Based on the first budget revision endorsed by the government on September 23, the Fiscal Council estimates that the full-year cash deficit will reach 8% of GDP instead of the 6.9% targeted by the Executive, according to a Council’s opinion.

The ongoing negotiations with the European Commission ahead of an expected medium-term fiscal consolidation plan may reduce some expenditures with a positive impact on the public deficit, the Council admits. Conversely, some expenditures may exceed the current projections with a negative effect.

Furthermore, the Council invalidates the government’s claim that the deficit would be sustainable as long as the excess money spent above revenues is used for investments. The yield of the public investments matters, the Council warns.

According to a summarisation of the budget revision published by the Fiscal Council, the Executive expects budget revenues to rise by RON 29.6 billion (+5.06% compared to the initial target) and expenditures by RON 65.8 billion (+9.78%), resulting in a supplementary deficit of RON 36.2 billion. The deficit would thus rise from RON 86.6 billion initially envisaged to RON 122.8 billion.

Notably, the government revised upwards the projected nominal GDP by 2.2% despite (under the macroeconomic scenario used for the budget revision) revising downward the real growth projection from 3.5% (under the scenario used for the initial budget planning) to 2.8%. The GDP deflator was revised upward to 7.2% from 5.9%.

iulian@romania-insider.com

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