Romania’s Budget Deficit

Last year, four EU countries, Romania included, reported a budget deficit equal to or higher than 3% of the GDP

Daniela Budu, 25.04.2017, 13:27

In 2016, Romania’s budget deficit accounted for 3% of the GDP, the Statistical Office of the European Union, Eurostat, announced on Monday. Romania’s GDP stood at around 170 billion euros last year while the deficit exceeded 5 billion euros, although the country pledged to keep its budget deficit below 3%, a threshold above which the European Commission is entitled to trigger the excessive deficit procedure. We remind you that Romania’s former Government, headed by Dacian Ciolos, set the budget deficit target at 2.95% of the GDP in 2016. Only three EU countries had a budget deficit of 3% or more, namely the UK (3%), France (3.4%) and Spain (4.5%). The EU’s budget deficit last year stood at 1.7% of the GDP.

According to the Eurostat, at the end of 2016 Romania was among the EU member states with the lowest level of Government debt to GDP, 37.6%, way below the 60% limit set by the Maastricht Treaty and one of the criteria for joining the Eurozone. The lowest level of Government debt was reported by Estonia, with 9.5%, followed by Luxembourg, Bulgaria and the Czech Republic. At EU level, 16 member states had a debt level that exceeded 60% of the GDP in 2016.

The European Commission warned Romania in its winter economic forecast that it might have the highest budget deficit in the EU in spite of the fact that it reported the highest economic growth in Europe last year. The Commission estimated that Romania’s budget deficit might go up to 3.6% of the GDP this year, thus exceeding the Government’s forecast of 2.98% of the GDP. The Bucharest Government, headed by Sorin Grindeanu, has publicly committed itself to keeping the budget deficit below the 3% threshold.

The European Commission has also forecast that Romania’s economic growth this year will stand at 4.4%, below the estimated 5.2% on which the Government based the 2017 budget. According to economic analysts, the only hope for the country’s 2017 budget is an increase in the number of employees, that would provide a “reserve” of revenues by curbing black market labour and by increasing the number of legal workers. Recent statistics show that Romania’s active population accounts for 8.9 million, of whom only 4.78 million are working legally, while 1.5 million are illegal workers. (Translated by E. Enache)