SIMILAR ARTICLES

Alan Duncan / We cannot allow our societies to continue to be attacked and undermined

Global security is under threat. The system of international rules that has kept our citizens safe and our societies prosperous since the end of the Second… Mai mult

Q2 / Average monthly income per capita in Romania has risen to nearly RON 1,600: Changes in redistribution of family budget

Data published by INS for the second quarter of 2018 show that Romanians’ monthly incomes have reached nearly RON 1,600 per person. They were RON… Mai mult

Current account deficit flickers to red on dashboard

According to the data released by Eurostat, Romania’s current account deficit exceeded, in the second quarter of the year, the threshold of five percentage points… Mai mult

Strategic chemical industry: Romania, on top in import increase and ranking last in EU in terms of increase in exports outside single market

Data published by Eurostat show that Romania recorded the second highest annual growth rate in imports of non-EU chemicals from 2007 to 2017 (13.1% per… Mai mult

Economic growth in the pocket: Current accounts vs. saving accounts – 64% to 4.5%

  Rising incomes have fuelled consumption and, implicitly, the economic growth in recent years, but not the savings. Although a large proportion of the population… Mai mult

Three problems in 2018 budget – perseverare diabolicum

de Marin Pana , 11.12.2017

The first time it happens, the second time it can be a coincidence but for the third time it is already confirmed the establishment of a strategy that can only lead to draining the public finances and exposing us to external risks that can materialize at any time as there is no room for manoeuvre (2.97% of GDP deficit planned!), no money reserve that is not already planned for consumption.

For 2016 and 2017, policies adopted and those that are intended – a combination of massive reductions in taxes and wages – will push the tax deficit close to 3% of GDP in 2016 (which accurately proved to be true, despite the level of 2.41% of GDP announced by the Ministry of Finance as operative data for the 12 months implementation – editor’s note) and above this level in 2017 (we look forward to seeing what Eurostat will announce next spring and not the value which will be officially communicated at the end of January – editor’s note) unless compensatory measures are identified or capital expenditures are again incompletely implemented,” said a press release signed by Andrea Schaechter, Head of the IMF Mission in Romania, in October 2015 (Agerpres). At that time, the Fiscal Council showed that “the budgetary slippage that will emerge in the coming years will largely reverse the tax consolidation (otherwise suboptimal in many respects) achieved with great social, economic and political costs during the crisis.

Three issues in draft budget

  1. The data on which the 2018 draft budget has been built are exactly those in the CNP autumn forecast. Data in which the exchange rate appeared at a stupefying 4.55 lei/euro, which would imply a hardly reasoned appreciation of the national currency compared to the current level of the euro/leu exchange rate.

It is noteworthy, however, that the annual value of GDP in billions of euros is missing for the first time, after several years when it was usual to be mentioned in the table presented by the National Prognosis Commission. Including in the preliminary version of the autumn forecast (where the value of 4.55 lei/euro appeared), a GDP of 198.2 billion euros has been mentioned. Within a few weeks, this value disappeared from the table and only the value in lei remained, of 907.9 billion.

  1. The second big question mark about the budgetary construction for 2018 is raised by the inflation data. Annual average inflation, the key input data, is clearly stated at 3.1% at the beginning of the draft budget. Those who drafted the table that opens the presentation of the implementation foresees for 2018 appear to have been ignorant of the BNR Report on inflation. An institution that deals right with this topic, the stability of prices.

Let’s see how the central bank’s estimate looks:

Quarter

Estimated inflation

Maybe some specialist from the Finance Ministry can explain how an average value of 3.1% can be obtained with the quarterly inflation values mentioned above. Or why they persisted in using an estimate that CNP made long ago, according to which, at the end of 2018, inflation would be only 2.6% and not 3.2%, the level resulted from the BNR analysis.

  1. The third problem of the budget is that Romania does not look much like a European country in terms of revenue share in GDP. The relatively low level of the budget revenue as a share of GDP (about 70% of the EU average) makes the deficit of 3% of GDP represent a difference of almost 10% between revenues and expenditures.

That is, much higher than the approximately 6% that a typical EU budget structure would have given us the right to have, at the EU level, where budget revenues are about 45% of GDP.

Even if, in relation to GDP, our deficit seems to be the same, we are allocating in fact too much for consumption (compared to the European standards) in relation to the revenue collected.

All in all, the 2018 draft budget should be revised here and there, in the key points, if we want to be credible in the implementation and preserve macroeconomic balances. In Romanian being said, to measure better the cloth and cut our coat according to that, not to what we are willing to, for various reasons.

Mergeți în homepage ›

Publicat la data de 11.12.2017

Lăsați un comentariu


NEWS

Cluj-Napoca - only city in Romania that receives European funds for innovative projects

Only Cluj-Napoca is among the 22 European cities that will receive financing from the European Regional Development Fund (FEDR) for innovative solutions in addressing urban… Mai mult

Prime Minister Dancila dismissed 13 of 15 civil society representatives from Economic and Social Council. They were blocking legislation that did not gathered all opinions

Prime Minister Viorica Dancila has replaced 13 of the 15 civil society representatives in the Economic and Social Council (CES). Following a decision published on… Mai mult

West Quadrilateral / Four counties joined to directly access European money for major infrastructure projects

From right to left: Gheorghe Falca, Nicolae Robu, Ilie Bolojan. Emil Boc, Mayor of Cluj Napoca, misses Four mayors from the West of the country… Mai mult

Chamber of Deputies / PSD loses UDMR’s support for amending Offshore Law, draft returns to committees for a week

The plenum of the Chamber of Deputies decided on Wednesday to resend the Offshore Law to committees after a seemingly surprising request of UDMR leader… Mai mult

Government amended insolvency law. Guarantees given by Minister Teodorovici

The Government adopted on Thursday the draft Emergency Ordinance for amending and supplementing legislation in the field of insolvency, which provides among other things for… Mai mult

Romania ranked 7th in EU in terms of renewable electricity

Unlike the vast majority of the economic areas, in which we are at the bottom of the European ranking, Romania succeeded to rank 7th by… Mai mult

Resounding failure of PSD lobbying action in Brussels

There are clear signs that the lobbying action launched by the ruling coalition in Brussels in favour of the government in Bucharest will end with… Mai mult

MFP: Romania does not endorse a separate budget for Eurozone and rejects the idea of ​​taxing financial transactions

Romania does not endorse a separate budget for Eurozone and rejects the idea of taxing financial transactions, Minister of Public Finance Eugen Teodorovici said after… Mai mult

Finance Ministry wants to change rules for insolvency: state could also register claims after procedure is launched

Companies’ possibility to avoid paying creditors (and in particular the payment of tax receivables) simply by declaring their insolvency would be drastically limited, according to… Mai mult

Phil Hogan: Swine fever in Romania has an impact on neighbouring countries and EU trade in pigs

Prime Minister Viorica Dancila, European Commissioner Phil Hogan and Agriculture Minister Petre Daea The swine fever epidemics in Romania has an impact on neighbouring countries,… Mai mult

Infrastructure projects lost EUR 41.5 million following budget amendment. In what projects cuts have been made

Despite the assurances that Dancila government is concerned and intensely working on the road infrastructure projects, at the budget amendment the Transport Ministry has cut… Mai mult

European Parliament have decided to adopt in October a resolution on the rule of law in Romania

Leaders of the political groups in the European Parliament have decided to adopt in October a resolution on the rule of law in Romania. The… Mai mult

"Romania's buffers have deteriorated, the country is less prepared for a negative shock" - IMF will reduce economic growth estimate

Romania will be less prepared if the economy is hit by a negative shock, as the structural deficit has been deteriorated - IMF representative for… Mai mult

Premiere: CSAT asks Finance Ministry to amend amendment - session suspended until Government comes with a draft that does not affect budgets of secret services

President Klaus Iohannis suspended on Tuesday the CSAT meeting for discussing the budget amendment, as there was no consensus on the budgets of institutions from… Mai mult