Romania must keep its budget deficit below 3% of the gross domestic product to exit European Union’s excessive deficit procedure.
The Commission expects the country’s budget gap will stay below 3% in 2013-2014, after Romania reduced its government deficit to 2.9% of GDP in 2012.
“The main risks to the budget over the forecast horizon relate to further possible financial corrections linked to the absorption of EU funds or the financing from the national budget of priority projects; renewed accumulation of arrears in the second half of 2013 and possibly continuing in 2014, especially at local government level and limited progress with restructuring state-owned enterprises that could result into renewed pressure on the budget,” the Commission said in its spring economic forecast report.
The country’s ESA95 budget deficit is forecast at 2.6% of the GDP in 2013 and at 2.4% of the GDP next year.
In its winter forecast report, the Commission saw Romania’s budget deficit at 2.4% this year and at 2.2% in 2014.
“Following elections in late 2012, the government passed the budget in February 2013 targeting a deficit of 2.4% of GDP. However, the gains from prioritization of investment projects and the impact of the revenue measures’ package are currently forecast to be more limited than previously assumed,” reads the current report.
Public debt is seen to stabilize below 39% of the GDP in 2013-2014.
In 2009, the Commission recommended an excessive-deficit procedure be launched against Romania, due to a budget gap of 5.4% of GDP in 2008. The eastern European country was given until December 2012 to lower its deficit.
Consequently, Romania had to implement severe measures to lower its deficit, including a 25% cut in the public wage bill and a five percentage point increase in the sales tax.
Romania has reduced its ESA95 budget deficit to 2.9% of the GDP in 2012.