Moody’s: Romanian Govt. provided weakest fiscal support in the region in 2020

Romania's Government extended the smallest fiscal support to the private sector in 2020, among Central and Eastern European countries, namely about 4% of GDP, according to a report by the rating agency Moody's, which analyzes eight states in the region.

The report covers Romania, Bulgaria, Croatia, Slovenia, Slovakia, Poland, Hungary, and the Czech Republic.

According to the report, the Czech Republic has extended the strongest fiscal support to the economy, over 20% of GDP, Profit.ro reported.

Speaking of the direct support alone (not including the state guarantees for loans), Romania still ranks last in the region with some 2% of GDP, but the most supportive Government was Hungary's (some 7% of GDP).

The fact that Romania is last in this ranking can be explained by the Government's limited capacity to act in this regard because of the wide deficit before the crisis, the report implies. The budget situation was quite difficult since 2019, Romania being the only EU state against which the European Commission initiated the excessive deficit procedure last year, even if this procedure is currently suspended.

According to a separate report drafted by the International Monetary Fund (IMF) on the support extended by Governments to support companies and the population in the context of the economic crisis, Romania is last in the EU and on par with countries in Africa, Central America, and Asia.

Based on the expenditures for healthcare and tax deferrals, Romania, with a budgetary effort of 2.17% of GDP, ranks last in the EU and 114th out of 191 countries analyzed by the International Monetary Fund (IMF).

In most countries in these regions, governments have made a budget effort of less than 2.5% of GDP to support businesses and the population through spending such as healthcare or tax deferrals.

Including the programs to support liquidity, Romania climbs to 74th place, and the magnitude of the support reaches 5.38% of GDP. However, measures to support liquidity are largely state guarantees for loans granted by the banking system to companies. In such cases, the state incurs costs only if the companies cannot pay.

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