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Romanian govt projects 5.5% GDP growth, 2.96% deficit in 2018 budget

Romanian govt projects 5.5% GDP growth, 2.96% deficit in 2018 budget Romania's GDP growth

BUCHAREST (Romania), December 7 (SeeNews) - Romania's government has approved the 2018 draft budget based on projections of 5.5% economic growth and deficit equivalent to 2.96% of gross domestic product (GDP) under the European System of Accounts (ESA) standards.

According to the document approved late on Wednesday, GDP in 2018 is estimated at 907.85billion lei ($232 billion/ 196  billion euro).

An average exchange rate of 4.55 lei per euro and a monthly average monthly salary of 2.614 lei is projected in the 2018 budget.

"The budget deficit (cash) is estimated at 2.97% of GDP, while the ESA deficit is 2.96% of GDP, with the deficit target set below 3% of GDP, according to the Maastricht Treaty," the buget draft reads.

According to the Maastricht treaty signed in 1992, the ratio of the annual general government deficit relative to GDP at market prices must not exceed 3% at the end of the preceding fiscal year.

Budget revenues are estimated at 287.5 billion lei, or 31.7% of GDP. VAT proceeds are estimated at 6.8% of GDP, excise duties at 3.3% and wage tax and income tax at 2.3% of GDP.

The government reiterated its pledge to allocate to defence 2% of GDP for a second straight year in order to meet the target agreed to at the 2014 NATO summit in Wales. Also, it said that it and has allocated 53 million lei to increasing the capital of companies of the national defence industry sector.

Romania, which joined NATO in 2004, plans to spend 9.8 billion euro  until 2026 to boost its defence capabilities, the National Defence Council (CSAT) said in August.

The budget expenditures in 2018 are projected at 314.5 billion lei, or 34.6% of GDP.  Social security spending and public sector personnel costs amount to 10.9% and 8.9%, respectively.

The budget is expected to be debated and voted on in parliament soon, but no exact date has been set yet. It should then be endorsed by president Klaus Iohannis.

In 2016, Romania's economy expanded by 4.8%.

Romania's 2017 budget is built on projections of 6.1% economic growth and deficit equivalent to 2.96% of GDP.

Romania's annual economic growth accelerated to 8.8% in the third quarter of 2017 from 6.1% in the previous quarter on the back of strong performance of the agricultural and industrial sectors and on rising consumption, latest data from the statistics office showed.

Overall, in the first nine months of 2017, Romania's economy grew by 7% on the year in non-adjusted terms and and by 6.9% in seasonally adjusted terms.

Romania's consolidated budget deficit has increased to 0.79% of the projected 2017 GDP in the 10 months through October, from 0.17% in the prior-year period.

In November, Moody's Investors Service said that although Romania has made material progress in correcting macroeconomic imbalances, these improvements could be eroded in the medium-term due to a loose fiscal policy and lack of reform.

Also in November, the European Commission (EC) said that Romania has failed to do enough to reduce its 2017 budget deficit and that the necessary annual adjustment needs to be at least 0.8% of GDP.

At the time, the EC warned Romania that it may not meet its budget deficit target and urged the government to take action to avoid the opening of an excessive deficit procedure.

Also last month, the European Bank for Reconstruction and Development (EBRD) raised its expectations for Romania's economic growth to 5.3% in 2017, but warned that the government may not meet its budget deficit target.

In October, the International Monetary Fund (IMF) said that Romania's real GDP growth is projected to reach 5.5% in 2017 before it decelerates to 4.4% in 2018.

(1 euro =4.6321 lei)

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