RO Fiscal Council sees 9%-of-GDP public deficit next year under “no policy change”

Romania's public deficit will rise to 9.8% of GDP this year, 0.7% of GDP more than envisaged by the Government, according to the Fiscal Council's opinion on the third budget revision approved by the Romanian Executive on November 23.

Meanwhile, "the starting point" for calculating next year's gap is estimated at 9% of GDP, according to the same source.

The Government has increased the budget deficit target for this year from 8.6% to 9.2% of GDP, and finance minister Florin Citu mentioned 7% of GDP as a possible target for next year.

The two major elements mentioned by the Fiscal Council for its higher public deficit estimate this year are the budget payments deferred by the companies, which would prefer to reschedule them (under a facility already in place) than pay them by the December 25 deadline, and the fees charged by the state for the 5G licenses, likely not to be received this year.

The two revenue elements questioned by the Fiscal Council are likely to be deferred; therefore, they could be part of the revenues base in 2021.

The Fiscal Council also finds the 4.2% GDP contraction assumed by the Government somewhat optimistic. The consensus forecast indicates a 4-6% contraction.

The Fiscal Council's estimate for the 2021 budget is based on the fact that a large part of the 2020 budget deficit is structural and only partly caused by one-off elements. Furthermore, the effects of the crisis will remain in place for a large part of next year, requiring similar one-off measures.

(Photo source: Nuthawut Somsuk/Dreamstime.com)