Lazea: Romania should have budget deficit of 1% of GDP

Romania should have a budget deficit of 1% of GDP, not 3% if GDP, said Valentin Lazea, chief economist of the National Bank of Romania.

He pointed out that Romanian society does not consider as public asset a budget with small deficits and that can be seen in illusions about the budget. The first illusion is that Romania still has a single tax share. The second illusion is that the continuous and unlimited tax rate leads to higher incomes in all cases.

The third illusion: “Possible cuts of tax rates could be compensated by better collection. But can you compensate by better collection as much as you want? For instance Romania collects 67% of VAT and that brings 6.2%  of GDP. Therefore if we collect 100%, which nobody can, there will be an additional 3%. No country can collect 100%,” Lazea explained. 

He mentioned the fourth illusion, “expenses with budget salaries can grow, they should mot be correlated with any macroeconomic indicator or with productivity, or with salary in the private sector.”

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