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Dumitru (Raiffeisen Bank Romania) about draft budget: Risks remain for higher deficit in 2020
Risks are still there for a higher deficit in 2020, macroeconomic prognoses seem too optimistic, which means income projection is too optimistic, said Ionut Dumitru, chief economist at Reiffeisen Bank Romania, about the draft budget for 2020.
“At first sight, risks are still there for a higher deficit in 2020. Firstly, at macroeconomic hypothesis level we have a more conservative scenario. Over 4% economic growth in 2020 seems hard to achieve. Macroeconomic prognoses seem too optimistic, which means the income projection is too optimistic. As for expenses we will see if expenses for PNDL (National Program for Local Development)can be cut down so much, as this seems to be the major problem,” Dumitru said.
He mentioned that the draft budget has not eliminated incomes from over excises for fuel, while for expenses the increase of the pension point according to the law in force was included.
“For expenses, this reduction of investment expenses from PNDL seems notable as well as the attempt to back it with European funds. What seems bad on paper does not seem bad as intention, but reality has shown we are not able to handle European funds which means that investments will be small next year,” Dumitru added.
The draft budget for 2020 is built on economic growth of 4.1%, a budget deficit of 3.59% and an average inflation rate of 3.1%, according to the Report on macroeconomic situation for 2020 and its projection for 2021-2023 published on Tuesday morning on the Public Finance Ministry site.
Incomes foreseen for 2020 are 360.149 billion lei, with a share of 31.89% of GDP, while expenses are estimated at 400.694 billion lei, 35.48% of GDP.
The cash budget deficit target for 2020 is estimated at 3.59% of GDP (40.545 billion lei) whole ESA deficit at 3.58% of GDP, to reach 1.94% of GDP in 2023, being thus included in provisions of European regulations.