At the same time, the continuous placing of the budget deficit to around 3% could weaken the public finances and substantially complicate their management in case of adverse shocks, maintaining the fiscal policy in the trap of a procyclic conduct.
”The assessments of the Fiscal Council show a high probability for the occurrence of a negative revenue gap in 2017, triggered by the extremely optimistic character of the macroeconomic scenario underlying the budget projection,” the Fiscal Council said in a report on the 2017 state budget.
The Fiscal Council said that the ”budget slippage, which started in 2016 and which is estimated to continue in the upcoming years, is generated by a mix of aggressive tax cuts, especially related to consumption, combined with an ample increase of budget expenditures, especially social expenses”.
Romania’s social democrat government has drafted the 2017 state budget on an economic growth projection of 5.2%, while the budget deficit is estimated at 2.99%.