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Dumitru (Fiscal Council): We are witnessing unsustainable economic growth
Consumption tax cuts, included in the new Fiscal Code and ample salary increases of over 20% deteriorate macroeconomic balances, while budget deficit, which will be under the announced target this year because investment expenses were not made, show a clear trend to reverse fiscal consolidation, according to the president of the Fiscal Council, Ionut Dumitru.
“We see an economic growth over potential, most probably unsustainable: GDP grows by 5.2% in the first term, while consumption demand grows by 10%. At the same time, we see increases for services and constructions. Industry, which makes economic growth sustainable, grew by 1%. Therefore I think there are proofs we have an increase which creates imbalances and they are more and more visible,”Dumitru said.
This year, budget deficit is on a growing trend,the president added.
“At budget level, we see an evolution which shows a sudden reverse of fiscal consolidation. After having reduced budget deficit under 1% if GDP last year, deficit went up again. This year we have a target of 2.8% -2.9% which we will not reach because of the incapacity to make expenses concerning investments, but will significantly grow compared to 2015. For 2017, the European Commission says the deficit will probably go up to 3% of GDP. Therefore it is obvious we have a tendency of reversed fiscal consolidation, when economy grows over its potential”, Dumitru explained.
In these conditions, Ionut Dumitru says that election programs announced by parties are not realistic.
“All election programs, regardless of political party colour, suppose two things: massive tax drop and massive expense increase, especially social expenses. This cannot be realistic, especially when macroeconomic balances show deterioration at present,” Dumitru added.