Budget deficit could reach 3.5pc of GDP, Fiscal Council President warns

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The budget deficit for the first five months of the year is very high, due to increasing expenditures, whereas if not decisions are made, by year-end it will reach 3.5-3.6%, Fiscal Council President, Ionut Dumitru, has warned on Friday.

“We see higher expenditures on wages and social assistance, above the approved budget. If no decision is made, we would probably see the budget exceed 3%, up to 3.5-3.6% by year-end,” Dumitru said.

He argued that the first budget rectification witnessed cuts in investments of RON 10 billion, in order to cover the needs for wages and pensions. This year the investments have reached a historic low and there is no room for moves.

“We would probably see an official decision on amending the law on Pensions Pillar II. (…) They would intentionally promote changes to bring more resources to the budget to keep it below 3%,” Ionut Dumitru said.

He added that the increase of the pension point as of July 1 will have an impact of RON 1.2 billion. The impact of increasing the minimum pension will be of RON 600 million, the Fiscal Council President said.

The Finance Ministry released the execution of the consolidated state budget on Thursday, with the figures revealing a higher deficit, up to 0.88% of GDP in May, against 0.65% of GDP in April.

In the first five months of 2017 Romania had a deficit of 0.25% of GDP. By nominal value, the deficit was of RON 2.17 billion in May 2017, increasing in May 2018 to RON 8.18 billion, up 3.7 times.

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