Brussels’ perspective on the Romanian economy

The European Commission says that Romania took no effective action to correct its significant deviation from the adjustment path towards the medium-term budgetary objective.

Daniela Budu, 23.11.2017, 13:57

The European Commission has warned Romania that it took no effective measures to reduce its medium-term budget deficit, as the EU Council recommended it in June. European Commissioner for Economic and Financial Affairs, Pierre Moscovici, has reminded that the public deficit in Romania will reach 3% this year, 3.9% in 2018 and 4.1% in 2019. In his opinion, the EU Council should adopt a revised recommendation to Romania, of an annual structural adjustment of at least 0.8% of the GDP in 2018 that means a drastic cut in expenditure.

Moscovici says this objective is reasonable and attainable given the significant economic growth expected in Romania. The European Commission recommends Bucharest to use any windfall gains for budget deficit reduction, while the budgetary consolidation measures should secure a lasting improvement in the general government structural balance, in a growth-friendly manner. Romania must report to the EU Council by April 2018 on the action taken in response to the EC’s recommendation.

Pierre Moscovici also presented the results of the assessment for the euro-zone, where six countries, namely France, Italy, Belgium, Portugal, Austria and Slovenia were warned that their budgetary forecast for 2018 risk being non-compliant with the European regulations. In Bucharest, economist Aurelian Dochia says that Romania’s budget deficit has an accelerated growth tendency and that in 2018 it will inevitably exceed 3% of the GDP.

In is opinion, the increase in the budget deficit coming at a time when the economy goes up by a high rate, of 7%, which is very dangerous for the economy. He has explained that “it will be very difficult to reduce the budget deficit next year, given that most budget expenditure is already a must. It is no longer possible to reduce budget expenditure when it is linked to salaries, pensions and so on. The expenses with the investments, which are usually sacrificed, have already been decreased starting this year. So there is little that can be done next year in this respect, which is why I believe the Government will have a problem securing the 3% deficit target,” Aurelian Dochia has explained.