Fiscal Council: Romania's public debt to stabilise just above 50% of GDP

21 September 2021

Romania's public debt to GDP ratio will stabilise just above 50% of GDP by 2024 under the scenario of a 1.5pp annual fiscal consolidation, according to the head of Fiscal Council Daniel Daianu.

The country's fiscal consolidation is possible thanks to the robust revenues derived under the next generation and multiannual financial framework (2% of GDP per annum, combined) that would offset structurally weak budget revenues, according to Daianu, quoted by Wall-street.ro.

The robust inflows from the European Union would protect the country from rising interest rates (potentially caused by high inflation) that exert pressures on the budget expenditures (via public debt service), he explains. But there are other scenarios explored by the Fiscal Council, Daniel Daianu added.

A milder fiscal consolidation, of 1pp per year, will result in the debt to GDP ratio stabilising around 60% of GDP at around 2026.

Romania's debt to GDP ratio soared from 15% in 2008 to 47% at the end of 2020, amic economic crises and pandemic - but also as a result of pro-cyclical policies, explained Daianu.

The Fiscal Council head concludes that regardless of the scenario considered, Romania's public debt is projected to increase during the period 2021-2024, exceeding the level of 50% of GDP even in the case of the most optimistic hypotheses.

(Photo: Mattwatt/ Dreamstime)

andrei@romania-insider.com

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Fiscal Council: Romania's public debt to stabilise just above 50% of GDP

21 September 2021

Romania's public debt to GDP ratio will stabilise just above 50% of GDP by 2024 under the scenario of a 1.5pp annual fiscal consolidation, according to the head of Fiscal Council Daniel Daianu.

The country's fiscal consolidation is possible thanks to the robust revenues derived under the next generation and multiannual financial framework (2% of GDP per annum, combined) that would offset structurally weak budget revenues, according to Daianu, quoted by Wall-street.ro.

The robust inflows from the European Union would protect the country from rising interest rates (potentially caused by high inflation) that exert pressures on the budget expenditures (via public debt service), he explains. But there are other scenarios explored by the Fiscal Council, Daniel Daianu added.

A milder fiscal consolidation, of 1pp per year, will result in the debt to GDP ratio stabilising around 60% of GDP at around 2026.

Romania's debt to GDP ratio soared from 15% in 2008 to 47% at the end of 2020, amic economic crises and pandemic - but also as a result of pro-cyclical policies, explained Daianu.

The Fiscal Council head concludes that regardless of the scenario considered, Romania's public debt is projected to increase during the period 2021-2024, exceeding the level of 50% of GDP even in the case of the most optimistic hypotheses.

(Photo: Mattwatt/ Dreamstime)

andrei@romania-insider.com

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