The President of the Competition Council, Bogdan Chirițoiu, believes that stimulating the economy through public spending has reached its limits, as a mega-stimulus of 9% of GDP generated only 1% economic growth.

“Romania is failing to reduce the budget deficit. Romania, in 2024, slipped, because by 2023 we were also on everyone’s trend of reducing our budget deficit, of returning to 3%. The normal rules say this: the budget deficit must be a maximum of 3% of GDP. All of Europe exceeded them during the crisis, but now everyone is recovering and is going to 3 or close to 3. We see what we do with defense now. An exception may be created for defense. Romania, unfortunately, in 2024, instead of taking it down from 5 to 3, took it to 9. This huge amount of money pumped by the Romanian state into the economy – 9% – is huge. What is the state doing? It borrows, gives money to people and companies, which should stimulate economic growth, you should see… people, having so much money, spend and should see economic growth. In our “it is no longer seen in economic growth. So, with a mega-stimulus of 9% of GDP you only manage to generate 1% economic growth. So, it seems to me that this instrument of stimulating the economy through public spending is exhausted,” said Chirițoiu, quoted by Agerpres.

The head of the competition authority stressed that the money that is not used to increase GDP is found in inflation and higher imports, which leads to a deepening of the balance of payments deficit.

“If this money doesn’t go to increase GDP, what does this 9% of GDP go to? Well, it goes to inflation, so more is not produced, but what is produced becomes more expensive, and it goes to imports. The balance of payments deficit increases. So, all this money that the Romanian state borrows and puts into the economy fails to generate any welfare for the population or in any case does not generate economic development, yes, because you still buy Romanian products, but more expensive than they were, or you buy more imported products, which is good for consumers, but does not ensure economic development,” he explained.

In his opinion, public money should be directed mainly towards infrastructure works, which generate economic development, and less towards the consumption side.

“Now, exactly how the Government is going to do it…ideally, you should keep the public money that goes into economic development, so in the kind of works like infrastructure that can generate GDP growth and, if you have to reduce budget spending, which you have to reduce, less of it should be directed to areas that do not generate economic growth, which is just the consumption part and which to a large extent goes abroad, leaves the country. The policy is exactly the opposite. It is always much easier to cut investments, even if some and others scream, but it is still easier to cut investments than to take from the consumer money of the many. What the Government is going to do, I don’t know, talk to the Minister of Finance on Monday, he is the first one who has to juggle these decisions. Of course, he needs support in the coalition and so on.”

Reducing labor taxes, “nuances” in the application of the turnover tax, offsetting outstanding invoices that public authorities owe to builders for the works performed with their tax obligations, as well as granting loans with partially subsidized interest are the proposals that the construction employers’ associations will discuss on Monday with the Minister of Finance, Alexandru Nazare.

The purpose of this meeting is to continue as many infrastructure projects as possible and support the country’s economic development.