Romanian Parliament votes 2019 budget, 2.76%-of-GDP deficit target

Romania’s Parliament endorsed on February 15 the 2019 state budget with 275 votes for, 122 against, and 2 abstentions, according to local G4media.ro.

Compared to the draft sent by the Government, the most important amendment was hiking the children allowances by some 80% to RON 150 (EUR 32), which increased the estimated budget deficit to 2.76% of GDP, compared to 2.55% initially targeted by the Government. Notably, the public pension fund is projected to post a surplus of 0.5% of GDP this year, after a small deficit (0.5% of GDP) in 2018.

The Fiscal Council and the European Commission expressed concerns related to the optimistic assumptions used by the Government in estimating the budget revenues. Specifically, the Government envisages 5.5% GDP growth this year, compared to independent estimates of around 3%. Moreover, the Government expects a significant increase in employment and real wages (with an impact on private consumption).

President Klaus Iohannis blamed the ruling coalition for the 2019 budget planning that came very late and fails to demonstrate the Government’s responsibility and credibility. The budget planning is grounded on “speculative revenues” and ignores the children with special needs and orphans, a hint to the Government passing the responsibility for social payments to the local administrations.

In contrast, Iohannis praised the amendment of the opposition National Liberal Party, which hiked children allowances by 80%.

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