The difference between the European Commission’s and Romania’s estimates regarding the 2017 budget deficit arise from the use of different estimation methodologies, but the Romanian authorities have pledged a governing program that will meet the deficit target of less than 3 pct of GDP, the Ministry of Public Finance said in a release.
“In its letter the European Commission expresses concerns about Romania possibly overshooting the 2017 deficit target. According to the state budget approved by the Parliament of Romania, the government pledged a budget deficit below 3 percent, under observance of the Maastricht criteria. The difference between the two approaches is the result of different methodologies being used for the estimation,” said the Ministry of Finance.
The reply of the Romanian authorities comes after European Commissioners Valdis Dombrovskis and Pierre Moscovici sent the Ministry of Public Finance a letter in the context of the European Commission releasing its reports on the economic and social situation in member states.
“Although at this moment we have differing views on the economic forecast for 2017, the government of Romania pledged to implement a governing program designed to bring sustainable development, investments in infrastructure and new jobs while observing a deficit target below 3 pct of GDP,” the release says.
According to the European Commission’s winter economic forecast published mid-February, Romania’s general government deficit is expected to reach 3.6 pct of GDP in 2017, compared to 3.2 pct as in the autumn estimates, and is seen rising to 3.9 pct of GDP in 2018.
“The 2017 budget adopted by the new government contains a number of other tax cuts (in particular, tax exemptions for pension income) as well as expenditure increases such as a significant increase in old-age pensions and public wages. The general government headline deficit is projected to further widen to 3.9 pct of GDP in 2018, due to the full-year effect of the significant increase in old-age pensions scheduled for July 2017,” the European Commission cautioned back then.
At the same time, the EC revised upwards to 4.4 pct its growth estimates for the Romanian economy this year, and said that the advance will be 3.7 pct in 2018.