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Fiscal Council: Romania could exceed its deficit target

9 August 2019

The target of budget deficit assumed by Romania for the end of 2019 could be exceeded and may oscillate in the range of 3.4% – 3.7% of GDP, if no credible additional compensatory measures will be adopted, warns the Fiscal Council, in an opinion published on Thursday, on the draft of the consolidated budget rectification.

According to the conclusions regarding the fiscal rectification, the Fiscal Council recommends an increase of transparency in the process of communicating the budgetary constructions by publishing and adopting as a benchmark the consolidated general budget, “not only parts of it”.

“The forecast of the macroeconomic framework related to the first budgetary rectification is based on a plausible advance of nominal GDP resulting from a lower real economic growth and a probably higher deflator. Also, the assumptions regarding the labor market are optimistic, especially regarding the pace of growth. Since the initial construction, the general consolidated budget provided for a large deviation from the rule on the structural balance and, moreover, there is the risk of exceeding even the 3% of GDP threshold – given the proximity of the initial target to this ceiling”, is mentioned in the statement of the Fiscal Council, according to Agerpres.

Also, the Fiscal Council considers that an eventual positive budgetary impact of both the measures to increase the efficiency of the collection and of the fiscal amnesty cannot be taken into account ex-ante in the projection of the budgetary revenues, considering the principle of prudence, established by the LRFB (Law of Fiscal-Budgetary Responsibility).

The representatives of the Council note that they have “significant reserves in relation to the proposed level of budgetary revenues – especially in the case of VAT and social insurance contributions”, thus identifying a cumulative income minus between 5.8 and 6.8 billion lei.

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