Romania's Fiscal Council expects 6.4%-of-GDP public deficit in 2024

Romania's public deficit is reaching 6.8% of GDP in 2023, nearly 1% of GDP more than expected by the government, to decrease only moderately at 6.4% of GDP in 2024 – against the 5%-of-GDP target set by the executive, according to the opinion expressed by the Fiscal Council on the final form of the budget planning for 2024.

"The estimate of the cash deficit takes into account the information available to the Fiscal Council, [...] and the assumption that there will be no forced reduction of expenses", the Fiscal Council's document reads.

The Council also points to "uncertainties regarding the final form of the fiscal measures" adopted by the authorities under a document separate from the budget planning.

The fiscal corrective measures passed by the government in 2023 would have an impact of about 1% of GDP in 2024, according to the Council's estimates. Additional measures are needed to bring the budget deficit to 3% of GDP in a few years, it points out.

The Council admits that the new Pension Law was necessary "to eliminate flagrant inequities, to take into account the ageing of the population." However, it warns of its severe impact in the short and medium term as the additional deficit generated is permanent.

The fiscal Council stresses once again that fiscal consolidation must be operated primarily on the revenue side. "In an EU state with extremely low tax revenues, approx. 27% of GDP, when the average in the EU is over 40% of GDP, with massive and chronic underfunding of education and public health, with tax evasion and almost institutionalized tax evasion, with a gap in VAT collection of over 36% compared to the EU average of some 5%, this is the common sense, the logical alternative," the document reads.

According to the medium-term projected fiscal-budgetary framework, the budgetary consolidation in the period 2025-2027 is carried out exclusively on the expenditure side, the share of budgetary revenues in GDP indicating a downward trend in the analyzed period.

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