ING expects Romania’s public deficit to reach 5% of GDP even without pension hike

Romania’s public deficit might exceed 5% of GDP this year even if the Government defers the 40% pension hike planned for September, according to a research report of ING Bank Romania quoted by Profit.ro.

Slower than projected GDP growth, weaker consumption and higher public spending are the main causes of the upwards revision of the projection.

Before the Covid-19 crisis, independent analysts expected the Government to miss by a small margin the 3.6%-of-GDP deficit target this year, although the gap was expected to surpass 6% of GDP under the scenario of full enforcement of the 40% pension hike this September.

However, under the post-Covid-19 crisis scenario, ING Bank Romania expects 2.1% GDP growth (revised downwards from 3.6% before the crisis).

The Government sketched the 2020 budget planning based on 4.1% GDP growth forecast.

The bank operated only moderate revision for the average inflation forecast from 3% to 2.8% (to reflect lower oil prices).

It expects the local currency to trade at RON 4.85 to EUR, which is not far from the before-crisis consensus expectations.

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