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BNR report: Romania must start macroeconomic correction in 2021

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Romania must start macroeconomic correction in 2021, which depends mainly on the reduction of the structural budgetary deficit, and this correction must be gradual, spread on several years, according to the analysis report of convergence ‘ Romania – Euro zone, monitor’.

‘In 2021, most EU states will have budgetary deficits dropping considerably ( non-permanent expenses will be reduced, those provoked by pandemics and the economic crisis); only Romania would be left with a deficit of over 8% if no adjustments are made, due to the growth by 14% of the pension point). Romania would get out of the general frame, would disappear the effect of a comparable deficit with those in the region. We would get in 2022 with public debt over 55% of GDP and financing would become even more problematic’ the report says.

Although fiscal rules in the EU are suspended in 2020 and 2021, according to the report, the macroeconomic correction must start in Romania.


‘The problem for Romania is not the debt stock, which was almost 35% of GDP in 2019, but it could become a big problem in some years. It is a problem of flow, pressure on the budget (deficits) as the fiscal income is very low – under 27% of GDP (the lowest in the EU except for Ireland). An increase of the permanent expenses which worsen the structural deficit would lead to the drop in the sovereign rating, increase of expenses with the service of public debt’ the document says.

According to the quoted source, Romania must start macroeconomic correction in 2021, which depends on the reduction of the structural budgetary deficit.

‘This correction must be gradual, over several years. An excessive speed of correction would bring back the economy in recession. A deficit of 7% of GDP in 2021 would not be easy to reach,especially as the final deficit in 2020  will surpass 9.5% of GDP. In 2024, the budgetary deficit should be under 3% of GDP to create the necessary conditions for accession to the Mechanism of Exchange Rate 2/MCS2. The idea that accession to the Banking Union (UB) before getting into MCS2 is not convincing. As in order to access the UB you need solid budgetary consolidation, together with thorough evaluation of the asset quality review’ the document says.

The economists mention the fact that for financing deficit it is necessary to have a credible programmed for correction on average term ( 3-4 years) with massive support on the part of European funds. For this purpose, it is necessary to have a programmed of resilience and recovery of Romania which should materialise in projects which could be easily financed from European resources.


The report refers to the degree of robustness of the domestic banking system, the capacity to stand strong shocks taking into consideration the effects of the pandemics. BNR took measures to diminish the negative effects generated by pandemics. Besides the gradual reduction of the monetary policy rate and the flexibilisation of the regulation framework in the context of the pandemics, the lending institutions were recommended to consolidate their own funds inclusively by restrictions connected to the distribution of dividends.

The report is coordinated by academician Daniel Daianu, the chairman of the Fiscal Council, and the working group comprises Amalia Fugaru, Anca Galatescu, Gabriela Mihailovici, Bogdan Moinescu, Ioana Muntean, Florian Neagu, Iulian Panait and Mirela Roman. Other contributors were Csaba Balint and Dan Cristian Palangean.

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