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Ministry of Finance assures that 2017 target deficit, namely 2.96% of GDP, is not at risk

de Razvan Diaconu , 30.10.2017

Regarding the EUROSTAT release on Romania’s budget deficit in the second quarter of 2017, the Ministry of Public Finance (MFP) has issued a press release explaining the European figures and assuring that the annual deficit is in line with the plan.

We present below the full release:

“The deficit target of 2.96% of annual GDP set for 2017 is not at risk. The gap between the balances mentioned in the EUROSTAT release and the data published monthly on the MFP website comes both from the calculation methodology, as the European System of Accounts (ESA) uses the accrual method and the impact generated according to the calculation methodology used for the seasonally adjusted quarterly deficits.

The implementation of the general consolidated budget according to the national methodology at the end of the first quarter of 2017 showed a surplus of 0.19% of the annual GDP, and in the second quarter, the general consolidated budget recorded a deficit of 0.96 % of GDP.

On the other hand, we inform you that the implementation of the general consolidated budget for the first nine months indicates a deficit of 0.81% of GDP, which shows that Romania is in line with the deficit target of 2.96% of GDP, set for 2017.

Please note that the value communicated by EUROSTAT, 4.1% of quarterly GDP, is calculated based on the seasonally adjusted ESA balance, by relating to the quarterly GDP. This reflects the trend pattern of the budget deficit recorded in the earlier quarters and related to the GDP in the second quarter, a quarter in which GDP is typically lower than in the third and fourth quarters of the year, in nominal terms.

It should be recalled that in 2016, the GDP in the second quarter was RON 178.7 billion, which represented 23.5% of the annual GDP. The highest quarterly GDP was recorded in the fourth quarter, RON 228.9 billion. In the second quarter of 2017, the GDP amounted to RON 197.5 billion, with the same share of the GDP forecasted for 2017.

Also, we notice in the data published by EUROSTAT that the same indicator recorded a maximum of 3.7% of GDP in the second quarter of 2016 when the deficit for the whole year was 3% of GDP. Compared to the similar period in 2016 (second quarter), we can notice that the budget deficit increased by 0.4pp to 4.1% of GDP.

It should be noted that the adjustment led to very low values in the third and fourth quarters of 2016, respectively 2.3% and 2.1%. Therefore, data published quarterly are not likely to explain the annual values. Such a seasonal development is also expected for the third and fourth quarters of 2017 so that we reach the level below 3% of GDP for the whole year.”

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