This adjustment entails a multi-annual program in line with EC requirements to lower the country’s budget deficit close to the 3% of GDP limit.
The adjustment cannot and must not be brutal as such a move would drive the Romanian economy into big trouble, the central bank said.
Romania must distinguish between current spending and one-off spending to ease the effects of the pandemic, it said. The central bank added EU funding could help balance Romania’s deficit and ease its correction.
“It is vital that Romania absorbs as much as possible of available E funds in the upcoming years,” central bank analysts noted.
The government’s most recent estimates indicate a budget deficit of 8.6% of GDP in 2020, coupled with an economic contraction of 3.8%. The picture could worsen if Parliament votes to raise pensions by 40% instead of the government’s decision to raise them by just 14%.