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Former Finance Minister warns: Budget deficit could reach in 2018 the same level as in 2008

The scenario in 2008 seems to repeat. Expanding consumption, crediting, higher interests, economic growth above expectations. To all these comes the level of the budget deficit. This year the Government could find solutions to keep the level below 3% of GDP, however in 2018 it will reach a level close to the one in 2008, read the working papers on the next year’s budget on the Government’s table, capital.ro informs.

The budget deficit could reach 4.78% of GDP next year, similar to the level reached in 2008, i.e. 4.8% of GDP. This concerning variant is on the executive’s table, whereas the Finance Ministry is drawing simulations on the governing programme.

Former Finance Minister Anca Dragu says: “There are similarities with the 2006-2008 period in regard to the structure of the economic growth and the trend to stiffening the consolidated state budget. Nevertheless, there are two notable differences. The positive one is the much better external positioning – the current account deficit at about 3% of GDP, against 14% in 2007 which proved unsustainable. This debt, to be paid by our children, the ones we cannot provide for school manuals and decent schools – is not given by building highways, high speed railways, modern airports, schools or hospitals. The tripling of the debt takes place on the background of the faulty administration of the economy due to lack of vision for development. In other words, after 10 years, we are as poorer, but much more indebted.”

The payroll expenditures will add to budget expenditures more than RON 10 billion next year, which will exceed 8.8% of the GDP to reach RON 79.7 billion, a working document of the Government’s table reads, according to capital.ro.

The cut in income tax to 10% will lead to collection deficit of RON 11 billion. The capital expenditures, investments would rise by only RON 4 billion against the level this year.

Another budgetary burden for the Finance Ministry is in the governing programme, i.e. the increase of the pension point from RON 1,000 to RON 1,100 as of July 2018. This will lead to higher budget expenditures by RON 3 billion.

 

About Valeriu Lazar