State budget deficit up to 1.11% of estimated GDP, could reach 4.5% in 2019

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The consolidated state budget deficit in the first four months of the year is of RON 11.4 billion, i.e. 1.11% of the estimated GDP for 2019.

The outcome is by 70% weaker than in the same period last year, when the deficit was 0.65% of GDP.

In 2016 and 2017, in the same interval, the consolidated state budget registered surplus of 0.17% (2017). Nevertheless, in 2017 the state budget registered a deficit of 2.88% of GDP. If compared, in 2019 the deficit is 1.11% of GDP and the target is -2.76% of GDP, ziare.com informs. Simple mathematics show that an adjustment of 1.4% of GDP is needed, i.e. about EUR 3 billion more revenues or less expenditures in the coming eight months.

To be noted that in the last four months of the year the pensions are to be increased by 15%.

Economist Aurelian Dochia says this is a certain way to exceed the deficit target. “Until now they succeeded with difficulty to meet the 3% of GDP deficit target, but this year, looking at the figures, it is practically impossible to meet the 3%. Almost all expenses from now on in 2019 are compulsory. They are related to wages and pensions, mostly. The investments were cut in the past years, they have no room in this year’s budget. It’s quite likely to exceed the deficit target and enter the European Commission’s procedure of excessive deficit,” the economist said for hotnews.ro.

In turn, CFA Romania President Adrian Codirlasu believes there is a risk to exceed the deficit target of 3% of GDP, but there may be changes in terms of investments and expenditures for the public employees. “Investments will be cut, are there anymore investments to be cut? There’s a high risk to exceed the 3% target. It will be very difficult to meet the target,” he said.

Economist Dragos Cabat says he expected these developments.

“We all knew the expenses will grow, mainly for wages. I don’t think someone believed the revenues will increase at the same pace. They simply can’t. (…) The expenditures are scheduled until the year end. The only way possible is to increase taxes. Even so, if taxes are increased tomorrow, the effects will be registered after six months,” Dragos Cabat said. He also believes the investments will be cut.

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