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February 7, 2023

Chief economist: IMF economic growth estimate is realistic

Ionut Dumitru, president of the Fiscal Council and Raiffeisen Bank’s chief economist, considers that the International Monetary Fund’s estimate of an economic growth of 2 per cent in 2011 is “realistic.” “An economic growth of 2 per cent is a realistic statement in the current context, without supplementary fiscal measures,” Dumitru stated in a press conference, quoted by Agerpres.

At the same time he added that the social contributions’ burden is very high at this moment and the pension budget lacks balance. According to Dumitru, the Romanian pensions’ budget has a sustainability problem. “Medium and long-term solutions have to be found. We have to stress the idea of contributivity. The switch towards the contributivity principle was admitted by the Constitutional Court with the exception of magistrates’ pensions,” the head of the Fiscal Council explained.

The Fiscal Council believes that solving the pensions’ problem should be Romania’s “top priority” in the process of lowering the budget deficit. “Romania’s pension expenditures are the 6th highest in the EU and place Romania first among new member states. When we consider the ratio between pension expenditures and budget revenues Romania is second after Greece. (…) The pensions represent Romania’s top priority because we cannot endlessly finance them from the state budget,” Dumitru added, quoted by Mediafax. According to the Social Council’s data, Romania’s pension expenditures in 2009 represented 36.8 per cent of the budget revenues, being second after Greece’s (40.5 per cent in 2008). Dumitru pointed out that more than one million of the 4.72 million pensioners paid from the state’s social insurances budget in 2009 benefited from invalidity pensions or had retired early, while 577,000 benefited from bequeathed pensions.

In what concerns the structural deficit, Dumitru mentioned that its reduction has to be achieved through structural reforms. Asked how he comments on the Public Finance Ministry’s initiative to borrow from international markets, Dumitru pointed out that that is a “timely” measure. According to the head of the Fiscal Council, budget rectification is one of the first requests that the Council has to answer.

Romania ranks bottom in terms of consolidated budget revenue

In the consolidated general budget overall revenues department, Romania has not exceeded the level of 33 per cent GDP over the past ten years, much under the EU average of 42.2 per cent, Agerpres reports. Romania therefore ranks bottom in the EU in this respect, according to a report presented by Fiscal Council president Ionut Dumitru at a press conference yesterday.

As to tax revenues, Romania is bottom of both the EU-27 and among the new EU members from Central and Eastern Europe. In the non-tax revenues category, Romania is 23rd EU-wide and last among the new state members. The Fiscal Council report also shows that in terms of tax revenues, Romania is next to bottom in the EU and 23rd with respect to direct taxes, which total a little over 6 per cent GDP. In the income tax collection department, Romania also lags towards the bottom both among EU states and the new members. Dumitru made the point Romania continues to have a problem tax collection rate-wise. He also said Romania ranks 24th of 27th in the EU, and 9th of the 10 new members in terms of profit tax collection.

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