Fiscal Council warning: State budget deficit could reach 3.6 pct at the end of the year

Aurel Dragan 29/06/2018 | 12:23

The increasing of the budget deficit in the first five months of the year at 0.88 percent of GDP is the result of the spending growth and if there will not be taken action against this situation the deficit at the end of the year could reach 3.5 – 3.6 percent, according to Ionut Dumitru, the chairman at the Fiscal Council.

“The budget deficit is a huge one for the first five months of the year and is primarily the result of rising spending. Revenues are below expectations but not very far what budgeted, while spending is having a much worse dynamic. We have wage and social welfare expenditure increases that far exceed the approved budget and in this context there is a need for resource. If nothing is done and the budget is executed as we saw in the first part of the year, we will probably exceed 3 percent. I would say somewhere at 3.5-3.6 percent at the end of the year,” said Dumitru.

According to the president of the Fiscal Council, at the first fiscal correction last year, 10 billion lei were cut from investments and allocated to salaries and pensions. This year, investments are at a historical minimum and there is no room for maneuver in the sense of further reducing investment to allocate money to current expenditures or wages and pensions. Ionuţ Dumitru argues that under these conditions we can see other measures.

“We see this discussions about Pillar II. We will probably have an official version of the Pillar II operation law. Governors have not come up with anything in recent days, but there have been statements from officials about amending the legislation. Probably, they intend to make this changes to bring some budget resources and keep the deficit at 3 percent,” said Dumitru.

He also stated that the increase of the pension point by 10 percent as of July 1 has a budget impact of about RON 3.1 billion for half a year and an annualized impact of RON 1.2 billion. The increase of the minimum pension has an impact of RON 600 million on the budget.

The consolidated general government registered a deficit of RON 8.14 billion, or 0.88 percent of GDP in the first five months of 2018, almost four times higher than the same period in 2017 when the deficit was RON 2.2 billion and 0.27 percent of GDP. The revenues of the consolidated state budget, amounting to RON 110.9 billion, representing 11.9 percent of GDP, were 12.7 percent higher, in nominal terms, compared to the same period of the previous year.

The social assistance expenditures increased by 10.5 percent compared to the previous year, being mainly influenced by the 9 percent increase of the pension point from 1 July 2017 to RON 1,000, the increase and modification of the monthly indemnity for childcare and insertion incentive.

At the same time, investment expenditures, including capital expenditures as well as those related to development programs financed from domestic and external sources, were RON 7.4 billion, 1.8 times higher than the same period last year.

BR Magazine | Latest Issue

Download PDF: Business Review Magazine March (II) 2024 Issue

The March (II) 2024 issue of Business Review Magazine is now available in digital format, featuring the main cover story titled “BAT DBS Romania Hub: A Vibrant New Office For An Employee-Centric
Aurel Dragan | 27/03/2024 | 17:32
Advertisement Advertisement
Close ×

We use cookies for keeping our website reliable and secure, personalising content and ads, providing social media features and to analyse how our website is used.

Accept & continue