Romania’s forecast body helps government to expand public deficit by boosting GDP value

The National Commission for Strategy and Prognosis (CNSP), the government’s economic forecast body, has revised downward its estimates regarding the gross domestic product (GDP) growth rate, but rose the forecast for GDP value, helping the government to expand its fiscal deficit.

In its latest report, the commission estimates Romania’s GDP will grow by 5.5 percent in 2018 (compared with 6.1 percent in the previous forecast, released in April), up to RON 945 billion (EUR 203.2 billion), or EUR 10,435 per inhabitant, from EUR 188 billion (EUR 9,596 /inhabitant) in 2017.

The previous report of CNSP, released in April, forecasted a GDP value of RON 930 billion in 2018.

All the EU member states should maintain the public deficit below 3 percent of GDP, and Romania’s government plans a fiscal gap of 3 percent of GDP in 2018.

But public deficit’s upper limit depends on the GDP, and a larger value allows larger deficits.

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For a GDP value of RON 930 billion, 3 percent means RON 27.9 billion, while for the latest forecasted value, of RON 945 billion, the maximum level of public deficit increases up to RON 28.35 billion.

This means that the new forecast allows the government to increase the public deficit by RON 450 million (close to EUR 100 million) without exceeding the EU limit.

Many analysts expect a slowdown of economic growth rate in 2018 to less than 5 percent and a lower GDP value.

The International Monetary Fund (IMF) estimates for this year a growth rate of 5.1 percent in Romania in its latest World Economic Outlook report.