The deficit of the consolidated general budget for this year rises to 6.7pct of GDP at the first budget adjustment this year, given that the measures adopted to stimulate the economy represent 3pct of GDP, announced on Wednesday Finance Minister Florin Citu in a statement at the Victoria Palace.
According to him, the cash deficit increases by 31.9 billion lei.
The Finance minister also announced that the estimates of the National Commission for Strategy and Prognosis indicate a contraction of the economy by 1.9pct this year and a nominal GDP falling to 1.12 billion lei.
“It is a budget adjustment that comes sooner than we were used to because some measures were needed to support the economy. The package that comes to support the economy, cumulatively, has a value of almost 3pct of GDP. We are talking here about furlough, guarantees for IMMInvest, aid for the liberal professions, allowances for medical leave, health, assistance for parents, incentives for medical professionals, plus tax facilities for companies, all of which add up to a package of 3pct of GDP, which means that the deficit will change. The macro coordinates from which we start: the National Commission for Strategy and Prognosis estimates that the economy will have a contraction of minus 1.9pct and a deflator of GDP of 4.9pct, which means a general increase in prices in the economy and a nominal GDP of 1.08 billion lei as compared to 1.12 billion lei as we considered in the initial budget. Under these conditions, the consolidated general budget deficit increases from 40.5 billion lei to 72.5 billion lei, which means an estimated deficit for this year of 6.7pct of GDP. These are the estimates we are making right now. With the data we have. The deficit of the consolidated general budget increases in cash terms with the amount of 31.9 billion lei,” said Florin Citu.
Labour Ministry, to receive 8.1 bln lei, Health Ministry, 3.8 bln
The Ministry of Labour and Social Protection will receive 8.1 billion lei at the budget adjustment, and the Ministry of Health about 3.8 billion lei, Minister of Public Finance Florin Citu told a press conference held at the Government headquarters on Wednesday.
“These are the two ministries that receive money at this budget adjustment. Here is the most money and, in fact, the purpose of this budget rectification is to allot money to these ministries to overcome the health crisis, but at the same time to maintain the production capacity in a functional economy. A budget adjustment that comes to support the first package adopted by this Government, to support the economy. The second package we are currently working on to restart the economy, will be introduced after the state of emergency. It is a significant package, as important as the one we have put together during this period. Now we want to see the effects of these measures, and we will see them in the coming days. I already know that payments are being made for the furlough,” said Citu.
No tax rises this year, but rather liquidity injections into the system
Finance Minister Florin Citu said on Wednesday that there won’t be any tax rises this year, but quite the opposite, liquidity injections into the system will continue just as so far.
“The main lesson of the 2008 – 2009 crisis was exactly this: one doesn’t raise taxes and interest rates in times of crisis because this would put a major brake on the economy. On the contrary, we inject liquidity into the system, just as we have done so far. We pay the invoices for companies on time, we refunded 4 billion lei worth of VAT, in April we refund the anticipated VAT with subsequent control. So our action is against the tax raising idea,” said the Minister of Finance when asked whether the government contemplates raising taxes for companies or the population until the end of the year, in order to keep the deficit in check.
The Finance Minister also said that the payment of furlough benefits is there to support the citizens who are wading through this difficult period.
“We are now coming up with projects for the second phase. There is a debate on rent payments, but nothing concrete at this moment. This project is not at the Ministry of Public Finance,” Citu said.