Romania’s budget deficit in the focus of the European Commission

Romanias government is ready to take further measures to cut public spending if it cannot observe the budget deficit target set at 3%, Finance Minister, Viorel Ştefan has said

Daniela Budu, 16.03.2017, 13:38

The European Commission warns that Romania might report the biggest budget deficit growth within the EU this year, despite the fact that it registered the biggest economic growth rate in Europe in 2016. The head of the European Commission Representation in Romania, Angela Cristea, pointed out, at the launch of the economic report for Romania, that the document signals a number of paradoxes related to Romania’s economic evolution.

Angela Cristea: “On the one hand, the poverty rate in Romania has dropped, but social inequalities have grown. Also, the document shows the biggest growth of income inequalities within the EU in Romania. And we notice that this is not one single occurrence, there has been a tendency for income inequalities since 2012. Actually, this tendency has also been reported in other EU member states and we believe that it reflects the global effects of a crisis complicated by the effects of globalization.”

The EC estimates that Romania will end the year with a deficit of 3.6% of the GDP, the biggest in the EU. Finance Minister, Viorel Ştefan, said Romania reported good economic results, adding that the EC’s concerns are carefully followed by the government.

Viorel Stefan: “Romania has made progress in terms of structural reforms, especially as regards governance, employment and the reduction of poverty, healthcare and public administration. I would like to point out that, in 2016, Romania was included in the category of states without macroeconomic imbalances alongside Austria, Belgium, Estonia, Hungary and Great Britain. The government has reiterated its commitment to maintaining the budget deficit within the limits set under the Stability and Growth Pact and it intends to take further measures to reduce spending, if it notices potential failure to reach the targets set for the first quarter.”

Viorel Ştefan has also said that the government wants to streamline and improve control actions with a view to increasing the rate of tax collection to the budget. As regards the evolution of the Romanian economy, the chief economist of the national bank, Valentin Lazea, says that in order to have potential growth of the GDP close to 5% annually, which is the necessary level to help Romania bridge the gaps separating it from the European developed countries, we should implement structural reforms in the education and healthcare sectors and also improve demographic conditions. Furthermore, Romania needs to increase the absorption rate for European funds and make public investments efficient.