ING: Fiscal deficit may rise to 4.4% in Romania on wage hikes in public sector

Romania’s budget deficit could reach 4.4% of the GDP next year if the Government applies the measures for increasing the salaries in the public administration proposed by the labor and budget committees within the Chamber of Deputies on Monday, according to a report of the ING analysts, which was published yesterday. The proposed measures, which haven’t yet been voted by the Chamber of Deputies, are supported by the Social Democratic Party and its allies. The MPs want to increase bonuses for the medical personnel and to give 15% wage increases to the employees in education and public welfare. These wage increases would lead to a rise in the budget deficit because no compensatory measures have been drafted, according to ING. Moreover, some tax cuts will enter into force starting January 2017, which will also put pressure on the state budget, according to the report. The Fiscal Code provides the VAT reduction from 20% to 19% starting next year. Other categories of public employees may also ask for increases, the ING analysts added. According to Prime Minister Dacian Ciolos, the measures voted by the Parliament in recent months will increase the state’s expenses by some EUR 2 billion next year, namely 1% of the GDP. The Government has been opposing these measures, arguing that it didn’t have resources to support them, but PSD leader Liviu Dragnea said that he would push for the wage increases so that Romanians would feel the economic growth in their pockets. Politicians quarrel over salary increases before elections in Romania editor@romania-insider.com