Latest EU country report on Romania

The EUs latest country report on Romania shows that Romanias economic growth rate is above the European average, but warns of the budget deficit target risking to exceed 3% of the GDP

Mihai Pelin, 12.04.2018, 13:05

Romania has reported the lowest unemployment rate of the past years and an economic growth rate above the EU average, but this is based mainly on consumption and loaning. Social inequalities were maintained and the budget deficit risks failing to observe the 3%-of-the-GDP target, shows the EUs latest country report on Romania.

Also, Romania has the lowest unemployment rate of the past 20 years, but it still faces the problem of work force availability and a high risk of poverty for vulnerable categories. Moreover, public investments are inefficient.

Here is the head of the European Commission Representation in Romania, Angela Cristea, with details: “Romanias investment rate is higher than the EU average, standing at 23% of the GDP, but the efficiency of these investments is a lot more reduced in Romania in comparison with the rest of the EU countries. Usually the authorities spend less than the amounts allotted and the construction rate is even lower.

In another development, the finance minister Eugen Teodorovici says that despite the economic growth reported, Romania needs to take action to transfer the economic growth engines from consumption to investments: “Consumption is the main factor for growth and this needs to be changed as soon as possible. The way the strategy has been defined and the measures included in the governing plan, all show very clearly that this is the direction to follow.

The finance minister has explained that measures are being taken to boost public investments, including through the simplification of public purchase procedures, and to create a friendly framework for private investments. As regards the budget deficit, he believes that the set target will not be exceeded and promised to come up, shortly, with a set of quantifiable measures and clear deadlines for implementation, all meant to keep the budget deficit under the target of 3% of the GDP.

The president of the Fiscal Council, Ionuţ Dumitru, has nevertheless drawn attention that the expenses level is not the only factor putting pressure on the budget deficit target.

Ionuţ Dumitru: “Fiscal revenues are very small in Romania, accounting for only 25.6% of the GDP in 2017 as compared to the European average of 40%. Its useless to discuss European infrastructure, European social services when we have such a huge gap between the European average and the revenues collected in Romania from duties and taxes. Bulgarias fiscal revenues stand at 29.5%. If Romania had the revenues of Bulgaria, then it would have a budget surplus.

Romania has been included by Brussels in the category of European states that are not facing imbalances and that continue to stay on a favorable trend. Final data show that in 2017 Romania reported a record economic growth rate of 7%, exceeding Chinas growth rate of 6.9%.