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May 11, 2021

PM Orban: Budget deficit is worrisome, all spending increase must be handled with caution

Prime Minister Ludovic Orban said on Wednesday that the budget deficit is worrisome and all spending increase must be handled with caution.

“The budget deficit should not be compared to the deficit of other years. Not only Romania, but the entire world is faced with a pandemic that has generated a severe economic crisis. This economic crisis has led to the closure of a lot of activities and has diminished the Romanian state’s revenues from taxes, fees and other dues. The deficit is largely the result of this economic crisis caused by the epidemic. I believe that all the measures we have taken will generate favorable effects in the medium and long term, the fact that we left liquidity in the market for companies and citizens by postponing bank installments for a period of nine months, by speeding up VAT refunds, suspending seizures and foreclosures, by offering tax and duty forbearance – all these measures have been taken to ensure liquidity, to have financial resources in place to keep the market moving. This is a worrisome deficit we must take into account and which requires us to be extremely cautious about any increase in spending,” Premier Orban said after attending an event dedicated to the National Anthem Day.

He also pointed out that the government cannot decide on the pensions’ raising rate before a mid-year report on the budgetary and financial situation is readied, and the forecasts of the National Strategy and Forecast Commission and other similar data from international bodies are available.

“I haven’t seen yet any country raise pensions and wages during this serious health crisis that has triggered an economic crisis, but we are under pressure and we will increase pensions and (child) allowances, yet by an amount that is really affordable for the Romanian economy,” Orban said, according to Agerpres.

According to data published on Tuesday by the Ministry of Public Finance (MFP), Romania’s general government deficit in the first six months of 2020 was 45.17 billion lei (4.17% of GDP).

“More than half of the deficit, or 23.04 billion lei (2.13% of GDP), is generated by the amounts left in the economy as tax benefits and exceptional expenditures adopted to combat the effects of the COVID-19 epidemic,” according to MFP.

In the first five months of 2020, the government deficit stood at 38.84 billion lei (3.59% of GDP), while in the first half of 2019 it was 19.96 billion lei, or 1.94% of GDP.

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