Romanian Fiscal Council: public deficit to exceed 8%, possibly 10% of GDP

Romania's Fiscal Council believes that the leading indicators considered by the Government in the latest budget amendment are overly-optimistic.

The Council expects the country's GDP to contract by 4-6% this year, two to three times more than in the "very optimistic" 1.9% GDP contraction scenario assumed by the Government.

In a pessimistic scenario, Romania's economy could go down by 8-9%. "Judging on the available data, the Fiscal Council considers that the Government's macroeconomic scenario, built on a 1.9% decline in real GDP, is very optimistic," the Fiscal Council's opinion reads.

The budget deficit projected by the Fiscal Council for this year ranges between 8.1% and 10.4% of GDP, compared to the 6.7% of GDP target set by the Government.

Even considering the macroeconomic framework assumed by the Government (1.9% GDP decline this year), the budget deficit would be between 7.3 and 7.45% of GDP, according to the Fiscal Council's analysis.

Moreover, the budget gap will not decline in 2021, if pensions go up by 40% in September as planned, the Fiscal Council warns.

Given the level of the budget deficit, Romania's financing needs will range from 8.6% of GDP, under the Government's optimistic projection, to 11-14.3% of GDP - or, in absolute terms, between RON 120 bln and RON 144 bln (EUR 24-29 bln).

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