Fiscal Council: The budget project for 2017 deviates deliberately and substantially from the fiscal rules

The Fiscal Council warned that the planned public budget for 2017 is based on an optimistic economic growth rate.

“The budget project for 2017 deviates deliberately and substantially from the fiscal rules set up both by the national law and the European treaties signed by Romania. The Fiscal Code maintains its objections on the indulgence of the approach of the persistent placement of the budgetary deficit to the level of 3 percent of GDP,” said the Fiscal Council on Friday.

The Council also says that the evaluations of the Fiscal Code shows a high probability of appearance of a negative income gap in 2017, having as main source the extremely optimistic feature of the macroeconomic scenario, the base for the budgetary projection.

It believes that it’s probable the necessity of some corrective measures adoption regarding the new incomes or expenses in order to avoid the exceeding of the 3 percent-target of GDP during the budget year in 2017.

The budgetary decrease starting 2016 and that will continue the next years is generated by a mix of taxes reduction, especially on consumption, of high increases in budget expenses, especially social expenses. The estimations show that Romania has probably the lowest incomes (including the social insurances contributions) from EU (together with Ireland) starting 2016, which will make the budgetary construction more complicated on the medium term.

The gap that separated Romania from the average fiscal incomes in EU28 is around 14 percentage point from GDP, according to the Fiscal Council, so that it recommends the Government the acceleration of the structural reform measures with an impact over the collection rate of the budgetary incomes and over the efficiency of the public expenses.

Therefore, the Council believes that the urgency of the implementation of World Bank program signed in 2013 by Romania regarding the upgrade of the budgetary incomes system update should be a priority.