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FinMin Citu: Budget deficit estimated to grow up to 8.6pct of GDP this year
The budget deficit is estimated to increase this year from 6.7% of GDP to 8.6% of GDP, five percentage points being directly related to the crisis period that Romania is going through today, the Minister of Public Finance, Florin Citu, informed on Thursday.
"The budget deficit is projected to rise from 6.7% of GDP up to 8.6% of GDP. A five percentage point increase from the initially approved deficit of 3.6% of GDP. And we talked about this influence on budget deficit before, about what triggered it. As expected, we have a decrease in budget revenues compared to the estimates of almost 31 billion lei. This means three percentage points. So three percentage points from the five are the result of the crisis, of the fact that the economy is facing a difficult time, a period of crisis and it's normal that the revenues go down. At the same time, the additional spending directly related to the crisis account for about two percentage points. This means that five percentage points are directly related to the period of crisis we are going through. Without this crisis we would have kept the estimate at 3.7% of GDP and I think we could have done even better," Florin Citu told a press conference on budget rectification.
He mentioned that, in order to understand the figures better, we should look at the situation in Europe. According to the Minister of Finance, in Europe, the average increase is 7.7%, which means that deficits increase compared to those initially estimated. Also, the latest forecasts indicate a further worsening of budget deficits, especially in the Eurozone, so that in France, the increase is at 11.4%, and in Italy at 11.6%. "In Europe, larger deficits are caused by declining revenues," he said.
Florin Citu underlined that the rectification presented is only a proposal, which will go to the government meeting on Friday for approval, adding that the dynamics of the economy in 2020 was re-estimated by the National Strategy and Forecast Commission (CNSP).
"With this rectification, the National Commission for Strategy and Prognosis has re-estimated the dynamics of the economy in 2020. The contraction that the European Commission estimates for this year is 3.8%, compared to a contraction of 1.8%. The two percentage points come exactly from the two months in which the economy was shut down. This also means that the initially estimated nominal GDP has also been reduced, with an impact on revenues. And this is what we must consider first in making the budget rectification, this context in which estimates for the dynamics of the Romanian economy got worse," said Florin Citu.
For instance, Government's healthcare outlays have increased throughout the year by about 45% on the initial budget and if necessary we will allocate additional resources, Minister Florin Citu said.
"For healthcare, a priority area this year, we have allocated more resources; in fact compared with the initial budget the amounts allocated for healthcare have increased by about 45%. We are talking about the settlement of medical leave, medicines, healthcare equipment, bonuses for those who have been on the forefront in the fight against this virus, and of course we didn't do what the Social Democratic Party (PSD) used to do: leaving no stockpiles. I have provided additional stockpiles to be ready for what's to come. Healthcare spending overall have gone up about 45% throughout the year against the initial budget and we will continue to look at the second part, if we still need to provide more resources; we are ready to allocate additional resources for this sector," said Citu.
In terms of education spending, Citu underlined that everything possible was done to ensure the good development of Romanian education by the end of this year.
He added that the new budget revision also supplemented resources for the Ministry of Transport, so that the budget of this ministry in 2020 "is a record one; it is the largest investment budget allocated by the Romanian government."
"Transport, healthcare, and education are areas where PSD cut every year at budget revisions, just look back. Every year, PSD would cut significant amounts from three sectors: investment, healthcare, and education. We do not do that; on the contrary, we have provided additional resources for these important sectors and in this difficult moment that the Romanian economy is going through. The Ministry of Labour, the one everyone is looking at today, has had the largest appropriations all the way back at beginning of the year. It started with the largest appropriations, and with this revision it reaches almost 10 billion lei extra," said Citu.
Pensions also will increase in 2020 by the largest amount that Romanians have ever seen and that is added to the pension point, the Minister of Finance, Florin Citu, told a press conference on budget rectification.
"From the first moment I said that we will increase pensions in 2020 and today I am here to tell you that yes, in Romania, pensions will increase in 2020. The pension point, the value of the point will have the largest increase, the largest amount that we will ever see added to the pension point and that we have ever saw added to the pension point. Because PSD has never increased pensions by this amount, although it had periods of economic growth one after the other, for three years, and not thanks to them but thanks to the international economic context and they still did not increase the pensions by this amount," said Citu.
He stressed that, despite the difficult global economic context, the government has managed to increase pensions in addition to allowances.
"In this difficult global economic context we are going through, we have managed to make this effort and increase the pensions, in addition to increasing the allowances, by the highest amount that Romanians have ever seen added to the pension point. "I challenge Mr Ciolacu to find another country that makes such efforts in economic crisis, increases pensions and allowances with the sums that this government makes," added the Chief of Finance.
Florin Citu did not specify in the conference the percentage by which the pension point will increase.