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Economists: The increase of the budgetary deficit target for this year corresponds to the new economic reality
The increase of the budgetary deficit target to 6.94% of GDP brings a new perspective, closer to the reality, said several economists from the banks at the request of Agerpres.
They plead, at the same time, for keeping public investments on the list of priorities.
' The increase of the budgetary deficit by 1.94 percentage points up to 6.94% of GDP corresponds to the new economic reality. It is a decision expected on the market since the summer of this year. Even if it is about the increase of the budgetary deficit, as long as the foundation is one of an investment nature, we can say that the decision is beneficial. As far as I understand, it is about investments in essential sectors such as health, education, transport and regional development. Investments improve the projections of potential GDP and we can expect to see a consolidation of the living standard in the future. But we must be consistent' said Florian Libocor, BRD's chief economist.
In his turn, Lucian Anghel, deputy general manager Libra Internet Bank considers that it is very important that public investments remain on the list of priorities this year, as the increase of the constructions sector depends on the infrastructure works. This sector generates 6-7% of GDP in Romania.
'The economic increase estimated by the government is slightly optimistic, but what matters when we calculate the percentage of budgetary deficit is the nominal value of GDP which will be influenced this year by the generalised increase of prices' Lucian Anghel says.
Similarly, Valentin Tataru, macroeconomist ING Bank Romania, said that the new deficit target is closer to reality. 'Taking into consideration the rapid advance toward the initial target of 5%, deficit which was registered in the first part of the year, the budget rectification has become a process more and more necessary. We think that, although the new target of deficit is 6.94% brings a perspective closer to reality, it belongs to a scenario rather optimistic. Our basic scenario includes a deficit of 7% closer to the new taget of the government, but we evaluate the risks of the estimate as being upwards. To keep short, we estimate the chances that the deficit gets over 7% as being higher than the chances it could be lower.But at present, the potential for improvement starting next year starts to become more and more relevant against the deficit of this year, and the main factor to follow is represented by the on-going negotiations for the deficit adjustment with the European Commission', Valentin Tataru said.