In an opinion piece published on their website, the Fiscal Council shows they believe the revision of the national budget will not lead to the deficit target being overshot for the current year, but only because of a very likely failure to spend the money on public investment.
“The Fiscal Council believes that keeping the budget deficit within the limits of the annual target for the current year is easy to do in the context of maintaining the current parameters of the tax and budget policies, and the balance of risks seems tilted to the side of a smaller than targeted deficit, given that investment underspending looks very likely, shown by the experience of 2014 and the developments in the half-year programme,” the opinion reads.
As far as the government revenue is concerned, the Fiscal Council says the estimates are grounded in updated actual performance following economic growth that exceeded initial projections and an improvement in collection efficiency.
On the other hand “The Fiscal Council has serious reservations over the upward revision of the revenue from social security contributions, but it believes that the high risk of smaller revenue becoming true is offset by high probability of higher tax revenue than initially projected, given prudent extrapolation of H1, 2015 performance,” the Council says.
At the same time, the Fiscal Council is sceptical over the materialisation of estimates regarding post-accession European funds that have been upwardly adjusted by RON 2 billion (EUR 0.45 billion), given the performance against the H1, 2015 programme and the implicit hypothesis of inflows tripling in the second half of 2015. “Nevertheless, failure of the estimates to materialise should not trigger a widening in the government deficit, because of automatic adjustment of related government spending,” the Council says.
As far as spending is concerned, “its realisation at the projected level seems highly unlikely given a massive under-implementation of public investment spending in H1, 2015 and implicit acceleration of public investment inflows required by convergence toward annual earmarking (it should be four times higher in the second half of 2015 compared with the first half). Given the context, upward revision of such magnitude from initial projection (+RON 2.9 billion) at the first budgetary revision (…) seems surprising. The previous years’ implementation reveals a systematic trend of projected allocations failing to materialise despite ambitious projections,” the Council says.
The Council also warns about the budgeted staff spending of RON 49.76 billion (EUR 11.26 billion), or 7.1 per cent of the gross domestic product (GDP), which exceeds the ceiling set in Law 182/2014, both in nominal terms and in terms of percentage to the GDP, by RON 1.39 billion (EUR 0.31 billion) and 0.28-per-cent of the GDP, respectively. The Fiscal Council argues that the legislation in force forbids rises in staff spending at budget revisions. “Law 192/2014 capped staff spending for 2015 at RON 48.37 billion (EUR 10.95 billion), or 6.8 per cent of the GDP,” reads the Council’s opinion.
The Fiscal Council also says its opinion does not take into account the latest amendments to the budget revision draft that were notified to it on July 28 in the morning.
The government approved on Tuesday a first budgetary revision in 2015 as suggested by the Finance Ministry, Government’s spokesman Corneliu Calota told Agerpress.