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April 19, 2024
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Economy Finance Romanian News

Bloomberg: Romania May Need the Rest of the Decade to Reduce Budget Gap

The budget gap in Romania has skyrocketed. In the most recent interview, Romania’s Finance Minister told Bloomberg that the country might need the rest of the decade to reduce it. Also, this year’s five rounds of elections will impact Romania’s economy.

The cited source mentions that Romania may need until the end of the decade to bring its budget deficit down to a target set by European Union rules as the government contends with public resistance to fiscal restraint in an election year.

Romania failed to keep the deficit in check last year, with a shortfall reaching 5.7% of GDP after an initial target of 4.4% — despite the government’s approval of several spending-cut packages. At as little as 27% of GDP, Romania’s tax revenue is among the EU’s lowest.

Finance Minister Marcel Bolos said a regime of annual budget cuts amounting to 0.5% of gross domestic product under the EU’s new fiscal rules presents a “tough” challenge. According to him, Romanian will likely need the seven years allotted by the fiscal framework to narrow the gap to 3% of GDP from the 5% forecast for this year — a slower pace than initially projected.

I simply don’t know if a more considerable adjustment is even possible for us. It’s an election year, and spending cuts are a very sensitive topic in our country.

Romania’s Finance Minister Marcel Bolos

More than that, the foreign debt reached a new record: EUR 168 billion, which makes all the efforts to narrow the deficit gap even harder.

On the other hand, Romania is one of the countries with easy access to funding, though at a higher interest than its peers. Also, Romania is the EU champion in absorbing the EU funds from the 2014-2020 financial framework, which offers a brighter perspective on the country’s finances.

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