“If we’re talking about more discipline in spending public funds, (the lowering of investments – e.n.), although it does not mean quick economic growth on short term, it means the release of important funds which were wasted in different ways, unrealistic projects, corruption, and so on. On short-term, it affects the economic growth. (…) On the other hand, on long term, a serious budget and fiscal discipline is delivering important funds,” Isarescu stated.
The governor added that, as regards GDP growth deceleration, there are several clear reasons, including a much more conservative position towards public spending.
The European Commission said Tuesday that Romania’s government will need to increase taxes or cut expenditure else the budget deficit will expand to 2.8% of the gross domestic product next year, when revenue is expected to go down following reductions of the social security contributions and the property tax.
“For 2015, Romania’s deficit is projected to increase to 2.8% of GDP under a no-policy-change assumption,” the Commission said Tuesday in its autumn forecast.
Romania and the European Commission had set a target of 1.4% of GDP for the 2015 budget deficit, namely half of the current EC forecast.
The European Commission expects Romania’s economy to grow only 2% in 2014, a significant cut from a 2.8% estimated in June, due to a strong deceleration in the second quarter.
On the other hand, the country’s gross domestic product rose 1% in the third quarter against the previous quarter, according to the European Commission’s latest forecasts, which means the economy is out of technical recession.