Romania’s budget issue: toxic mix of “American” revenues and “European” spending

Relatively recently joined the functional market economies club, although it has multiple pending development (not just economic) issues, Romania looked around and chose a poisonous… Mai mult

Spectacular GDP growth in Q1: 5%, in the context of rhythm decline in manufacturing to just 1.2%. Dilemmas

Gross Domestic Product for the first quarter of 2019 increased by 5% in real terms compared to the same period of the previous year (5.1%… Mai mult

Equation of public employees in Romania’s expenses compared to EU

Simply put, data recorded over time in the monthly budget implementation published by the Ministry of Finance indicate a share of staff costs in total… Mai mult

Foreign groups of enterprises in Romania and areas where they operate. Hierarchy changes

Germany (16.9%), France (11.7%) and Italy (9.5%) are the countries with the largest share in Romania’s economy by the number of employees in 80,905 groups… Mai mult

Budget implementation in Q1, short and simple: wages and social spending up, general and local investments down, co-financing for projects implemented with European money down

The general consolidated budget recorded, after the first two months of 2019, a deficit of about RON 5.5 billion, equivalent to 0.54% of the GDP… Mai mult


How Romania is seen from an EU economic indicators perspective

de Marin Pana , 17.9.2018

Eurostatistics is a synthesis based on a set of standardized and harmonized benchmarks for the comparability between countries at the European level (Principal European Economic Indicators – PEEIs in English).

These indicators are published and reviewed monthly, in order to provide a synthetic picture of a national economy and recent developments.

Here is the way it looks, on the website of the EU statistical body, a selection of the indicators of interest for the way Romania is seen from the outside, from the perspective of the centralized analysis at the level of the EU and the conclusions that can be drawn from recent economic evolutions:


  • Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018
  • Labour costs (%, Q/Q4)
  • Turnover in the services field (%, Q/Q4)
  • Employment (Q/Q-1)
  • Job vacancy rate (%)
  • Housing prices (%, Q/Q4)
  • Current account
  • Mar 18             Apr 18             May 18            June 18           July 18            Aug 18
  • Unemployment rate (%)
  • Industrial production (%, M/M-12)
  • Construction (%, M/M-12)
  • Long-term bond yield (%/year)
  • Euro/RON exchange rate



Firstly, the steady increase in labour cost draws attention, an increase well above the economic advance and constantly speeding up.

What does not appear (because of the dilution in the overall average) in European statistics is even more important, namely the significantly intensified rhythm of increases in the public sector compared to the private sector.

It is noteworthy in this context that since the beginning of 2017 the turnover evolution in the services sector was far from keeping up with the evolution of revenues which rose far beyond the productivity advance and were reflected in the evolution of labour costs. But the service sector is predominant in the GDP structure in any advanced economy.

With the benefit of a slowdown in the inflation index, the extra money went at a significant proportion to the real estate sector. This is where heavy struggles take place to maintain it, at the very least, within the macroeconomic stability benchmark of + 6% displayed on the scoreboard in Q2 2017, then moderated but returned to the trouble area earlier this year.

The employment, set on the downward trend in Q3 2017, returned to better values in the two following quarters, although the job vacancy rate slightly increased back from 1.1% to 1.3%, namely where it was also at the beginning of 2017. The signals are that it is becoming increasingly difficult to find people with certain specializations and skill levels.

The unemployment rate has maintained constant and relatively low compared to the European average, but it would look quite different after adjusting it with those who went to work abroad. Here is the explanation of the relatively low budget revenue collection as a share of GDP (about 70% of the EU average), although the taxation level is not low. But with 70% of the country’s workforce left, we can only have 70% of the revenue collection at a 100% load of those who stayed to support the state budget.

Incidentally, what about the social solidarity between generations in terms of paying the pensions? Those who stayed to work in Romania also support the parents of that 30 % who went to more promising places. Who, from higher wages, also send money home directly to those who are jointly supported by lower wages offered in the country.

For now, the evolution of industrial production, the one that sets the tone for the whole economy, remains robust, but the merits belong exclusively to the private sector, as there is no involvement of the state in terms of significant investments. The latest data on the construction sector also shows a recovery, but the trend remains to be confirmed in the next quarters.

Unfortunately, yields of government long-term bond rose above the 5% level at the beginning of Q3 2018 and will have consequences on interest payments, already up by 20% in the first seven months of the year, despite the decrease in the public debt share in GDP.

In spite of the current account deficit increase and the decrease in economic performance, including an increase in the trade deficit, the euro/RON exchange rate remained relatively stable and even returned to slightly lower levels in the summer months, as the attempt of exceeding the threshold of 4.65 RON/euro has been halted in the middle of the year.

All in all, data show that we should curb the forced march of increasing incomes, be they wages or pensions, to correlate them much more closely with the labour productivity and the results of the real economy. While not yet problematic, the picture of the economic data monitored by Eurostat raises questions about the macroeconomic stability.

Something that is like health, which you do not value enough until you lose it.

Mergeți în homepage ›

Publicat la data de 17.9.2018

Lăsați un comentariu


4.2%, from 3%: BNR has increased inflation forecast for 2019

The National Bank increased the inflation forecast for 2019 by 1.2 percentage points, from 3% to 4.2%. Also, the forecast for 2020 goes up by… Mai mult

Emergency procedure at European Court of Justice for Romania’s question: Are MCV recommendations mandatory?

The Court of Justice of the European Union (CJEU) has decided that Bihor Court’s request to be discussed under the emergency procedure, which is a… Mai mult

Government decides to increase external borrowing ceiling by EUR 4bn. It has consumed program resources for two years

The Government's agenda for Wednesday also includes the draft decision to increase the foreign loans ceiling for 2019 and 2020 by EUR 4 billion, up… Mai mult

Preparations for Summit in Sibiu - European Commission’s recommendations for EU's strategic agenda

On Tuesday, the European Commission presented a series of policy recommendations on how Europe can shape its future within an increasingly uncertain and multipolar world.… Mai mult

Meeting between Prime Minister Viorica Dancila and Chinese Prime Minister Li Keqiang: talks on a possible involvement of Chinese companies in PPP projects in Romania

On Friday, Prime Minister Viorica Dancila had a meeting with Chinese Prime Minister Li Keqiang, during which she stated her interest in involving Chinese companies… Mai mult

So-called "Belina Law" was adopted. Opposition will refer CCR: it turns Belina Island into a fiscal paradise

The Chamber of Deputies adopted on Tuesday the bill that provides for a derogating tax regime, such as tax exemptions or reductions, for land and… Mai mult

Deveselu shield is undergoing an upgrade process; the US provides alternative defence capabilities with THAAD systems

Aegis Ashore anti-missile system installed at Deveselu 99 Military Base will go in the next period through a previously planned upgrade process, the MApN announced… Mai mult

How 2019 began: Investments, allocations by 78.5% lower than the same period of 2018. 21% decrease in co-financing for attracting European funds

The consolidated general budget recorded a deficit of 0.5% of GDP in the first two months of 2019 namely RON 5.2 billion, a "performance" only… Mai mult

Romania's GDP exceeded Portugal’s in 2018: which has a population two times lower and a GDP/inhabitant twice as high

Romania's economy exceeded, at current prices in euros, Portugal's economy in 2018, a country with a population and a surface two times smaller as Romania.… Mai mult

Document / Draft to amend "Greed Ordinance"

The Ministry of Public Finance published Tuesday evening, a day and a half before the approval in the Government, the draft OUG that amends the… Mai mult

The two OUGs on judiciary for the three files are ready and submitted to Government

The Justice Ministry has prepared the two OUG drafts for which the coalition has put much pressure on the Justice Minister Tudorel Toader before granting… Mai mult

ECOFIN / Tax havens list has been updated. Politico: Eugen Teodorovici took EU Finance Ministers by surprise

Finance Ministers of the EU voted on Tuesday at the third meeting of the Council for Economic and Financial Affairs (ECOFIN) chaired by Romania, the… Mai mult

March 15, 15:00, for 15 minutes: Romania really wants highways!

Dozens of companies, mayoralties, sports teams, public figures, organizations and many ordinary people joined the protest "Romania wants motorways". Of course, the country did not… Mai mult

Facebook has removed 30 pages and PSD propaganda accounts in Romania

Facebook announced Thursday that it has closed hundreds of false accounts promoting false content in the UK and in Romania and this is the first… Mai mult

Laura Kovesi, indicted in a second case opened by Magistrates' Investigation Section

Laura Codruta Kovesi was indicted on Thursday in a second case. The section for investigating the crimes committed by magistrates accused her of having led… Mai mult