Fiscal Council's Daianu: We cannot fit deficit target in 2019;2020 budget should start correction

This year Romania cannot fit within the deficit target of 3 percent and the budget for 2020 should start the correction, the key-parameters being maintaining the deficit level of 2019, Chairman of the Fiscal Council Daniel Daianu stated at the European Union Finance & Banking Lectures Project 2019 (EU-COFILE) seminar. 

"The budget deficit is higher by 0.8 percent of the GDP than it was in last year's budget execution. We believe that we cannot fit within the 3 percent target. We even said in the note regarding the revision that we have a budget which includes in its structure a higher structural tension which resides in the scarcity of resources and very high pressures. The issue is not so much related to the stock. One would say that Romania's public debt of 35 percent of the GDP is still reasonable. Poland has 48 or 49 percent, Hungary around 70 percent, Croatia over 70 percent as well. The public debt, although it tripled compared to the one in 2007-2008, back then it was 14 percent, one would say it is reasonable. The issue is in flows. The commitments are overwhelming and they are not hypothetical commitments. It's not about the promises. It's about the commitments which are set out in the normative acts," Daniel Daianu stated. 

He mentioned that it's possible for many not to understand the magnitude of these commitments. 

"With great nonchalance, talks are being carried out on maintaining the calendar... I have the feeling that there is no sense of proportions. We can talk about a sense of measure. People who have the sense of measure. Automatically, you think that a person who has the sense of measure also has a sense of proportions. Why do I say that their magnitude is not understood? Because under unchanged conditions, if the implementation calendar is maintained, the percentage supplement of the GDP in 2022 would be between 3 and 4 percent of the GDP. Folks, we are talking about 3 and 4 percent of the GDP and not about 0.3 or 0.4 percent. This is why I say that there is no sense of proportions," Daianu stated. 

In his view, the 2020 budget should start the correction and the key-parameter should be for the next year budget deficit to exceed the one in 2019, taking into account that it's possible for it not to be below 3 percent. 

Daniel Daianu said that the institution has a new assessment of the deficit for 2019, but said he doesn't want to say what is the figure. He stated that the increase in 2010 of the pension point has a 3 times higher impact in 2021. The deficit in 2021 would exceed 4 percent of the GDP, in 2021 it would be over 5.7 percent of the GDP and in 2022 it would be around 7 percent. Daianu explained that the figures only take the into account the increases with social assistance (including pensions) and not the increases with wages. 

The European Union Finance & Banking Lectures Project Seminar is organised by the National Bank of Romania (BNR), the Romanian Association of Banks and the Alpha Bank at the BNR Training Centre in Sinaia.