RO PM: We must freeze expenditures. We can’t afford to remain Europe’s black sheep

Romania's economy can't support further increases in public expenditures, prime minister Florin Citu said after the cabinet meeting on Wednesday, February 10.

"Romania's finances must be recalibrated. We must freeze the expenses to keep things under control," Citu said, quoted by Ziarul Financiar, adding that Romania is under scrutiny by foreign investors and the European Commission for its excessive public deficits.

However, PM Citu dismissed allegations about what the opposition calls an "austerity budget," stressing that a deficit of 7% of GDP means a lot.

"We did not want to put a tough break on expenditures this year, but we cannot afford to remain Europe's black sheep," Citu explained.

The public deficit will be reduced this year to 7.16% from 9.8% of GDP under the national methodology, Citu announced.

Still, under the European Union's ESA methodology, it will consolidate by a mere 0.9pp to 8.2% of GDP, he said, adding that the European Commission was not very happy about such a moderate consolidation pace.

The major difference between the two methodologies is that ESA includes accrued expenditures, while the national methodology is closer to the cash principle.

The Government aims to bring the public deficit under 3% of GDP by 2024, and backloading the fiscal consolidation increases the pressure on public finance in 2022-2024.

PM Citu dismissed the media rumors about tensions between the main partners in the ruling coalition: his National Liberal Party (PNL) and the reformist alliance USR-PLUS. The ministers of the reformist alliance have reportedly expressed disappointment with the budgets earmarked for their ministries, according to Hotnews.ro.

Speaking of the 2021 budget planning, PM Citu said that the revenues are expected to rise by 13% compared to 2020 (when they accounted for 31% of GDP and increased by a slim nominal 0.4% compared to 2019). He explained that this increase would be driven by the budget dues deferred by companies during 2020.

He also said that budget planning is based on expectations for a 4.3% real GDP growth in 2021 (7% nominal GDP growth). The public investments will increase to RON 61 bln (EUR 12.5 bln) in 2021, from 53 bln in 2020, and the transfers from the European Union's budget will cover some 60% of them.