Romania’s consolidated budget gap could increase to up to 4.8 percent of GDP in 2020, well beyond the government’s projections, the Fiscal Council has found. While the government had estimated a deficit of 3.6 percent, the government body formed by independent experts has reminded the finance ministry that the budget bill requires an adjustment (via Maszol).
According to the council’s assessment, even if the government postpones the planned 40 percent pension increase scheduled for September, the budget gap still only has a chance of dropping to between 3.8 and 4.1 percent. If the pension law is applied, the council expects the budget deficit to exceed 6 percent of GDP in 2021, and 7 percent in 2022, if no adjustments are made.
The body strongly recommends that the government should balance the budget. Otherwise, it will seriously impact the country’s economy, and it is hard to imagine that financial markets would tolerate budget gaps of such magnitude, the council noted.
The huge gap is due to measures that cut into the government’s income, such as lowering part-time workers’ social security tax, which accounts for 0.14 percent of GDP, and terminating the greed tax, which accounted for between 0.1 and 0.15 percent of GDP. The independent body’s analysts believe that the later the budget correction is made, the greater the risk of unfavorable economic and fiscal performance increasing.
Title image: Pixabay