The Finance Minister on the budget deficit

Finance Minister Eugen Teodorovici has given assurances that Romanias budget deficit for 2018 will not exceed the limit set by the European Union

Roxana Vasile, 07.01.2019, 13:28

Romania’s budget deficit for 2018 will not exceed 3% of the Gross Domestic Product, Finance Minister Eugen Teodorovici told a private TV station on Sunday. The statement comes as economic experts from the right-wing opposition claimed the deficit would reach as much as 5%, above the limit set by the European Commission.

Eugen Teodorovici: “The deficit will be below 4%. Our estimate was somewhere around the 2.9% mark, we don’t have any official data yet. The numbers for December will come out on January 25. As Finance Minister, however, I do have certain figures to ground my forecast on. So I can say under no circumstances will the deficit exceed 3%”.

Another sensitive point in the relation between President Klaus Iohannis and the Government is the budget for 2019. At the end of last week, the President pointed out that the absence of a draft budget is a serious matter which the Government urgently needs to solve. The President also demanded an explanation from the ruling coalition senior party, the Social-Democratic Party.

Eugen Teodorovici has given some, arguing that the draft budget for 2019 could be made public this week and a possible debate in Parliament might be scheduled for early February: “The country’s Supreme Defense Council has given its go-ahead, but we still need to discuss the bill with the Economic and Social Council and the Fiscal Council, so that the Government will have already passed the bill before Parliament resumes sittings at the end of January or in early February. There won’t be any kind of deadlock”.

The draft budget for 2019 provides for all the fiscal measures recently adopted by the Government. The bill is also expected to increase the minimum wage salary and the pension point. On the other hand, multinational companies operating in Romania bringing their profits back home could be levied an additional tax related to the amount of money they repatriate.

Last but not least, Eugen Teodorovici said he will invite National Bank Governor Mugur Isarescu and the President of the Romanian Association of Banks for talks on the banking system. The meeting is necessary, Teodorovici says, as there is mounting pressure from the Central Bank to keep the ROBOR loan reference index in check, considering in the last years the index has fluctuated both to the detriment of businesses and individual loan takers.

Whereas in 2006 the ROBOR (Romanian Inter-bank Offer Rate) index stood at 0.86, in September 2018 the index reached 3.30, nearly 4 times higher. In Romania the inflation rate was not 400%, and that’s why, at the end of 2018, the Government introduced the so-called “tax on greed” levied on banks whenever the ROBOR index exceeds 2%. The banking sector has harshly criticized the Government’s emergency decree. (Edited by D. Vijeu)