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May 26, 2020

Central Bank estimates drop in public debt’s GDP share

The National Bank of Romania (BNR) expects the public debt to drop as a share of GDP over the medium term if robust economic growth is maintained and the direction of economic policies ensures the preservation of fiscal consolidation gains, the annual activity report published on the institution’s website shows.

“To the extent in which the future direction of economic policies ensures the preservation of the fiscal consolidation gains made so far and the economic growth continues at relatively robust levels, the public debt’s GDP share is expected to enter a downward trend over the medium term. (…) The growth of the public debt (+RON 23.2 bln) was significantly superior to the need to finance the general consolidated budget’s cash deficit (RON 12.5 bln), (in 2014 – editor’s note) against the backdrop of the supplementary consolidation of the buffer-reserve needed to limit refinancing and liquidity risks,” the document reads.

Thus, as a share of GDP the public debt (calculated in line with the EU methodology) stood at 39.8 per cent in 2014, compared to 38 per cent the year before. When the gross volume is adjusted with the volume of liquid financial assets, namely cash and deposits, debt securities (at market value), investment fund participations and shares/units (including mutual fund units if floated on the stock exchange), the indicator drops to 31.4 per cent, just 1.2 percentage points above the value registered in 2013, BNR informs.

BNR points out that the general consolidated budget’s deficit dropped from 2.2 per cent of GDP in 2013 to 1.5 per cent of GDP at the end of 2014.

“Structural factors as well as the improvement of the economy’s cyclical position contributed to the reduction of the deficit, against the backdrop in which economic growth remained at a level superior to the forecast dynamic of the potential GDP. The fiscal consolidation carried out was however preponderantly structural in nature, the adjustment effort being mostly localized at the level of expenditures, against the backdrop in which, despite a growth in the volume of European funds that transit the budget (from 1.4 per cent of GDP in 2013 to 1.7 per cent of GDP in 2014), the total expenditures as a share of GDP dropped from 35.2 to 34.9 per cent,” BNR explains.


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