Romania posted a budget deficit of 3% of GDP in 2018, five times wider than the average in the European Union (where it was 0.6% of GDP), according to Eurostat data released on April 23.

Only one of the other 27 EU countries posted a fiscal gap wider than Romania: Cyprus (4.8% of GDP).

The average budget deficit in the EU narrowed significantly from 1.0% of GDP in 2017 to 0.6% of GDP, while the gap widened from 2.7% of GDP in 2016-2017 in Romania.

The wide fiscal deficit in Romania was caused by the small revenues-to-GDP ratio that was the second-lowest among EU’s 28 states: 35% versus an average 45.6% in the EU. Only Ireland posted a lower revenues-to-GDP rate, but its taxation and economic policies are aimed at attracting foreign companies.

On the upside, Romania’s public indebtedness is among the lowest in Europe: the public debt accounted for 35% of GDP at the end of 2018, compared to an average of 80% in the EU. Nonetheless, there are several EU countries with lower indebtedness: the Baltic states (except Latvia, with 35.9%), Bulgaria, Czech Republic, and Denmark.

editor@romania-insider.com

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