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Romanian government is staking on further rapid growth

Wednesday, August 28, 2019

Subject

Romania’s revised 2019 budget.

Significance

The government has portrayed the first budgetary adjustment for this year, in mid-August, as a positive exercise and a mere correction in the payments schedule, with sums that had been allocated to underspending departments redirected to cover urgent needs elsewhere. According to this account, the adjustment will painlessly ensure full payment of wage and pension commitments which increase from September, while keeping the cash deficit below 2.76% of GDP. But this is based on assumptions of continued high economic growth despite the European and global slowdown, and ignores underlying vulnerabilities in the economy.

Impacts

  • As long as the economy grows at a respectable pace, the public will go along with official optimism.
  • The business community is concerned at the prospect of new taxation.
  • Behind the scenes, parties are preparing for a presidential election that may represent a shift in the power balance.
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