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.