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Fiscal Council: Budget deficit could grow up to 4.8 of GDP in 2020
The Fiscal Council (CF) estimates a probable level of the budget deficit for 2020 between 4.6 and 4.8 per cent of the GDP, over 6 per cent of the GDP in 2021 and over 7 per cent of the GDP in 2022, according to the opinion of the CF on the Law on the state budget and the Law on the social insurance budget for 2020.
"Considering the information available at the moment, CF estimates a probable level of the budget deficit for 2020 between 4.6 and 4.8 per cent of the GDP. The deviation from the target of 3.6 per cent of the draft budget comes from: 0.45 percentage points (pp) of the GDP from the deterioration beyond expectations of the budget execution for 2019, which represents the starting point in the subsequent budget constructions; 0.5 pp from the modification of fees and taxes after the adoption of the draft budget for 2020; 0.15 pp in the case of a more plausible (prudent) macroeconomic projection," shows the document.
The Fiscal Council appreciates that additional measures are needed on budgetary revenues and expenditures to ensure convergence with the proposed deficit target for the current year.
"Regarding the fiscal-budgetary perspectives in the medium run, considering unchanged policies and tolerance (hard to imagine) from the markets, CF appreciates probable levels of the budget deficit of over 6 per cent of the GDP in 2021 and over 7 per cent of the GDP respectively in the year 2022. In these conditions, and given the complicated domestic and international economic context, including from the perspective of the availability and the costs of financing, it is obvious the necessity of adopting the most rapid corrective measures, able to restore the fiscal-budgetary situation on a sustainable path, and according to the national and European tax rules," specified the same document.
Prime Minister Ludovic Orban said on Thursday that he understands the concerns expressed by the Fiscal Council regarding the possible increase of the budget deficit, but assured that "there is no risk" for this to happen in 2020.
Asked what the government's position is regarding the Fiscal Council's opinion that the budget deficit will double if the pensions are increased by 40 percent, the Premier said that "the answer is the budget blueprint itself, at the 'Expenditures' chapter it provides for the additional amounts required for increasing the pensions according to the Pension Law, and the projected deficit is 3.59 percent. As such, I understand the Fiscal Council's concerns, but regarding 2020 there is no such risk. We have also made the budget projection for 2021 and there is no danger for the budget deficit to widen. Of course we must also follow the economic developments, we must follow the evolution of the collections to the state budget, we also have a plan to improve collection and fight tax evasion in order to make sure that tax collection improves. We haven't examined yet the report of the Fiscal Council, but we'll do that," said Ludovic Orban.