February 16 (SeeNews) - Romania's president Klaus Iohannis on Thursday signed 2017 budget bill into law despite his concerns it is too optimistic.
"As promised earlier, we made an analysis of the state budget which has confirmed everything I said last time: the budget revenues are optimistic, some say. I say they are overly optimistic indeed," Klaus Iohannis said in a televised statement.
"The country needs a budget, and the government said it is committed to implementing this budget, now it has the opportunity to prove how," he added. Last year's budget was approved in December 2015.
The president is most reserved about the projected 14% increase in budget revenues in 2017.
"There is no explanation for this phenomenal increase. Also, we are dealing with exceptionally high debt commitments, of 54 billion lei ($1.27 billion/1.17 billion euro)," he said.
On Tuesday, Iohannis said that he might send the budget bill back to parliament for a review before signing it into law.
The budget bill, approved by the parliament on February 7, is built on projections of 5.2% economic growth and deficit equivalent to 2.99% of gross domestic product (GDP).
Consolidated revenues are projected at 254.7 billion lei, or 31.2% of GDP, and expenditures are expected to reach 278.8 billion lei, or 34.2% of GDP. The resulting deficit of 24.1 billion lei is equivalent to 2.96% of GDP in cash terms and 2.99% of GDP under the the European System of Accounts (ESA) standards. According to the EU's 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.
Romania's consolidated budget showed a deficit equivalent to 2.41% of the projected GDP last year, compared to 10.3 billion lei shortfall, or 1.47% of GDP in 2015, according to finance ministry data.
Romania's economy expanded by 4.8% year-on-year in 2016 compared to a revised 3.9% growth in the previous year, flash data from the country's statistical board, INS, showed on Tuesday.
On Monday, the European Commission raised its forecast for Romania’s economic expansion in 2017 to a real 4.4% from 3.9% projected in November, as growth of private consumption and investments is expected to gain speed.
At the beginning of January, the World Bank forecast that Romania's economy will expand in 2017 and 2018 at 3.7% and 3.4%, respectively, and also warned of the possible negative effects of fiscal loosening.
(1 euro =4.5226 lei)