January 16 (SeeNews) - Romania's prime minister Sorin Grindeanu said on Sunday he sees the country's economy growing by 5.2% in 2017, as the inflation rate would stay at 1.4% and the budget deficit would remain under the EU-agreed threshold of 3%.
"Speaking about the macroeconomic framework for 2017, we see GDP at 815 billion lei ($193 billion/ 181 billion euro), economic growth of 5.2%, 1.4% inflation and some 180,000 new jobs," Grindeanu said in a talk-show on Romania TV on Sunday. "Our revenues for 2017 are estimated at 253.1 billion lei and expenditures at 277.2 billion lei. There's a difference of 24.1% between revenue and expenditure, meaning a deficit below 3%, of 2.95%."
Shortly after taking office on December 30, Grindeanu said that he expects the country's 2017 budget to be voted in parliament no later than January 25.
The forecasts calculate in the effect of recent measures taken by the government and are in line with the governing programme, the prime minister said.
Last week, Romania's president Klaus Iohannis signed into law a bill doing away with health and social insurance tax on all pensions and scrapping revenue tax on pensions under 2,000 lei. At the beginning of January, Iohannis also signed into law a bill eliminating 102 fees and charges, initiated by governing Social Democrat Party (PSD). Also at the beginning of January, the government approved an emergency ordinance hiking the minimum wage by 16% to 1,450 lei starting February 1.
Romania also reduced its VAT rate from 20% to 19% as of January 1. This rate cut follows the 2016 reduction from 24% to 20%.
Romania's economy expanded by 4.3% year-on-year in the third quarter of 2016, slowing down from 6.0% annual growth in the second quarter, provisional data from the country's statistical board INS showed. In the first nine months of 2016, the economy grew by 4.8%.
Romania's annual consumer price deflation decelerated to 0.5% in December, from 0.7% in November. The country ended 2015 with a deflation of 0.9%. In its latest inflation report issued in November, Romania's central bank BNR kept its 2016 inflation forecast unchanged at minus 0.4% and raised to 2.1% its projection for 2017.
Grindeanu added in his televised statement that Romania will honour its commitments to NATO to allocate 2% of its 2017 GDP for defence.
In November, president Iohannis stated that Romania will allocate to defence the funds, as promised, even if the effort takes budget deficit above 3% of GDP. In order to reach the 2% target, Romania must add 4.9 billion lei to the defence ministry's budget. Currently, Romania's defence spending relative to GDP stands at 1.48%.
According to the Medium Term Budgetary Objective (MTO) agreed at the end of 2014 with the International Monetary Fund (IMF) and the European Commission, Romania must not surpass a structural deficit target of 3% of GDP.
Romania's consolidated budget showed a deficit equivalent to 0.73% of the projected GDP for 2016 in the eleven months through November, according to finance ministry data.
On Wednesday, the World Bank said it raised its 2016 economic growth estimate for Romania to 4.7% from 4.0% projected in June. Its projections for the rate at which Romania's economy will expand in 2017 and 2018 remained unchanged from June at 3.7% and 3.4%, respectively, according to the report published on the World Bank's website.
(1 euro = 4.4920 lei)