markedly. Since QUEST estimates that the expenditure financed under cohesion policy will give rise to larger gains in the capacity of the economies to grow and that these effects, because of the lags involved, will tend to increase over time, the more the period is extended, the greater the effect on GDP is forecast to be. By 2013, therefore, the gain in GDP produced by Structural Fund support for the 2000-2006 period is estimated by QUEST to be only slightly smaller in the four EU15 Cohesion countries than estimated by HERMIN (17% as opposed to around 17.5%). By 2015, it is estimated to be larger and the gap continues to widen as the period is extended. Moreover, this is the case for all the countries concerned except Ireland. In Portugal, in particular, GDP is estimated by QUEST to be a 117
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